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What is Demand Response?


Josh Schellenberg Published: 23 February 2010 9:00 PM UTCPosted in: Demand ResponseTags: Demand Response

From reading comments on EnergyDSM.com and LinkedIn, I get the sense that there is a bit of misunderstanding about demand response.  Here is the explanation that I use.  Please comment on how this compares and contrasts with your understanding of demand response.

Demand and supply on the electricity grid need to be in balance at all times.  Therefore, system operators meticulously monitor and forecast energy demand in order to provide the matching amount of supply throughout the day and year.  When the matching amount of supply is either unavailable or expensive to acquire., demand response plays a key role.  Without demand response, electricity would be less reliable and more expensive.

There are two types of demand response:

Emergency demand response: When electricity demand peaks during the middle of a day with unusually hot or cold weather conditions, the matching amount of supply may not be available.  In order to avoid a power outage, electric utilities call upon their emergency demand response programs.  For example, California utilities have a program where large commercial and industrial customers reduce their electric load to a previously agreed upon level during emergencies.  Although this program is only called upon once every two or three years, it has helped avoid costly power outages.

Economic demand response: As electricity demand increases, the cost to acquire supply increases.  When demand is low, supply comes from relatively inexpensive base load generation, such as coal or nuclear power.  When demand is high and base load generation is exhausted, supply comes from relatively expensive peaking generators.  Although residential customers pay a flat rate, the price their utility pays for electricity generation constantly changes.  The flat rate you pay reflects the average cost to deliver the electricity throughout the year.  Economic demand response lowers that average cost by providing incentives for customers to use electricity off-peak.  For example, many utilities offer time-of-use electric rates, which are higher during the day and lower at night.

Electricity is more reliable with emergency demand response, and less expensive with economic demand response.  Anything that makes a product more reliable and less expensive will grow in popularity.  Look for demand response to expand and gain more regulatory support in the years to come.