Distributed energy resources for grid services: tackling climate change and delivering net zero
Climate change is a race against the clock. To mitigate its devastating effects, countries worldwide must considerably reduce the emissions linked to human activities. A decarbonised power sector dominated by renewable sources is at the core of the transition to a sustainable energy future.
One of the main challenges countries face when trying to increase their clean energy consumption is integrating more renewables into the grid while keeping it stable. The electrical network is highly complex, and it needs to ensure that supply and demand are constantly balanced. Given the unpredictable nature of renewable energy sources, this can prove to be highly challenging.
Therefore, as we move away from fossil fuels and the energy system becomes more decentralised and decarbonised, the need for flexibility to help balance the grid increases. More local flexibility must be found, involving smaller actors, including households and local businesses.
The importance of DERs for grid services
In this context, distributed energy resources (DERs) are becoming a critical flexibility source to address the need to decarbonise the power sector, capitalise on the move toward decentralised renewables, and continue electrifying transport.
As the global residential energy storage systems market is gaining momentum — with installation growth rates soaring in geographies including the UK, Germany, Japan, Australia, and several US states — flexibility markets with residential participation are likely to become more established in the next few years, with financial value, rules and technical systems currently being developed by regulators, stakeholders and industry.
This flexibility model’s potential for expansion is enormous, with the customer taking centre stage and playing an active role in these virtual power plants (VPP). To date, many countries have projects in the pipeline, and more are planned to be completed in the near future.
In this blog, we’ve taken into account different energy markets — the UK, the US, Australia, and Japan, and analysed their approach towards grid services with residential participation.
Grid services with residential participation in the UK
Renewables currently account for 41% of total electricity generation in the UK, representing its largest share. According to a recent report by the International Energy Agency’s (IEA), based on the consumer transformation scenario, renewables are forecasted to account for around 90% of total electricity generation in 2050.
Grid services with early stages of residential participation are already a reality in the country, where residential energy storage systems can support the network through distribution level flexibility services to take pressure off the grid in constraint areas and other tools such as the Balancing Mechanism (BM).
Distribution level flexibility services allow those with distributed storage assets at their home or business to offer energy capacity to the local grid, providing additional energy and replacing the need to make costly network reinforcements.
We are thrilled to be at the forefront of this innovation and we are involved in several projects to support National Grid in collaboration with UK Power Networks (UKPN), a Distribution Networks Operator serving London, the South East and East of England. Our partnership aims to provide flexibility services at a local level in a few different constraint areas across the UK, such as in Lewes, East Sussex, and the Worthing and Littlehampton area.
Homeowners who participated in these flexibility contracts were equipped with Moixa optimised batteries, which were then grouped to create a virtual power plant (VPP) through Moixa’s GridShare software. GridShare managed to connect them to form a cloud-based, decentralised network of power generation systems, turning customers into prosumers in the local energy landscape and joining the dots between electricity supply and demand across the grid.
The growth of residential VPPs in the US
In the US, renewables currently account for 13% of total electricity generation. According to a recent report by EIA, they are forecasted to make up for 29% of the whole electricity generation in 2050.
Forecasts also suggest that residential ESS and PV capacity will steadily increase over the years, thanks to the decreasing costs of residential storage and rising resilience concerns.
In terms of grid services with residential participation, there are many bilateral contracts between utilities and flexibility providers, with over 30 operational and planned residential VPPs across the country. The leading service procured by these VPPs in the US power system is frequency response, as residential energy storage systems are expected to respond more quickly than conventional generation.
North America, which boasted a VPP market size of USD 0.32 billion in 2019, is predicted to obtain a lead in the global market on account of the implementation of large-scale VPP projects in the US and Canada. For instance, in 2020, Utility Portland General Electric (PGE) launched a virtual power plant pilot in Oregon, with more than 500 residential energy storage batteries being aggregated into a VPP.
Implementing VPPs in Australia
The largest share of the current total electricity generation is coal (75%), while renewables still account for only 19%. However, according to database company Statista, renewables are forecasted to make up for 72% of total electric power production in 2050.
Similarly to the US, the Australian capacity for both residential ESS and PV is forecasted to increase constantly over the years. Geographical factors such as the risks of bushfires and other extreme weather events are among the leading causes that drive the importance of resilience and backup power.
In Australia, VPPs with residential participation are mainly operated as part of trials to integrate the technology into the National Electricity Market (NEM). AEMO, the Australian Energy Market Operator, has run VPP demonstrations to test the technology’s capabilities to deliver energy and grid stability services, the operational visibility of these arrangements, and the consumer experience.
In 2020 ARENA, the Australian Renewable Energy Agency, partially funded a trial led by Tesla to deploy 3,000 household solar and battery storage systems on residential properties. This is part of a larger project to connect up to 50,000 solar and battery systems across South Australia to form the world’s largest VPP.
Japan: residential participation in grid services to start in 2024
In Japan, renewables account for 12.5% of total electricity generation and have been forecasted by IEA to account for 22% of total electricity production in 2030.
As Japan moves away from centralised fossil fuel generators to increasing shares of distributed renewable energy resources, system flexibility will be critical to accommodate increasing levels of intermittent renewable generation and keep the grid in balance.
With a forecasted capacity for both residential ESS and PV that has been steadily growing over the years, Japan is committed to focusing on clean energy sources and innovative technology in the foreseeable future. One of the main contributing factors for this growth is the importance of backup power in the country due to Japan being subjected to frequent natural disasters such as earthquakes and typhoons.
While VPPs containing large industrial assets have begun to participate in some flexibility markets, residential participation in grid services is expected to start in 2024.
Since 2018, we have partnered with ITOCHU, a leading Japanese trading house with business interests and holdings worldwide, to deploy their Smart Star ESS to customers in tandem with Moixa’s GridShare software. By leveraging our technology, ITOCHU has been able to deploy arguably the largest connected battery fleet globally, reaching the milestone of 30,000 residential batteries connected to Moixa’s GridShare platform.
With 30,000 ITOCHU devices on the GridShare platform already, it is clear that VPPs of distributed assets will play a key role in grid management once markets allow it. Moixa and ITOCHU are ready to open the way for grid services and to generate value for the grid and consumers when this reality arrives.