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A clothes dryer using a demand response switch to reduce peak demand
Daily load diagram; Blue shows real load usage and green shows ideal load.


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 diesel generators.

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 fail to reduce load adequately to match total power supply.



According to the Federal Energy Regulatory Commission, demand response (DR) is defined as:[1] “Changes in electric usage by end-use customers from their normal consumption patterns in response to changes in the price of electricity over time, or to incentive payments designed to induce lower electricity use at times of high wholesale market prices or when system reliability is jeopardized.” DR includes all intentional modifications to consumption patterns of electricity to induce customers that are intended to alter the timing, level of instantaneous demand, or the total electricity consumption.[2] It is expected that demand response programs will be designed to decrease electricity consumption or shift it from on-peak to off-peak periods depending on consumers’ preferences and lifestyles.[3] Demand Response can be defined as "a wide range of actions which can be taken at the customer side of the electricity meter in response to particular conditions within the electricity system (such as peak period network congestion or high prices)".[4] Demand response is a reduction in demand designed to reduce peak demand or avoid system emergencies. Hence, demand response can be a more cost-effective alternative than adding generation capabilities to meet the peak and or occasional demand spikes. The underlying objective of DR is to actively engage customers in modifying their consumption in response to pricing signals. The goal is to reflect supply expectations through consumer price signals or controls and enable dynamic changes in consumption relative to price.[5]




There are three types of demand response - emergency demand response, economic demand response and ancillary services demand response.[10] Emergency demand response is employed to avoid involuntary service interruptions during times of supply scarcity. Economic demand response is employed to allow electricity customers to curtail their consumption when the productivity or convenience of consuming that electricity is worth less to them than paying for the electricity. Ancillary services demand response consists of a number of specialty services that are needed to ensure the secure operation of the transmission grid and which have traditionally been provided by generators.

Smart grid applicationEdit

Smart grid applications improve the ability of electricity producers and consumers to communicate with one another and make decisions about how and when to produce and consume electrical power.[9][11] This emerging technology will allow customers to shift from an event-based demand response where the utility requests the shedding of load, towards a more 24/7-based demand response where the customer sees incentives for controlling load all the time. Although this back-and-forth dialogue increases the opportunities for demand response, customers are still largely influenced by economic incentives and are reluctant to relinquish total control of their assets to utility companies.[12]



One of the most important means of demand response in the future smart grids is electric vehicles. Aggregation of this new source of energy, which is also a new source of uncertainty in the electrical systems, is critical to preserving the stability and quality of smart grids, consequently, the electric vehicle parking lots can be considered a demand response aggregation entity.[13]

Electricity pricingEdit



In most electric power systems, some or all consumers pay a fixed price per unit of electricity independent of the cost of production at the time of consumption. The consumer price may be established by the government or a regulator, and typically represents an average cost per unit of production over a given timeframe (for example, a year). Consumption therefore is not sensitive to the cost of production in the short term (e.g. on an hourly basis). In economic terms, consumers' usage of electricity is inelastic in short time frames since the consumers do not face the actual price of production; if consumers were to face the short run costs of production they would be more inclined to change their use of electricity in reaction to those price signals. A pure economist might extrapolate the concept to hypothesize that consumers served under these fixed-rate tariffs are endowed with theoretical "call options" on electricity, though in reality, like any other business, the customer is simply buying what is on offer at the agreed price.[15] A customer in a department store buying a $10 item at 9.00 am might notice 10 sales staff on the floor but only one occupied serving him or her, while at 3.00 pm the customer could buy the same $10 article and notice all 10 sales staff occupied. In a similar manner, the department store cost of sales at 9.00 am might therefore be 5-10 times that of its cost of sales at 3.00 pm, but it would be far-fetched to claim that the customer, by not paying significantly more for the article at 9.00 am than at 3.00 pm, had a 'call option' on the $10 article.


Two Carnegie Mellon studies in 2006 looked at the importance of demand response for the electricity industry in general terms[19] and with specific application of real-time pricing for consumers for the PJM Interconnection Regional Transmission authority.[20] The latter study found that even small shifts in peak demand would have a large effect on savings to consumers and avoided costs for additional peak capacity: a 1% shift in peak demand would result in savings of 3.9%, billions of dollars at the system level. An approximately 10% reduction in peak demand (achievable depending on the elasticity of demand) would result in systems savings of between $8 to $28 billion.


