How to cope with rising electricity prices: energy flexibility and Virtual Power Plant

Korea Electric Power Company (KEPCO), South Korea's electricity company, has decided to freeze electricity prices for the second quarter of 2024. In 2023, KEPCO raised the rates three times: by 13.1 KRW per kilowatt hour (kWh) in the first quarter, 8 KRW in the second quarter and 10.6 KRW in the fourth quarter, which was confined to commercial electricity use. Industry watchers, however, anticipate that KEPCO will continue to face pressure to raise prices this year as its losses continue to mount.¹

In face of the rising electricity prices challenge, large commercial and industrial energy users can respond positively by utilizing flexible demand and joining virtual power plants to help stabilize the power grid, while also obtaining new revenue opportunities.

In the Zero Emissions scenario, given the gradual electrification of end-users and the increase in the number of renewable energy plants, we are witnessing a growing electricity demand. A demand that “weighs” on the grid and obviously has an impact on transmission and distribution infrastructure. Grids, as well as the measures aimed at strengthening them and making them stronger and smarter, are therefore increasingly critical for the transition to clean energy.

By 2030, if we want to achieve the objectives of the 2050 Agenda on climate and energy sustainability, electricity use worldwide will have to increase by 20% over the previous decade. This is according to an IEA report from October 2023, Electricity Grids and Secure Energy Transitions, on the role grids play in the paradigm shift we are now seeing. In this scenario, grid expansion and diversification is key to supporting decarbonization, guaranteeing electricity supply, and effectively integrating renewable sources. By 2040, countries around the world will have to add or renew a total of more than 80 million kilometers of grid.

DR programs are not only a useful tool for responding to the growing demand for electricity, improving grid stability, and managing the impact of renewables. They are also an advantageous solution for businesses wanting to increase their profits using sustainability, and for grid operators, who save on the expenses required to install new capacity.

United States Cold Storage, a leading American cold storage logistics company, was a pioneer in participating in the Demand Response programs provided by Enel X. 15 years ago, the company, which used significant quantities of energy to support its core business, understood the program’s potential, entering into a partnership and quickly expanding it to over 20 distribution sites in the continental United States.

United States Cold Storage participated the DR program through temporarily shut down the freezer to reduce energy use. Because there are so many frozen products in the freezers, there is large thermal inertia—a decrease in refrigeration for the length of an event has no significant effect on the temperature in the freezers, and no risk to the operations of the refrigeration equipment. Merely in 2022, United States Cold Storage obtained an economic return of about 4 million dollars.

Daniele Andreoli, Head of Global Flexibility Solutions at Enel X points out that "Small changes in energy use can have a huge impact if aggregated at scale." This is also where the advantage of Enel X's virtual power plant lies, as it aggregates numerous distributed flexible demands, enabling it to harness the power of aggregation to help stabilize the power grid.

Enel X’s customers can be found in all industries, currently in Korea includes those in retail, data centers, electronics, manufacturing, government offices, transportation, hotels, universities, and more. Participating in Demand Response programs with demand flexibility causes no obvious changes for energy users or, more importantly, any impact on product quality. And this helps decarbonize the grid, avoiding costly investments in building new power plants, and earning from the energy made available. Demand Response is a direct and efficient way to cope with electricity price impact for large energy users. And also a perfect ally for achieving Zero Emission goals.