With ongoing debate about the National Energy Guarantee, there has been a bit of discussion about the merits of ‘demand response’.
Demand response is not a complicated concept - it basically means that a customer reduces their electricity demand at a particular time of the day. Unfortunately, some people have mistakenly associated demand response with the electricity system becoming unreliable.
In reality, demand response is a way to help reduce individual customer bills, improve reliability and reduce the average cost to supply electricity to all households and business.
The concept of peak electricity demand
Generation infrastructure has traditionally been built in Australia’s electricity system to meet peak demand. These demand peaks generally occur on very hot summer days when those households and businesses with air conditioning all switch them on at the same time. Additional power stations and electricity wires need to be built to meet this higher level of demand. More capacity is added to the system. However, the extreme peak demand periods only occur in a very hot summer. Given how these peaks are driven by variable weather patterns, it is possible for several years to go by between individual peaks.
And with declining energy consumption (because of energy efficiency), the more infrastructure that gets built, the higher the unit cost of supplying electricity (i.e. higher costs spread over fewer units of energy output).