Electricity grids and peak demand responseEdit




Some grids may use pricing mechanisms that are not real-time, but easier to implement (users pay higher prices during the day and lower prices at night, for example) to provide some of the benefits of the demand response mechanism with less demanding technological requirements. In the UK, Economy 7 and similar schemes that attempt to shift demand associated with electric heating to overnight off-peak periods have been in operation since the 1970s. More recently, in 2006 Ontario began implementing a "smart meter" program that implements "time-of-use" (TOU) pricing, which tiers pricing according to on-peak, mid-peak and off-peak schedules. During the winter, on-peak is defined as morning and early evening, mid-peak as midday to late afternoon, and off-peak as nighttime; during the summer, the on-peak and mid-peak periods are reversed, reflecting air conditioning as the driver of summer demand. As of May 1, 2015, most Ontario electrical utilities have completed converting all customers to "smart meter" time-of-use billing with on-peak rates about 200% and mid-peak rates about 150% of the off-peak rate per kWh.

Australia has national standards for Demand Response (AS/NZS 4755 series), which has been implemented nation wide by electricity distributors for several decades, e.g. controlling storage water heaters, air conditioners and pool pumps. In 2016, how to manage electrical energy storage (e.g. batteries) has been added into the series of standards.

Load sheddingEdit


Incentives to shed loadsEdit

Energy consumers need some incentive to respond to such a request from a demand response provider (see list of providers below). Demand response incentives can be formal or informal. For example, the utility might create a tariff-based incentive by passing along short-term increases in the price of electricity, or they might impose mandatory cutbacks during a heat wave for selected high-volume users, who are compensated for their participation. Other users may receive a rebate or other incentive based on firm commitments to reduce power during periods of high demand,[23] sometimes referred to as negawatts.[22]



Application for intermittent renewable distributed energy resourcesEdit

The modern power grid is making a transition from the traditional vertically integrated utility structures to distributed systems as we begin to integrate higher penetrations of renewable energy generation. These sources of energy are often diffusely distributed and intermittent by nature. These features introduce problems in grid stability and efficiency which lead to limitations on the amount of these resources which can be effectively added to the grid. In a traditional vertically integrated grid, energy is provided by utility generators which are able to respond to changes in demand. Generation output by renewable resources is governed by environmental conditions and is generally not able to respond to changes in demand. Responsive control over non-critical loads which are connected to the grid has been shown to be an effective strategy which is able to mitigate harmful fluctuations introduced by these renewable resources.[24] In this way instead of letting the generation respond to changes in demand, we have the demand respond to changes in generation. This is the basis of demand response. In order to implement demand response systems, we must be able to coordinate large numbers of distributed resources through sensors, actuators, and communications protocols. To be effective, the devices need to be economical, robust, and yet still effective at managing their tasks of control. In addition, a strong control mechanism must be created which is able to coordinate over large networks of devices to manage and optimize these distributed systems both from an economic standpoint and a security standpoint in grid stabilization.

In addition, the increased presence of variable renewable generation drives a greater need for authorities to procure more ancillary services (AS) for grid balance. One of these services is contingency reserve (CR), which is used to regulate the grid frequency in contingencies. Many independent system operators (ISO) are structuring the rules of AS markets such that demand response (DR) can participate alongside traditional supply-side resources. The available capacity of the generators can be used more efficiently for power production which they were designed for and not CR, thereby cutting costs and reducing pollution. As the ratio of inverter-based generation compared to conventional generation increases, the mechanical inertia used to stabilize frequency decreases. When coupled with the sensitivity of inverter-based generation to transient frequencies, the provision of ancillary services from other sources than generators becomes increasingly important.[25][26]

Technologies for demand reductionEdit

Technologies are available, and more are under development, to automate the process of demand response. Such technologies detect the need for load shedding, communicate the demand to participating users, automate load shedding, and verify compliance with demand-response programs. GridWise and EnergyWeb are two major federal initiatives in the United States to develop these technologies. Universities and private industry are also doing research and development in this arena. Scalable and comprehensive software solutions for DR enable business and industry growth.



