Power to the people: giving electricity users greater choice has environmental and economic benefits

25 October 2011

By embracing ‘demand response’ – a term used to describe the willingness of end-users to vary their demand for electricity in response to changes in prices – countries can achieve a broad range of environmental and economic benefits, according to a new Information Paper released by the International Energy Agency.

Demand response takes several forms, and can involve a range of innovative products and services encouraging consumers to shift their usage from peak periods to other times in order to reduce pressure on prices and system resources on an electricity grid.

The key knock-on effect of this and other ‘demand response’ methods is that they help improve flexibility and resilience and thereby reduce pressure on electricity systems.

When greater flexibility is achieved, power systems can use a wider range of energy resources including larger volumes of variable renewable energy, as they are not under constant and significant strain to deliver electricity. (Variable sources, which include solar, wind and tidal, fluctuate depending on the weather and season, and have traditionally been seen by some as a significant challenge in power systems because they can not provide supply that is as reliable and constant as other sources of energy).

Overcoming barriers

While progress has been made in recent years, most IEA countries could substantially increase the use of demand response.

Doug Cooke, Senior Executive Advisor on Electricity Markets and Security at the IEA and author of the paper, Empowering Customer Choice in Electricity Markets, argues that there are a number of potential barriers standing in the way of the efficient and timely deployment, such as under-developed legal and regulatory frameworks. He outlines key elements that need to be put in place in order to overcome these and other barriers, and implement an integrated and successful approach to demand response.

These elements include:

  • introducing a competitive, dynamic retail market with real-time prices to encourage the development of innovative products and services that can harness ‘demand response’ effectively and at the lowest possible cost
  • ensuring there is a knowledgeable and well-informed customer base that has the capability and opportunity to take full advantage of available choices
  • allowing ready access to detailed, real-time customer information, while ensuring privacy, to help stimulate competition and improve the quality of customer choice
  • improve legal and regulatory governance frameworks that reduce uncertainty and transaction costs and
  • deploying smart metering technologies and control devices to improve the ability of users to respond, especially small volume consumers

"Pressure on power systems in the twenty-first century will continue to grow as demand increases and power flows become more dynamic with the large-scale introduction of variable renewable generation. In order to cope with this strain, greater power system flexibility and resilience will be required, which means, among other things, substantially increasing demand response. And this will only be achieved by breaking through current barriers," said Mr. Cooke.

"Governments have a key role to play in developing the right environment so that the considerable potential for greater demand response can be more fully."

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