iRC Funding Spotlight - Is IT effective in coordinating energy transition markets?

In mid-January of 2024, Calgary temperatures dropped well below record lows with average highs in the -20s and lows in the -40 degrees Celsius for days on end. People were inside, thermostats were turned up and people were using more energy than usual during their forced hibernation. On a Friday evening, the Alberta Government issued an Emergency Alert to the public on behalf of Alberta Electric System Operator (AESO) with a request: please limit your energy use to essential needs only as we are reaching a breaking point. The electricity grid was becoming overloaded with demand, fossil fuel Peaker plants were at maximum capacity and still the potential for system disruption was pending.

People responded to the alert by turning off their lights, TVs, and appliances; limiting their energy use so that the grid would not overload during the brutal cold snap. As result, the grid was able to manage essential demand like lights and heating without rolling outages or, in a different and more extreme scenario seen in Texas in 2021, a complete system failure [1]. 

The above event in Alberta relied on the public limiting their use of non-essential electricity during an extended peak demand period and due to cold temperatures to circumvent limited but unusual capacity stress on the grid. 

As Assistant Professor Vaarun Vijairaghavan, Ph.D. explains, use of Peaker plants during peak energy demand periods are less energy efficient than a steady state energy grid but are daily occurrences, 

“One of the challenges of the (current) electric grid is that we’ve got limited capacity and that the capacity is in different types of generation (nuclear, hydro etc.) which generate base power and in natural gas which is used in Peaker plants.…these Peaker plants turn on for an average of 20 minutes per day, you can imagine the underutilization of capacity…they turn on only when there is peak demand. We don’t want to be in the state of turning Peaker plants on and off for short durations each day. We want to be in a steady state with less fluctuation. Yet, we have big capacity investment in these Peaker plants.”

Coordinating electricity demand while also increasing energy productivity through Information Technology (IT) investments is a primary objective of Vijairaghavan's recent SSHRC Insight Development Grant (2023-2025), Improving energy productivity through Information Technology, with Co-Investigator BTMA Professor Barrie R. Nault, Ph.D. The project focuses on the potential role of IT investments in the coordination of energy markets as well as the impact of demand-response consumer pricing on energy capacity. A component of this theory is that when peak demand is high, higher prices would deter the consumer from using non-essential energy devices to improve grid capacity.

The research team hypothesizes that, in addition to other benefits of IT in the Smart Grid, IT applied to our electricity grid through a pricing mechanism is likely to increase capacity and increase usage efficiency. And that, as was the case during the Alberta example above, essential electricity like heating your home can be easily differentiated by non-essential electricity like using your TV with the help of more integrated IT systems. In addition, the research team is looking at how an IT platform can facilitate this coordination.

“We are trying to design a coordination mechanism which will ensure that all the players in the supply chain (generation, transmission, distribution, and consumers) coordinate their IT investments. When they coordinate their investments, we think that there will be some increased overall efficiency of the electric grid.”

Although demand-response energy pricing is a well proven concept in mitigating fluctuations, the potential role of Smart Grid systems and IT investments in improving coordination, especially for electric energy markets such as renewable, non-fossil fuel energy resources, and conversion of fossil fuel energy to electric energy, has not been studied in-depth in Canada. 

“As Canadians, we consume a lot of energy, but can we find a better way to consume energy? In our project we look at ways to increase customer adoption of demand-response (technologies) which can lower peak demand, and thus both increase the efficiency of electric grid use and increase the effective capacity of the grid. Capacity is not free in terms of climate change because capacity has its own effects on climate.”

“At the broadest level our hypothesis is that IT investments increase total energy productivity—when you have more IT, it takes less energy for an equal amount of output. We also hypothesize that if you split energy into electric energy and non-electric energy, then IT has a bigger effect on electric energy than non-electric energy. So, the productivity of electric energy will increase more than the productivity of non-electric energy (with IT coordination).”

The research team is looking at how two types of technology can be used to improve energy productivity: Energy Management Systems (EMS) and Demand-Response Applications. And EMS is a central master control system responsible for monitoring electricity pricing and for controlling a consumer’s electricity consuming devices, everything from using your dishwasher and television to charging your Electric Vehicle (EV). And a Demand-Response Application is an app that is connected to these devices allowing activation when it receives a signal from the EMS. 

“We model customer adoption of these technologies…Our model starts at the point where the EMS system sees a price and responds to that price.”

And although there are some examples of  individual devices available that have some limited demand-response capability, EMSs that can control a broad selection of devices are not widely available. The centralized coordination platform is designed to increase the breadth of available energy management systems and Demand-Response-apps.

“Broadly speaking, we are trying to describe a mechanism that can be helpful. A critical motivation of this is where you have uncoordinated IT investments within the supply chain. If generators make large Smart Grid investments but (others) don’t, then the overall benefits of the Smart Grid are limited. You want to coordinate IT investments between (all players). This is the core idea of this research.”

Vijairaghavan admits that until mass coordination adoption occurs, the prices and the availability of these technologies may be a barrier for consumers but that,

“(technology) adoption is going to increase as technology prices decrease and availability increases and so we would like these prices to be lower and availability to be higher. We are also trying to figure out if that will (happen) as result of this coordination.”

_{[1] In the case of Texas, the system outage was partly due to their energy system being separate from other sources. In Alberta, we share energy resources between provinces and districts to prevent system failures. However, during the emergency event, other provinces were also experiencing stressed systems due to cold temperatures.}