Estimating the Technical Potential of Residential Demand Response in New Zealand: A Summary of Results

Abstract

This report was prepared by researchers at the University of Otago as part of the GREEN Grid project funded by the Ministry of Business, Innovation and Employment. The report summarises our order-of-magnitude estimates of the maximum technical potential and economic value of residential electricity demand response. This work focuses on the demand response potential for three appliances - heat pumps for space heating, electric resistive hot water heating and refrigeration - due to their large electricity demand and because this demand can in principle be shifted out of peak periods (6-10 am and 5-9 pm) without significant impact on service. Note that the realisable potential has not been estimated in this report. Based on simplified demand response scenarios the analysis found that: • The greatest residential load-shifting potential is in winter, which is currently the period of maximum congestion on the network. The combination of heat pumps, electric resistive hot water heating and refrigeration makes up approximately 20% of New Zealand total winter morning and evening peak demand and could be shifted out of these periods with minor impact on users. This demand shifting could achieve a demand reduction of more than 1.2 GW in the winter peaks or an average daily energy reduction of about 5 GWh. • Shifting load out of peak periods from these three types of appliances would result in a total estimated annual saving of approximately $70 M (or 13%) relative to no load shifting. This consists of $30 M saving in current spot market prices and $40 M saving in congestion charges. Although the analysis has focused on what is technically achievable with current consumption patterns, the results suggest that the implementation of residential demand response could provide a partial solution to the problem of how to implement a future 100% renewable electricity system in the face of a projected 150-200% increase in demand. Residential demand response at scale could assist with: • Preserving New Zealand’s hydro resource in dry years; • Avoiding the need to employ high Greenhouse Gas (GHG) emissions peaking plants; • Avoiding over-investment in generation and lines capacity; • Providing greater demand flexibility to match increasing supply variability as the proportion of renewable generation tends towards 100%; and • Providing households with a means to offset energy bills by offering income-generating demand response services to lines companies and/or the system operator.