Other methods to implementing demand response approach the issue of subtly reducing duty cycles rather than implementing thermostat setbacks.[30] These can be implemented using customized building automation systems programming, or through swarm-logic methods coordinating multiple loads in a facility (e.g. Encycle's EnviroGrid controllers).[31][32][33]

Similar approach can be implemented for managing air conditioning peak demand in summer peak regions. Pre-cooling or maintaining slightly higher thermostat setting can help with the peak demand reduction[34].

In 2008 it was announced that electric refrigerators will be sold in the UK sensing dynamic demand which will delay or advance the cooling cycle based on monitoring grid frequency [35] but they are not readily available as of 2018.

Industrial customersEdit

Industrial customers are also providing demand response. Compared with commercial and residential loads, industrial loads have the following advantages:[36] the magnitude of power consumption by an industrial manufacturing plant and the change in power it can provide are generally very large; besides, the industrial plants usually already have the infrastructures for control, communication and market participation, which enables the provision of demand response; moreover, some industrial plants such as the aluminum smelter[37] are able to offer fast and accurate adjustments in their power consumption. For example, Alcoa's Warrick Operation is participating in MISO as a qualified demand response resource,[38] and the Trimet Aluminium uses its smelter as a short-term mega-battery.[39] The selection of suitable industries for demand response provision is typically based on an assessment of the so-called value of lost load.[40]

Short-term inconvenience for long-term benefitsEdit


Importance for the operation of electricity marketsEdit





US Energy Policy Act regarding demand responseEdit



To encourage the use and implementation of demand response in the United States, the Federal Energy Regulatory Commission (FERC) issued Order No. 745 in March 2011, which requires a certain level of compensation for providers of economic demand response that participate in wholesale power markets.[43] The order is highly controversial and has been opposed by a number of energy economists, including Professor William W. Hogan at Harvard University's Kennedy School. Professor Hogan asserts that the order overcompensates providers of demand response, thereby encouraging the curtailment of electricity whose economic value exceeds the cost of producing it. Professor Hogan further asserts that Order No. 745 is anticompetitive and amounts to “…an application of regulatory authority to enforce a buyer’s cartel.”[44] Several affected parties, including the State of California, have filed suit in federal court challenging the legality of Order 745.[45] A debate regarding the economic efficiency and fairness of Order 745 appeared in a series of articles published in The Electricity Journal.[46][47][48]

On May 23, 2014, the D.C. Circuit Court of Appeals vacated Order 745 in its entirety.[49] On May 4, 2015, the United States Supreme Court agreed to review the DC Circuit's ruling, addressing two questions:

  1. Whether the Federal Energy Regulatory Commission reasonably concluded that it has authority under the Federal Power Act, 16 U. S. C. 791a et seq., to regulate the rules used by operators of wholesale electricity markets to pay for reductions in electricity consumption and to recoup those payments through adjustments to wholesale rates.
  2. Whether the Court of Appeals erred in holding that the rule issued by the Federal Energy Regulatory Commission is arbitrary and capricious.[50]

On January 25, 2016, the United States Supreme Court in a 6-2 decision in FERC v. Electric Power Supply Ass'n concluded that the Federal Energy Regulatory Commission acted within its authority to ensure "just and reasonable" rates in the wholesale energy market.[51]

Demand reduction and the use of diesel generators in the UK National GridEdit

As of December 2009 UK National Grid had 2369 MW contracted to provide demand response, known as STOR, the demand side provides 839 MW (35%) from 89 sites. Of this 839 MW approximately 750 MW is back-up generation with the remaining being load reduction.[52] A paper based on extensive half-hourly demand profiles and observed electricity demand shifting for different commercial and industrial buildings in the UK shows that only a small minority engaged in load shifting and demand turn-down, while the majority of demand response is provided by stand-by generators.[53]

