Definition and Background of Demand Response
– Demand response is a change in power consumption to match supply and demand.
– It involves adjusting the timing and level of electricity usage.
– Demand response can be achieved through price incentives and communication with customers.
– It is a technology-enabled economic rationing system for electric power supply.
– Involuntary rationing may occur through rolling blackouts during peak load periods.
– Demand response is defined as changes in electric usage by customers in response to price or incentive payments.
– It aims to decrease electricity consumption or shift it to off-peak periods.
– Demand response can be a cost-effective alternative to adding generation capabilities.
– It is part of smart energy demand, which includes energy efficiency and renewable resources.
– DR is similar to dynamic demand mechanisms but responds to explicit requests to shut off.
Implementation and Types of Demand Response
– Demand response schemes are implemented with commercial and residential customers.
– Control systems are used to shed loads during critical time frames.
– On-site generation of electricity can supplement the power grid.
– Demand response can significantly decrease peak prices and electricity price volatility.
– It can reduce overall plant and capital cost requirements.
– Emergency demand response is used to avoid involuntary service interruptions during supply scarcity.
– Economic demand response allows customers to curtail consumption when the value of electricity is lower.
– Ancillary services demand response ensures the secure operation of the transmission grid.
– Demand response can be used to increase demand during surplus hours.
– Three types of demand response: emergency, economic, and ancillary services.
Impact on Electricity Pricing
– Demand response can make the market more elastic, resulting in lower prices.
– A 5% lowering of demand can lead to a 50% price reduction during peak hours.
– The market becomes more resilient to intentional withdrawal of offers from the supply side.
– Demand response reduces strain on the electricity market during peak demand.
– It helps balance supply and demand, avoiding price spikes and potential shortages.
Importance of Demand Response
– Small shifts in peak demand can result in significant savings for consumers and avoided costs for additional peak capacity.
– A 1% shift in peak demand can result in savings of 3.9% at the system level.
– A 10% reduction in peak demand can result in system savings of between $8 and $28 billion.
– A 5% reduction in US peak electricity demand could produce approximately $35 billion in cost savings over a 20-year period.
– Shaving peak demand based on reliable commitments can allow for a reduction in built capacity.
– Demand response can help balance supply and demand, avoiding potential disturbances and additional capital cost requirements.
Load Shedding and Incentives
– Load shedding is imposed on service areas during times of system-wide peak demand.
– Utilities may implement targeted blackouts or rolling blackouts to reduce load.
– High-use industrial consumers may be asked to turn off equipment during peak demand.
– Incentives, such as tariff-based increases in electricity prices, may be provided to encourage load shedding.
– Some businesses generate their own power to avoid buying from the grid and may impose load shedding on themselves.
– Energy consumers need incentives to respond to demand response requests.
– Utilities may create tariff-based incentives by passing along short-term increases in electricity prices.
– High-volume users may receive compensation for participating in mandatory cutbacks during peak demand.
– Users may receive rebates or other incentives for reducing power during periods of high demand.
– California offers credits to enrolled customers who lower their electricity use during emergencies. Source: https://en.wikipedia.org/wiki/Demand_response
Demand response is a change in the power consumption of an electric utility customer to better match the demand for power with the supply. Until the 21st century decrease in the cost of pumped storage and batteries, electric energy could not be easily stored, so utilities have traditionally matched demand and supply by throttling the production rate of their power plants, taking generating units on or off line, or importing power from other utilities. There are limits to what can be achieved on the supply side, because some generating units can take a long time to come up to full power, some units may be very expensive to operate, and demand can at times be greater than the capacity of all the available power plants put together. Demand response, a type of energy demand management, seeks to adjust in real-time the demand for power instead of adjusting the supply.
Utilities may signal demand requests to their customers in a variety of ways, including simple off-peak metering, in which power is cheaper at certain times of the day, and smart metering, in which explicit requests or changes in price can be communicated to customers.
The customer may adjust power demand by postponing some tasks that require large amounts of electric power, or may decide to pay a higher price for their electricity. Some customers may switch part of their consumption to alternate sources, such as on-site solar panels and batteries.
In many respects, demand response can be put simply as a technology-enabled economic rationing system for electric power supply. In demand response, voluntary rationing is accomplished by price incentives—offering lower net unit pricing in exchange for reduced power consumption in peak periods. The direct implication is that users of electric power capacity not reducing usage (load) during peak periods will pay "surge" unit prices, whether directly, or factored into general rates.
Involuntary rationing, if employed, would be accomplished via rolling blackouts during peak load periods. Practically speaking, summer heat waves and winter deep freezes might be characterized by planned power outages for consumers and businesses if voluntary rationing via incentives fails to reduce load adequately to match total power supply.
