How are countries worldwide tackling the residential flexibility challenge?
By Ben Cole – Strategy Analyst at Moixa
Climate change represents a significant threat to the health of the planet’s ecosystem. To mitigate its devastating effects, countries worldwide must considerably reduce the emissions linked to human activities.
Energy systems around the world are undergoing a huge transformation in order to decarbonise and move the needle on the climate crisis. However, among the challenges of adding more renewable energy to the grid is the unpredictable nature of clean energy sources. For a country to be completely reliant on renewable sources for electricity, we would need an energy system that could overcome the problem of intermittency and meet the demand for power consumption on a 24/7 basis.
This is where residential flexibility and virtual power plants (VPPs) come into play. On top of storing energy when it’s in abundance and saving it for when it’s needed, distributed energy resources (DERs) can be aggregated in VPPs to provide grid services. Flexibility with residential assets can help effectively introduce more renewable energy onto the grid, keeping it stable and preventing transmission lines from becoming congested.
As the residential energy storage system market is gaining momentum, flexibility markets that allow devices in homes to participate are increasingly becoming more established. But how are countries worldwide tackling the residential flexibility challenge?
Different scenarios across the globe
Different markets worldwide have elements that contribute to the commercialisation of flexibility on a residential level. In recent weeks, Moixa has attended several events focused on energy flexibility, and the UK was branded as a leader in tackling this challenge.
One of the key initiatives that have encouraged flexibility with residential assets in the UK is the introduction of time-of-use tariffs — electricity tariffs where energy suppliers offer different prices at different times of the day — used in conjunction with favourable policy around feed-in tariffs and household grid charging and discharging.
With time-of-use tariffs, consumers in the UK are not only encouraged to shift their load to off-peak times but are also incentivised to, for example, discharge batteries to support the grid during peak times with export tariffs.
Meanwhile, Australia has recently felt the impact of disruptions to coal supplies, outages at several coal-fired power plants and soaring global energy prices, leading to the country’s wholesale electricity market being suspended by the Australian Energy Market Operator (AEMO).
This event caused a consequential loss of consumer confidence in the electricity system’s reliability, which on the flip side, drove energy storage adoption and increased customer engagement in residential flexibility programs. This is grist to the mill for Australia’s decarbonisation ambitions, which will require significant deployment of renewable energy and storage deployment.
Similarly, in some of the US energy markets, such as Texas and Puerto Rico, the same lack of confidence in the electricity system has driven battery adoption over the past few years. For instance, Puerto Ricans have taken their energy resiliency into their own hands, with over 55,000 rooftop-solar-powered batteries already in Puerto Rico’s homes, a fleet that grows by around 2,000 every month.
In all of these markets, electricity pricing is leading homeowners to engage in PV systems and energy storage to be independent from their energy providers and use flexibility to their advantage.
Regarding flexibility with residential assets, it is important to remember that each market has nuances due to different environmental and economic conditions; for instance, a model in the UK may not work in the US, Australia or Japan.
Putting consumers at the heart of the energy transition: the case of Hawaii
In order to reach our climate goals, it is vital to put consumers at the heart of the energy transition and find ways to turn them into active participants in the energy landscape. Therefore, the end customer offer is foundational for any successful VPP business model.
Hawaii is an excellent example of engagement with the end customer via incentives and policy reform. The island recently received its last shipment of coal ever, with the shut down of its coal plant imminent.
Hawaii’s renewable commitments and abundance of solar has led consumers to be the main stakeholders in the transition. Residential battery attachment rates to PV systems sit at above 80% for Hawaii due to the heavy incentives from the island’s energy providers to install a battery and allow devices to provide grid support. For instance, energy provider Hawaiian Electric has a ‘battery bonus program’ cash incentive to add batteries to existing residential solar panels. In return, the batteries must provide grid support to reduce load during peak times.
In addition, the step down of net metering for PV exports has encouraged rooftop solar owners to purchase these batteries, as there is no export incentive during the day. Not allowing PV export during the day is effectively a time-of-use tariff to encourage self-consumption and storage at times of high solar irradiance, consequently allowing this household storage to discharge at peak times to relieve the Hawaiian grid.
Ultimately, Hawaii has shown that well-timed policy decisions, as well as incentives, can really drive residential flexibility.