Sounds magical, doesn't it? Yet it's a clever idea which makes sense.
It works like this.
About 40% of total electricity demand is by households. Some of that demand is for devices which need to be instantly on when we switch them on, like lights, the kettle or TVs. However, a big chunk of demand is for devices which don't need to be on at a precise time. For example, geysers (water heaters) tend to switch on when the temperature of the water in the geyser drops below a certain point. But in fact, the geyser could wait for 15 minutes or an hour after that point before it turns on, depending on the state of demand in the grid. As long as the water is hot when we need it, or the EV is charged in the morning, or the house cooled, or the swimming pool's water filtered, we don't really care precisely when the energy was delivered to make those things happen.
How it would work in the case of a geyser is that instead of turning on automatically when the temperature drops below the desired level, the geyser would send a request to the grid, asking for a "packet" of energy, say 5 minutes of usage. The grid would then approve or deny each request based on grid conditions. Sometimes the need for electricity is more critical. For example, when the water temperature in the geyser has fallen a lot from the desired level, it would send more requests for packets to the grid more often. An automated central control system would handle all the requests for energy "packets" to shape the load in real time. When wholesale prices are high, the automated operator would delay or reduce the sale of "packets" of electricity, when low, it would facilitate them.
This is a version of "demand management", where big users get a discount on their electricity bills if they agree to being cut off from the grid for, say, 10 hours a year for an hour at a time when demand is high or supply low, except it would be automatic. Packetised energy management (PEM), as this system is called, is cleverer than manually controlled demand management precisely because it's automatic and real time. If demand is temporarily too high, demands for some "packets" of electricity would be denied, so that supply and demand would move back into balance. When there might potentially be surplus electricity, so output needed to be curtailed, all packet requests would be accepted. Your water would still be hot, your EV charged, your pool water filtered, your house cooled but the electricity that drove your devices would have been drawn from the grid when supply was high and electricity prices low.
It's odd to think we've never had this before. The grid has been set up to supply all demand instantly, no matter how erratic demand might be, which means it needs far more capacity to cater for excess demand than if it had more control, yet on the other hand often has too much capacity when demand is low, leading to negative prices.
If every household in California and New York had just one device that could consume power flexibly, the power grid would have the equivalent of 15 GW of additional capacity, which is more than 10 times the amount currently available from utility-scale battery storage in these states.
This video from Just Have a Think explains it very well.
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