Unlocking the potential of demand flexibility in homes

Harnessing modern technology has the potential to make the energy system more resilient and affordable. By reducing grid congestion, smart technology can lessen the need for costly upgrades, while ensuring energy is there when it is needed. Modern technology can also help us make the most of low-cost renewable energy e.g. solar and wind.

Demand flexibility in New Zealand homes 

Demand Flexibility has the potential to fundamentally change how New Zealanders use electricity. If households can use products that allow them to be smart and flexible about their energy use, it could mean lower electricity bills at the household level and offer significant benefits for New Zealand’s electricity system. 

In the context of this consultation, demand flexibility involves two-way communication between end-use products and an external party – enabling a demand flexible system that meet the electricity system’s needs, while the consumer maintains control over how their products operate. The external party that adjusts energy use could be either an in-home controller (or virtual system) such as a Home Energy Management System (HEMS) or a flexibility provider.  

Examples of residential end-use products that could operate in a demand flexible way in homes include EV chargers, heat pumps and electric water heaters (including heat pump water heaters). 

Demand flexibility is not to be confused with demand response, which is one-way communication between an end-use product and the grid in response to peak demand constraints e.g. inadequate levels of electricity supply. A common example of demand response is ripple control of electric hot water cylinders to turn off at peak times via a signal from an electricity distribution business. 

Instead, it is two-way communication that can directly benefit the consumer, while helping the electricity system operate in a cleaner, more affordable and more efficient way.  

Flexibility in our energy use can be used to shift when and how energy is consumed, resulting in less peak demand on the electricity system. It can help to manage intermittent renewable supply of electricity (for example from solar and wind generation) and manage peak demand (for example lowering the peak on winter evenings by shifting demand to other times), making energy more resilient and affordable as well as lowering emissions. 

Wider policy decisions and regulatory changes are progressing across Government (including the Ministry of Business Innovation and Employment, the Electricity Authority and the Commerce Commission) to encourage uptake of demand flexible technology and enable consumers and the wider electricity system to benefit.