Why No One Saw The Success Of Demand Response Coming.

Guessing the future is a tricky business. When one looks back at the futurologists of the 1950s, and their predictions of car transportation, one can’t help being struck by how far from reality some of them were. There are predictions of nuclear-driven cars, flying car airplanes and all sorts of things that never came into production, if indeed they ever made it off the drawing board at all.

But it’s not just the 1950s that have offered up some decidedly questionable futurology.

Delve into some predictions made by grid experts as recently as 2020 for the year 2050 and you will find some equally off-base predictions.

Looking through past presentations and projections of the UK grid, we are told much about the hydrogen and carbon capture solutions that we can expect to see - exactly the kind of maybe-sometime approaches that Vaclav Smil and Michael Cembalest caution us against.

But conspicuous by its absence is a much more here-and-now approach of demand response. There’s almost no mention of it at all.

Fast forward three years to the present day, and we see what is a quiet revolution happening under our noses. It’s too early to get the data from various energy companies, but initial information suggests that demand response has been a runaway success.

While the forecast for people taking this sort of scheme up was in the tens of thousands, the actual take up seems to be in seven figures.

Demand response has been around for more than a decade in the US, and in some states in a domestic format. However in the UK in the last few weeks have seen it break through into the public consciousness in a dramatic way. The concept even seems to have made it into the lexicon of new words. Last month The Times in the UK reported that Flexers are the one million electricity consumers who signed up for the newly launched Demand Flexibility Service. This requires them to use less than their normal power consumption in pre-notified time slots. Or as The Times puts it dryly, “People willing to sit in the dark for 50p”.

What this suggests is that energy companies have not really understood the psychology of ordinary consumers. Faced with high bills, and contrary to all expert predictions, consumers are more than ready to sacrifice the on-demand nature of switching on an appliance.

Peter King, Global Energy and Utilities Lead at Capgemini Invent, points to some of the reasons demand response is coming of age.

“Not so long ago energy companies were saddled with really quite inflexible software platforms which didn’t allow them to get involved with a demand response offering. The last year has seen many companies overhauling these completely. With the new type of platform, you can set up complex billing structures in a matter of minutes, and this has been a game changer. Also, the number of smart meters has gone up to nearly fifty percent in recent years, and this has played its part too,” says King,

But there's another crypto mining-related innovation around demand response, that was also completely unseen by the energy industry as recently as two years ago. It’s one that shows how the energy crisis has brought about a more practical and creative approach to energy.

In July of 2021 Fred Thiel, the Chairman and CEO of Marathon Digital Holdings, a NASDAQ-listed Texan Bitcoin mining company, came up with an interesting idea: He located a wind farm in Texas with a generation capacity of 280 MW, but where the transmission system couldn’t bring all of the output onto the system.

By being an interruptible and steady baseload, the crypto mine could pull energy from the wind farm and prevent the need for curtailment when the wind was at full tilt.

In other words, by seeing the Bitcoin operation and the wind farm as partner installations, co-located behind a shared electricity meter, they could do the job of stabilizing the output of the wind farm; as a bonus, they could help avoid congestion and problems balancing the grid during different external loads.

If there is a grid event, they can be required by the grid, or voluntarily, to turn down their mining activities. The grid pays the miners for this grid stabilization service.

If the miners weren’t there the service would need to be procured from other potentially more expensive sources, such as commissioning grid batteries.

Thiel is aware that some would see the irony of all of this. A much-maligned technology, Bitcoin, which is thought to produce the carbon footprint equivalent of a small nation is, in the right configuration, actually a boon that saves carbon and avoids renewable energy curtailment.

Thiel is phlegmatic about his venture and points to the entrepreneurial spirit found within Texas, U.S.

“The Texas grid is the fastest evolving grid in the USA because it’s an unregulated market, so people have an incentive to do things the entrepreneurial way. This is where the thinking around the duck curve and base load consumption really started being developed. Texas is very different from, say, California, which is a regulated market that is curtailing more and more power every month.

“In California, you couldn’t do what we’re doing here. Whereas in Texas, provided that you comply with CLR Curtailment Levelling Rule, which is basically a signal the operator puts out to curtail or not, provided you obey that, ERCOT will let you do what you like.”

In other words, market signals rule, the participants innovate around them and the market is largely effective in balancing the grid.

It’s very clear to Thiel that other regions that are heavily regulated don’t yet have these capabilities, but some soon will.

There’s another reason Texas developed this first and that is its size. It’s easy to forget that electricity cannot efficiently travel beyond 1,000 km, and if it does, there’s a huge amount of waste heat due to the impedance.

The state of Texas spans two time zones with 1,200 km in longitude and latitude so finding solutions like this makes a lot of sense, and goes some way to assisting the grid.

Texas has shown the energy industry that monetizing excess capacity and balancing the grid with demand response, are not opposing goals, they can in fact go hand in hand. And until storage becomes appreciably cheaper, or other technologies more feasible, this looks like a good way forwards.

In some ways, we can see domestic demand response as a prelude to creating complete local energy markets, where surpluses and deficits of power are constantly being traded by domestic, commercial and industrial users.

In this future world which is already being trialed in Indian and European power grids, there are similar benefits emerging: Lower capital expenditure, more grid stability, and more democratization.

Certainly, Texas shows the value of entrepreneurial thinking in bringing a greater sense of control to electricity users of all sizes and denominations.

Whatever the future looks like, it's clear we will probably need a lot more Texan-style thinking to get us there.

This article is written by Dr. Jemma Green and represents her own opinions. Dr. Green is the Executive Chairman, co-founder and major shareholder of Power Ledger Pty Ltd. The content of this article should not be viewed as an endorsement of Powerledger's products or services by Forbes.