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What exactly is demand-side management?
Managing the demand for electricity
People who do not have children of school age will try not to go on holiday during the school summer break. As we all know, prices for flights, hotels and ice-cream along the beach promenade are much lower outside the holiday period than during the high season. All those who are flexible in choosing the times for their holiday can consequently save a lot of money.
This is exactly how our electricity market will work in the future. Companies that are able to manage their production processes in a flexible manner will have the opportunity to use electricity when the prices are particularly low, for example, when there is a lot of wind. In hours of the day when demand for electricity is high, resulting in rising electricity prices, these companies can curtail their production or use previously stored energy. This is called demand-side management (DSM).
Industrial consumers smooth out fluctuations
To date, our electricity supply system has been based on the principle that power stations adjust their generation of electricity to the needs of consumers. Increased demand leads to an increase in the generation of electricity. Hence, it is still the supply side which reacts in a flexible manner. However, with the share of renewable energy in power generation increasing, this will become more difficult because the wind and the sun as providers of energy cannot be controlled. The amounts of electricity that PV systems and wind farms feed into the grid fluctuate much more than electricity generated in conventional power stations.
In the electricity market of the future, companies and private households (the so-called demand side) will react in a flexible manner to the fluctuating electricity supply provided from wind and solar power and will smooth out fluctuations. In this way, demand-side management will help to ensure that our electricity grid remains reliable (for more information about security of supply, please click here). By introducing the Electricity Market Act last year, the Federal Government has paved the way for an electricity market that is based on competition between flexible supply, flexible demand, and storage technologies.
Companies can sell flexible demand
Industrial companies, especially those in energy-intensive sectors such as the metal processing or the chemical industry, offer the largest potential for demand-side management (for details about an ongoing research project in this area, please click here). Nonetheless, medium-sized commercial companies can also benefit from DSM. Not only does DSM allow companies to reduce their energy costs, it also helps them to tap into new sources of revenue. Companies will be able to offer their flexible demand in different segments of the market: the balancing reserve market, the spot market or the market for interruptible loads.
Digitalisation opens up entirely new possibilities for adjusting the electricity demand (including the demand of private households) to the electricity generation capacities. The best time to charge so-called controllable electricity-consuming devices, such as heat pumps or night storage heaters, is when electricity is available at a low price. The batteries of electric vehicles can also primarily be recharged when the wind and the sun are generating a particularly large amount of electricity. The Act on the Digitalisation of the Energy Transition adopted last year marked the beginning of intelligently connecting electricity suppliers and consumers.