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Optimizing Power Grids with Demand-Side Management

Updated: Feb 8, 2019

Optimizing Power Grids with Demand-Side Management

From solar and wind farms force utilities to ramp down production at other power plants, while peaks in consumption have the opposite effect. These constant adjustments in production may wear down power plant components, increasing maintenance and capital expenses. It also becomes necessary to keep peaking power plants on standby, which have high costs per megawatt-hour produced because they only operate for a few hours each day.

Figure 1. A typical demand profile. Note how there are 200 MW of capacity that are only brought online at around 19:00, and another 200 MW that are only used at certain hours in the morning and afternoon. These power plants have a higher operating cost per MWh produced.

One alternative for managing variability is to deploy large-scale energy storage, but these facilities are often difficult to justify in terms of cost and benefit; for example, pumped-storage hydroelectricity may have a payback period of more than 20 years! Also, the deployment of energy management on the production side displays diminishing returns: for every facility brought online, it becomes less financially attractive to develop new projects because the most expensive peaking power plants are no longer needed.

The concept of demand side management (DSM), where measures to balance supply and demand are deployed at customer premises, looks more promising. The following are some of the main reasons why DSM works:

  • The total economic benefit is higher. The electricity price difference between low- and high-demand hours is normally larger than the production cost difference, which means the return on investment per kWh of storage capacity higher for consumers than for utilities. If a utility company wants to make its grid smarter, it becomes more effective to offer incentives for customers who invest in DSM measures, rather than spending capital to develop them.

  • Synergy with small-scale renewable energy: Energy consumers are also becoming small-scale generators, and there is a distribution cost for utilities when these systems are producing surplus energy and exporting it the grid. When DSM measures are deployed, utilities can actually benefit from distributed generation capacity: these systems can be instructed to absorb surplus generation rather than to export it to the grid when it’s not convenient. They also reduce transmission losses because more energy is being generated close to the point of consumption.

  • The Internet of Things: Emerging information technologies make it feasible for utility companies to monitor and control a distributed energy management system, achieving the same effect as a bulk storage facility. With the IoT, it becomes feasible for power plants of all types, small-scale renewables and energy storage to become a single interconnected system that can optimize its own operation.

Demand-side management is a concept that allows utilities and their customers to have a collaborative approach, something which has been difficult with renewable energy, where providing benefits for customers often involves an extra cost for utility companies.

Figure 2. DSM can shift peaks in consumption (yellow) to hours when there is surplus production capacity (light blue). Note how more than 400 MW of generating capacity are no longer needed in this example.

Key Elements of Demand-Side Management

The main benefit of demand-side management is its capacity to reduce power grid operating expenses by shifting peaks in demand away from their normal hours. DSM can also reduce capital expenditures: it eliminates the need to commission new peaking power plants.

DSM is one of those rare cases that results in a win-win situation in the energy industry, providing economic benefits for both utilities and their clients; energy consumers can reduce their consumption of expensive peak-hour energy, and utilities are no longer required to produce it.

The main objective of demand-side management is to decouple energy production and consumption, allowing energy to be produced at the lowest possible cost without restricting the hours when customers can consume it. DSM systems vary in configuration, but some key elements are needed in all cases:

  • A measurement system to determine current operating conditions, especially metrics such as the available storage capacity and the current output from variable renewable sources. Data can be aggregated and displayed to grid operators in real time.

  • A control system to take decisions that result in the lowest operating cost, after processing the data gathered by measurement systems.

  • Connected devices, capable of responding in real time to commands sent by the control system or by their end user.

  • An energy storage system, which serves as a buffer to balance supply and demand. Energy storage can be electrical, chemical or thermal, to mention a few options.

Demand-side management is a very broad concept, which allows various technologies to be deployed for the same end purpose. DSM is possible with systems such as:

  • Chiller plants with ice storage

  • Smart heaters with heat storage

  • Electrolysis hydrogen generators and fuel cells

  • Lithium-ion batteries, which offer a superior service life and depth of discharge compared to traditional lead-acid batteries

  • Biomass generators

Basically, any system that is capable of shifting peaks in consumption away from the hours when they normally occur is viable for the implementation of DSM. Also, despite how complex this may sound, energy consumption stays exactly the same from the consumer’s point of view, although at a lower cost. In fact, the customer experience can be enhanced: the control systems deployed by electric utilities can also include a smartphone application for the end user, allowing him or her to program the operation of home appliances.

The Importance of a Partner with Both Hardware and Software Competences

Although DSM offers great promise, there are potential pitfalls during its implementation, since the concept is demanding both in terms of hardware and software. Deploying a DSM system with technology from multiple suppliers who specialize in different areas can be quite a challenge, because there is no single communication channel. The need to coordinate various suppliers also reduces the accountability of each.

– This is the first part of a two part article. In the second part we will focus more on domestic DSM.

Logic Energy offers the required expertise in both software and hardware, and has a track record of success in multiple areas beyond the energy industry, including scientific research, academic applications and construction site safety. Logic Energy builds on more than 10 years of hands on experience and knowledge – In order to fully understand, you need to own the technology.

Community Energy Scotland

Community Energy Scotland is Scotland's only national charity dedicated to supporting communities to develop renewable energy projects,

The data we will receive from the installed remote monitoring systems will not only allow us to monitor the 28 sites, but could also allow us to devise a predictive maintenance.

Community Energy Scotland

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