What is the New South Wales Peak Demand Reduction Scheme?

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The New South Wales Government is preparing to launch the Peak Demand Reduction Scheme (PDRS)  which aims to reward businesses and households that shift energy use away from periods of peak demand.

The scheme was first drafted in 2021 and is set to come into effect towards the end of 2022.

It aims to take pressure off the electricity grid and shift energy use to periods where solar-generated energy is cheap and abundant in supply.

It is also part of the NSW strategy to achieve the goal of Net Zero emissions by 2050. 

The scheme has been hailed as a world first by NSW Energy Minister Matt Kean who said that consumers can expect to save a total of $1.2 billion in energy costs over the next 18 years through to 2040.

In simple terms, the NSW Peak Demand Reduction Scheme will focus on energy tasks that are not time critical and can be moved to different times of the day when demand is lower.

The scheme also aims to offer incentives for businesses to install products such as batteries, timers, smart pumps, heat pumps, smart lighting, energy-efficient lighting and others to lower their overall consumption.

Mr Kean said that if all backyard pool pumps and filters were used outside peak demand periods, the state could save up to 450MW of power.

To frame it in context, he said that is more than the generating capacity of one unit at AGL’s Liddell power plant which is scheduled to close in April 2023.

Smart meters, which can record real-time consumption data, are needed for the scheme to work.

The NSW Government is investing $25 million in the scheme to support the development of emerging technologies and software that allow households and businesses to use power when it is cheap and abundant.

How will the Peak Demand Reduction Scheme work?

The NSW Peak Demand Reduction Scheme scheme will focus on forms of electricity consumption that can be shifted to periods of low demand, or even turned off completely for short periods.

These include, but are not limited to:

  • Air conditioners 
  • Heat pump water heaters 
  • Refrigerated cabinets 
  • Ventilation motors 
  • Refrigeration motors 
  • Pool pumps
  • Spare fridges and freezers

Through the scheme, energy users will be given a discount when installing energy-efficient products that can operate more during ‘off-peak’ periods when electricity is generally cheaper, and demand on the energy system is lower.

Households and businesses that invest in energy-efficient appliances will be provided with a certificate valid for three years.

Energy users will only be eligible for PDRS if they can provide 0.1 kW of demand reduction for 1 hour. 

Why reduce peak demand?

The PDRS  sub-objectives are aligned with the Safeguard objectives, which are focused on improving reliability by reducing NSW peak demand, improving affordability by placing downward pressure on NSW wholesale electricity prices and improving sustainability by increasing load flexibility.

Reducing peak demand reduces stress on the energy grid.

If supply does not meet demand and the power frequency on the grid changes by more than 1 hertz, generation and transmission equipment can be severely damaged.

If the problem is not contained, the grid may suffer from physical damage. Any equipment or appliances that use electricity can also be damaged if this happens. 

Uncontrolled outages or load shedding events where power is intentionally cut to relieve stress on the grid and bring it back onto an even keel.

Whether it’s a cafe or a factory, businesses are often the hardest hit when this happens, and they are forced to shut down operations until power is restored.

Peak demand is also a major cause of high electricity prices.

Aside from market forces where a commodity such as electricity fetches very high prices when demand is high and supply is tight, investment considerations are also at play.

To ensure supply is always available, networks are built to exceed the capacity necessary to meet peak demand. 

So this means investment decisions to increase network capacity are based on forecasts of our peak demand for electricity, contributing to higher prices.

The transition to renewable energy, particularly solar energy, has created a new problem for the energy grid. 

Electricity demand is fairly high in the morning as people go about their pre-work routine.

That demand bottoms out and can even go into negative territory as solar energy ramps up between 10 am and 4pm. 

When everyone gets home from work, cookers, heaters, televisions and hundreds of other appliances are suddenly switched on causing demand to go through the roof.

This also affects the spot market because as mentioned earlier when demand is high, and supply is tight, market forces kick in.

The phenomenon is known as the duck curve and flattening it is one of the aims of the Peak Demand Reduction Scheme.

When is the NSW peak energy demand period?

The New South Wales Peak Demand Reduction scheme requires participants to reduce peak demand during the Peak Demand Reduction Period between 2.30pm and 8.30pm from 1 November to 31 March (Electricity Supply Act 1995).

Winter and Summer are typically the seasons where households and businesses consume a high level of electricity air by using conditioners, heaters, swimming pools, clothes dryers and other appliances. 

Customer invoices will vary as prices depend on the time of use tariffs such as Peak, Off – Peak and Shoulder.

Peak, off-peak and shoulder tariffs, vary across different retailers and distribution networks across New South Wales.

Need help from an energy expert?

If you are having trouble understanding the scheme, one of our energy experts can help you understand it.

If you need assistance finding an electricity and energy contract that fits your business needs and objectives, we’re the energy brokers in Australia that can guide you with that. 

Call Leading Edge Energy today, obligation-free, on tel:  1 300 852 770  or email us at info@leadingedgeenergy.com.au to speak with an energy management consultant about starting your journey to commercial energy bill savings.

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