The role of flexibility in Australia's volatile energy landscape

Schneider Electric

By Lisa Zembrodt, Principal and Senior Director of Sustainability Business, Pacific Zone at Schneider Electric
Thursday, 13 June, 2024

The role of flexibility in Australia's volatile energy landscape

Australia is on a critical journey towards integrating renewable energy across its power systems, but one core concern looms large: volatility. The ever-changing nature of the energy market is seeing businesses across the nation navigate the choppy waters of fluctuating energy prices and uncertain supply.

This turbulent environment has many businesses wondering where the lighthouse is that will help guide them on their path to stability. For this, businesses must appreciate the value of demand flexibility.

Flexibility is not merely a buzzword in energy discourse. It has the potential to unlock significant cost savings and operational efficiency, and should be a high priority goal for any business. Harnessing its potential requires more than recognition; businesses need to truly understand not only its value but all of the elements that make it valuable, such as how the market works and the rules and regulatory frameworks that affect it.

Flexibility in energy use can offer many ways to save money for the consumer, but it also reduces the overall cost required for upgrading the grid; rather than building a grid to meet peak demand, we can build a grid to meet response-adjusted peak demand.

The types of flexibility are many — from simply scaling back demand when prices are high or supply is scarce, to advanced real-time adjustments to help manage grid frequency. With so many options, it can be difficult for businesses to figure out which solutions are most suitable. Each business must consider how each option fits with its needs and, more importantly, what technology it has available, keeping in mind that digitalised control systems can unlock greater value.

Examining real-world case studies can provide valuable learnings and insights into the practical implementation of flexibility strategies and solutions for energy consumption. From supporting manufacturing businesses in optimising contract structures to quantifying the value of demand response capabilities, these can illustrate how proactive energy management works.

Aging coal-fired generation assets and the transition to a low-carbon grid amplify the necessity for, and value of, flexibility. While the sun rising every day is immutably predictable, the level or timing of cloud cover is not. Similarly, wind blows when it wishes, and not necessarily when I want to make a cup of tea. This intermittency of supply can dramatically impact energy price points, even over short periods of time.

As we continue moving towards renewable energy, the flexibility of aligning energy use with renewable and storage output availability is becoming essential to be able to operate continuously, and therefore stay competitive and survive.

Regulatory changes add another level of complexity to this energy transition, shaping incentives and constraints for businesses to navigate. For example, the introduction of the Very Fast Frequency Response market emphasised the growing importance of responsiveness and agility in energy management. The impending increase in the market price cap further stresses the importance of proactive adaptation to regulatory shifts; the higher price cap is both a risk and an opportunity depending on your position and capabilities.

Businesses must implement tailored energy management strategies. Whether through load-shifting initiatives, microgrid deployment or demand response programs, businesses must navigate a complex terrain of technological options and organisational considerations to optimise value in how energy is used. The importance of robust risk management incorporated in the strategy cannot be overstated, as businesses contend with uncertainties ranging from future price trends to the reliability of income streams.

In an increasingly dynamic energy landscape, by leveraging data-driven insights and fostering innovation businesses can not only mitigate risks but also unlock competitive advantages.

As Australia continues its journey towards a more sustainable and resilient energy future, the role of demand flexibility will only become more pronounced and more valuable. Embracing this reality and investing in flexible energy solutions will safeguard businesses against market volatility and position them as leaders in a rapidly evolving energy landscape.

Image credit: Akcengiz

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