A smarter grid

As our electricity demand increases and we transition toward greater use of renewable energy sources, demand management is becoming increasingly important.

A ‘smart grid’ has the potential to automatically optimise electricity consumption and generation across households, businesses and industry, leading to a more efficient and affordable energy system for all.

Supporting a sustainable energy system

Most of New Zealand’s electricity (around 80–85%) comes from renewable generation. One of the challenges of renewable electricity supply is that some sources are ‘intermittent’. For example, solar and wind energy are not continuously available, but fluctuate depending on time of day and weather conditions. New Zealand relies on hydro as a baseload source of energy, but even hydro supply can vary during times of low rainfall or ‘dry years’.

At ‘peak’ times, and/or when there is not enough renewable electricity supply to meet demand, the gap is filled by increasing fossil fuel generation. In New Zealand, electricity use peaks in the mornings and early evening, when residential use of heating and appliances is highest. Peaks are higher in winter due to increased heating demand.

As we move more of our energy usage to electricity (for example, as more people buy electric cars, and industry transitions from coal), it will be increasingly important to ensure we aren’t using electricity unnecessarily during peak periods.

Building more electricity infrastructure to meet peak demand is expensive, and ultimately increases the cost of power for all consumers. Using smart devices to manage demand peaks, and therefore reduce our infrastructure needs, has the potential to avoid overinvestment in New Zealand's electricity supply system. Transpower estimates that every gigawatt of peak demand avoided would save consumers approximately $1.5 billion.

Reducing peak demand relieves pressure on the grid


Current demand response measures

Demand response is one-way communication from electricity suppliers to devices. The most common example in New Zealand is ripple control of hot water which has been used since the 1950s, and allows suppliers to turn off consumers’ electric hot water systems when demand on the grid threatens to outweigh supply.

Businesses may also have demand response agreements with their electricity supplier, where they can choose to accept a request to reduce demand in exchange for financial reward.

Additionally, electricity users can be motivated to voluntarily shift their electricity demand to off-peak hours through lower-priced electricity rates and plans, or in response to an alert from suppliers.

A smart grid system enables automation of this process, while also ensuring control remains in the hands of the electricity users.

Smart grid system

A ‘smart grid’ system enables electricity supply and demand to be balanced through the use of connected technologies and two-way communication.

The two key elements of a smart grid are:

  • Demand flexibility – Two-way communication between smart devices and flexibility service providers, allowing flexible response to demand peaks, with more consumer control. This can be achieved automatically through the use of ‘smart’ devices (such as EV chargers, heat pumps and hot water thermostats) that have the capacity to communicate with the grid and react to demand and pricing signals, dialling energy use up or down in line with user preferences.
  • Distributed energy resources – Localised electricity generation and/or storage devices such as rooftop solar and batteries. Distributed energy resources need to be 'smart' to optimise energy use. The smart two-way communication enables homes to use home-generated electricity and storage to reduce their demand on the grid during times of high demand. They can also lower demand by selling excess electricity supply back to the grid. 

Flexible home energy demand

A ‘smart home’ is a household with smart devices capable of two-way communication with electricity suppliers. The smart device can respond to pricing and demand signals to optimise energy use in accordance with user preferences.  

The biggest opportunities to shift demand are in the home’s space heating, water heating and EV charging which make up most of the household’s energy demand. 

Smart chargers provide a great entry point for EV owners to start thinking about their home energy use and how best to manage this.  

As EV ownership in New Zealand increases, it is estimated that widespread use of smart chargers could save $4 billion in network costs by 2050. 

Residential smart EV chargers and demand flexibility

Smart commercial and industrial electricity use

The ability to dynamically switch fuels, adjust production rates and optimise energy demands can make a huge difference to the resilience and profitability of an energy-intensive commercial or industrial operation, while contributing to the stability of the electricity grid.

Businesses can optimise energy use within their facilities by deploying smart energy management systems that adjust lighting, HVAC, and other equipment settings based on occupancy, weather conditions, and energy prices.

Many businesses are investing in on-site renewable energy generation, to supplement grid electricity supply, primarily through the use of solar panels. When combined with battery storage, this system allows businesses to smooth out their electricity consumption profile, reduce peak demand charges, and provide grid support services like feeding electricity back into the grid when needed.

Household contribution to electricity demand management


Demand flexibility trial

To help meet the challenge of increasing electricity demand, EECA has partnered with industry which is represented by the Electricity Engineers’ Association (EEA) on the Demand Flexibility Common Communication Protocols Project (FlexTalk).

The joint project has published its final industry report, along with a technical insights document. The project concluded that any adopted protocol should provide standardised functionalities, including real-time data exchange, interoperability, security, scalability, maintainability, platform independence, backward and forward compatibility, and non-proprietary characteristics. 

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