See alsoEdit


  6. ^ [1] Description of French EJP demand reduction tariff
  8. ^ "Electric vehicles connection to microgrid effects on peak demand with and without demand response". IEEE Conference Publication. 2017-12-18. Retrieved 2018-01-07.
  11. ^ Siano, Pierluigi (2014). "Demand response and smart grids - A survey". Renewable and Sustainable Energy Reviews. 30: 461–478. doi:10.1016/j.rser.2013.10.022.
  12. ^ Giordano V.; Meletiou, A.; Covrig, C. F.; Mengolini, A.; Ardelean, M.; Fulli, G; Jiménez, M. S.; Filiou, C. (2013). "Smart Grid Projects in Europe: Lessons learned and current developments" (PDF). JRC Scientific and Policy Report. Retrieved 3 May 2014.
  13. ^ Shafie-khah, Miadreza, et al. "Optimal behavior of electric vehicle parking lots as demand response aggregation agents." IEEE Transactions on Smart Grid 7.6 (2016): 2654-2665. doi: 10.1109/TSG.2015.2496796
  16. ^ Monthly Market Report - July 2006
  17. ^
  18. ^ Liasi, Sahand; Bathaee, Seyed (20 December 2017). "Optimizing microgrid using demand response and electric vehicles connection to microgrid". Smart Grid Conference (SGC): 1–7. doi:10.1109/SGC.2017.8308873. ISBN 978-1-5386-4279-5. Retrieved 29 March 2018.
  19. ^ CEIC Working Paper Abstract
  20. ^ CEIC Working Paper Abstract
  22. ^ a b Tyler Hamilton (August 6, 2007). "A megawatt saved is a 'negawatt' earned". The Toronto Star.
  23. ^ Description of French EJP tariff - Claverton Energy Group Archived July 7, 2012, at
  24. ^ Reihani, Ehsan; Thornton, Matsu; Reihani, Ehsan; Ghorbani, Reza (2016). "A novel approach using flexible scheduling and aggregation to optimize demand response in the developing interactive grid market architecture". Applied Energy. 183: 445–455. doi:10.1016/j.apenergy.2016.08.170 – via Elsevier Science Direct.
  25. ^ Motalleb, Mahdi; Thornton, Matsu; Reihani, Ehsan; Ghorbani, Reza (2016). "A nascent market for contingency reserve services using demand response". Applied Energy. 179: 985–995. doi:10.1016/j.apenergy.2016.07.078 – via Elsevier Science Direct.
  26. ^ Motalleb, Mahdi; Thornton, Matsu; Reihani, Ehsan; Ghorbani, Reza (2016). "Providing frequency regulation reserve services using demand response scheduling". Energy Conversion and Management. 124: 439–452. doi:10.1016/j.enconman.2016.07.049 – via Elsevier Science Direct.
  28. ^ Peaksaver
  30. ^ Smart Grid: Taking our cue from nature
  31. ^ Katie Fehrenbacher. "Is Smart Energy Poised to Swarm California?". Archived from the original on 2009-02-21.
  32. ^ MIT Technology Review: Managing Energy with Swarm Logic, Feb 04 2009
  33. ^ EnviroGrid Controllers employ Swarm Logic for Smart Grid Applications
  34. ^ L. Liu, W. Miller, and G. Ledwich, "Community centre improvement to reduce air conditioning peak demand," presented at the 7th International Conference on Energy and Environment of Residential Buildings, Queensland University of Technology, Brisbane, Qld, Australia, 2016. Available:
  35. ^ "BBC talks about Dynamic Demand (smart fridges) and Smart Metering".
  37. ^ Zhang, X.; Hug, G. (2014). "Optimal regulation provision by aluminum smelters". 2014 IEEE PES General Meeting: Conference & Exposition. pp. 1–5. doi:10.1109/PESGM.2014.6939343. ISBN 978-1-4799-6415-4.
  39. ^ "Storing Power in Molten Aluminum Lakes".
  40. ^ Praktiknjo, Aaron (2016). "The Value of Lost Load for Sectoral Load Shedding Measures: The German Case with 51 Sectors". Energies. 9 (2): 116. doi:10.3390/en9020116.
  41. ^ "How Smart Is The Smart Grid?". 7 July 2010.
  43. ^ "FERC: News Release: FERC approves market-based demand response compensation rule". 15 March 2011.
  50. ^
  51. ^
  53. ^ Grunewald, P.; J. Torriti (2013). "Demand response from the non-domestic sector: Early UK experiences and future opportunities". Energy Policy. 61: 423–429. doi:10.1016/j.enpol.2013.06.051.