The tension between electricity supply and demand has been well flagged coming up to this winter. It’s not that Ireland doesn’t, as a whole, produce enough power for its needs – but at some crunch times, if the wind doesn’t blow hard enough or if a gas-fired generation plant breaks down during a cold evening when everyone turns up the heat and boils the kettle at the same time, a peak in demand risks exceeding the supply available. Then the network operator Eirgrid would have no other choice than temporarily cutting off some customers until the balance is restored.

A slice of this demand, however, is earmarked under contracts whereby commercial users have agreed to reduce their pull on the national grid on demand from Eirgrid. A small but growing number of specialist electricity trading businesses manage those contracts and, in turn, use this capacity to participate in the wholesale electricity market.

Five of these so-called aggregators are members of a trade group, the Demand Response Association of Ireland (DRAI):

  • Enel X, a subsidiary of the historic Italian energy utility part-owned by the Italian government;
  • ESB Customer Solutions;
  • GridBeyond, the Dublin company co-founded by its CEO Michael Phelan;
  • Veolia, the French-based environmental services multinational;
  • Viotas, founded in Limerick by Paddy Finn and Duncan O’Toole.

“Between them, they operate approximately just over 80 per cent of the total demand response operating in electricity markets in Ireland,” says Siobhán McHugh, chief executive of the DRAI. She adds that around 800MW of electricity capacity on the island of Ireland is participating in demand response, which translates into between 150 and 200MW available at any given time. 

This accounts for a small proportion of the Irish market’s peak demand, which exceeds 5,000MW or even 6,000MW on those cold winter evenings. But when a crunch looms, the last few hundred megawatts are precisely those that make the difference between achieving balance and triggering a black-out. And at other times when a surge in needed, firing up additional tranches of gas generation can be costly both in financial and environmental terms.

Siobhán McHugh: “You generally would not use demand response that frequently.” Photo: Thomas Hubert

“As we’ve had this capacity margin crunch on the power system, we’ve seen more and more instances of that demand response being called on,” says McHugh. “This year, for instance, we’ve seen, I think, over 30 instances – that is very unusual. You generally would not use demand response that frequently and, certainly across different power markets internationally, you wouldn’t see that as well. So it’s very much a sign that our power system at the moment is under a little bit of strain.”

So, can demand response really turn large electricity users such as high-powered factories and data centres from the villains of the story, sucking electricity out of the national grid, into the providers of solutions to match the fits and starts of power supply and demand?

On this week’s podcast, we ask McHugh how this emerging business works, who can take part in it and what it can achieve. Listen to the full interview above.

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Demand response aggregators already manage hundreds of customer sites around Ireland, according to McHugh. “They look at working with companies across the whole spectrum of industries, really: everything from pharmaceutical, agri-food, mining, cement manufacturing, large uses, like data centres, down to some smaller sites as well,” she says. “And those sites can either maybe vary their demand, interrupted, interrupt some processes that they’re operating, or some of them have on-site generation, or battery storage as well.”

Industrial electricity users and aggregators agree how much capacity can be freed up at each site and when, McHugh explains. Some know in advance that they won’t need electricity at certain times of the day or week. Some can easily reschedule operations such as heating, cooling, pumping or using large machinery. “Other things like battery storage, which is a very fast acting, is sometimes present on sites for their own resilience if there’s any interruption to their grid supply,” she adds. “The rest of the time, they’re capable of providing that service and responding to different frequency events, maintaining supply on the grid overall.”

With the combined capacity from all its customer sites, each aggregator then competes in the wholesale electricity market like any other participant, such as wind farms or fossil-fuelled power plants. Some of the contracted power is sold in the capacity market, attracting payments for the service of standing by in case it is needed; other volumes are traded in the so-called pool market to match forecast demand as it develops.

“Any sort of medium-sized commercial or industrial sites absolutely should explore this.”

Siobhán McHugh

As such, electricity freed up by demand response participants is paid at the same price as the power from other sources traded at the same time. Then aggregators and their customers share the payments between them. Has this additional revenue stream become a deciding factor for large electricity users to invest in additional equipment, such as batteries or combined heat and power (CHP) plants?

“I’d be inclined to say no,” McHugh replies. “They will install those assets for their own site resilience. So they’ll use it because they need a certain amount of uptime or productivity time, they have certain processes that maybe cannot be interrupted – they would lose products, they would lose a lot of their output – and so they will have those types of self-gen, battery and other assets to protect their supply of power and to make sure that their own sites are resilient. Outside of that, then demand response is an opportunity to probably earn a little bit of revenue in terms of those assets being used for not just their own site’s benefit, but for the grid as a whole.”

She adds that some participants in demand response have also entered this space to boost their ESG credentials, as supporting the national grid gives them an opportunity to promote “the part that they play in the community”.

Many businesses may already have an electrical set-up that would allow them to shed demand from time to time, but what are the criteria for demand response aggregators to show interest in working with them? McHugh says the current critical size is electricity intake of “a couple of hundred kilowatts”. “At a minimum, roughly, you would need to be able to have quarter-hour metering or a sufficient degree of granularity on your metering,” she adds. “At the moment, I’d say it’s not down at the very small SME level, except if you maybe have very specific heating, cooling, pumping, something like that involved in your business. But any sort of medium-sized commercial or industrial sites absolutely should explore this, as should the bigger sites as well.” 

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