Demand Response and Distributed Energy Resources (DERs)

There are two sides to a balanced electricity system; supply, which comes from generation, and demand, from homes and businesses. Much of the time the system is held in balance by changing the supply of electricity as demand changes. Demand response concerns reducing or flexing this demand and has been used by the System Operator, which controls the real-time operation of the National Grid and wholesale electricity market, to help balance the system during some planned maintenance work. 

Traditional approaches to this include the automated control of hot water cylinders by local lines companies via ripple control and large commercial consumers that can flex their demand when asked. More recently, new and emerging technology, known as Distributed Energy Resources (DERs), means that many more consumers can be enabled to provide support to the National Grid via demand response, including on an aggregated basis. Transpower’s focus is on providing high service levels at least cost to consumers. In some cases, demand response has the potential to be a lower cost alternative to transmission investment.

On this page you can learn about demand response (DR) what DERs are, how they can be managed and get an overview of the FlexPoint distributed energy resource managment system (DERMS) and what Transpower is currently doing to enable businesses and network operators to unlock and monetise its potential.  

Introduction to Distributed Energy Resources (DERs) Distributed Energy Resource Management Systems (DERMS) The future of DERs and DERMS

DR means a consumer reducing their demand at times of high system utilisation, supply constraints or high prices typically for reward through a pre-arranged contract.

Distributed Energy Resources (DERs) comprise any equipment connected to the power system that is capable of providing demand response by varying its consumption or production of electricity.  Examples include solar photovoltaic (PV) systems, batteries, electric vehicles (EVs) connected to smart and two-way chargers and smart appliances.

DR and DERs have the potential to be controlled in terms of when, and how much, electricity they consume or provide, giving them the potential to:

  • Serve as a cost-effective alternative to transmission and distribution investment, especially when the capacity of existing networks would only otherwise reach its limits a few times a year;
  • Delay or avoid investment in large-scale generation;
  • Maximise the utilisation of low-cost renewable energy;
  • Reduce the amount of high emissions generation;
  • Reduce the cost of meeting peak demand; and,
  • Help maintain system quality and security.

You can read more about the massive potential for DERs in our 2020 report, Whakamana I Te Mauri Hiko – Empowering our Energy Future

For a deeper, more technical, explanation of the potential of DERs, read this report (PDF July 2020) prepared by Sapere for the System Operator on behalf of the Electricity Authority.

Distributed Energy Resource Management Systems (DERMS)

Distributed Energy Resource Management Systems (DERMS) are software based platforms used to control DER.  In addition to the ripple control of hot water and the participation of large commercial consumers, the growth of DERMs, can be managed to:

  • Reduce and flex demand in real time through turning smart appliances down, up, on or off;
  • Reduce and flex demand by using PV or batteries to meet load locally; and,
  • Shift demand from peak to off peak times by controlling when smart devices such as appliances, hot water cylinders or EV chargers operate.

To get an idea of the potential of such an approach, we modelled the uptake of EVs to 2035 and the impact of connecting them to smart chargers that can automatically charge cars outside of peak time, such as overnight.

As the charts below show, the effect of using Distributed Energy Resource Management Systems (DERMS) and automated smart chargers and batteries, peak demand can be reduced by around 2 GW. That’s more than twice the output of Aotearoa New Zealand’s largest hydro power station at Lake Manapouri.

As such, DERs and DERMS make an excellent alternative to transmission investment. In our Electrification Roadmap, we estimate that for every GW of peak demand saved, around $1.5 bn in generation, transmission and distribution investment can be avoided.

The future of DERs and DERMS

Enabling this needs more than just the DERs to be in place and connected. Common connection and communication standards need to be applied to maintain system stability and quality, and regulations put in place to allow for full market participation in a similar way to how generation is offered into the wholesale market.

Transpower ran demand response, and later DERMS investigation and proof of concept programmes between 2007 and 2020. This was done as part of the Regulatory Control Period defined scope of work against the following objectives:  

  • Work with the Electricity Authority on a DR protocol (CC 5.173); 

  • Report on compliance with the DR protocol (CC 5.185); 

  • Be a development programme for capability (CC 5.183); and, 

  • Consider the use of transmission alternatives in investment decision-making (DROP 5f). 

Through this investigation programme, participants were engaged from major commercial sites and aggregators to small residential loads and instances of PV and batteries. The trials involved coordinating a large number of dispatch events, over five years, to test various demand response programmes and participant  types (e.g. price responsive and non-price responsive) as well as to gain a better understanding of participation in general and identify and remove any barriers to participation.

This long-standing work programme achieved a number of goals including:

  • Increased awareness of demand response across a greater range of participants, particularly smaller ones, aggregators and local lines companies;
  • Driving the local development and deployment of appropriate connection and communications technologies;
  • Driving the development of open control platforms capable of receiving signals from a central control system such as the FlexPoint DERMS platform; and,
  • Demonstrating that DERs and DERMS can, on a case by case basis, be a cost-effective alternative to traditional transmission investment.

FlexPoint was developed to dispatch DERs and record participation and undertake post-event performance data analysis so enabling payment. It is an open access platform built around application programming interfaces (APIs) and is certified by the OpenADR Alliance for the OpenADR 2.0 standard (IEC 62746-10-1 ED1). FlexPoint™ includes a custom mobile application that allows programme participants to respond to events via their mobile devices. 


Next steps

Alternatives to transmission

Now that the investigation programme has been completed, the focus has shifted. Transpower is now supporting the development of local and regional DERs programmes as a non-wires alternative to transmission as regional major capital project grid investments are considered.

This means working with local lines companies (Electricity Distribution Businesses, EDBs) in areas where system capacity is close to being reached to investigate the potential of DERs to delay or avoid more expensive infrastructure investment in poles and wires. In some cases, a demand response programme might be a cost-effective complement to other measures such as transformer overload protection schemes. In January 2021, such as scheme, utilising PV and batteries and commissioned Aurora Energy, was adopted in the Upper Clutha (Wanaka) district. 

In addition, DER and DERMS can be utilised to help manage The National Grid when there are outages or constraints are in place. 

Enabling market participation

The Electricity Authority (the Authority) is leading a project with Transpower in its role as System Operator to enhance the wholesale electricity market to publish accurate price information in real time. The Real Time Pricing (RTP) work programme includes putting in place the means for DERs to participate in the wholesale electricity market and be dispatched in real time, just as generation is. The Authority's target date for the introduction of RTP is October 2022. 


Market development

Throughout the sector, local lines companies (EDBs), generators, retailers and new market entrants are working to build new business models to make the most of new DERs technologies. It is to such third parties that Transpower would look for the provision of demand response services as alternatives to transmission. Later, it is these businesses that would participate in the wholesale market under the RTP provisions.




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Some useful external links on DERMS