Demand response entails shifting the power load according to external signals, typically the price of a megawatt-hour of electricity at a certain moment. Demand response is seen as an opportunity to adjust load according to system conditions. The flexibility from the demand side provides an opportunity to facilitate the integration of larger shares of variable generation sources, which will be a key challenge for future decarbonised power systems.

About demand response

Demand response programmes offer electricity consumers the opportunity to intentionally shift their load either in response to price signals or in exchange for an incentive. Through this load shifting, demand response programmes offer the possibility to downsize the pressure on the transmission and/or the distribution network, i.e. increase the load on a voluntary basis either when the power supply is more available, for example, due to large output from variable renewables sources, or to reduce the load when the power supply is particularly tight or at peak levels, without significant impact on the daily life of consumers.

Demand response technologies can typically be deployed at three distinct levels, with an impact proportional to the scale of consumption:

• at the industrial level, when large manufacturing plants have the flexibility to adjust production processes to electricity prices in order to decrease their energy costs.
• at the commercial level, typically through automated solutions to manage air conditioning or lighting systems, also in order to decrease energy costs.
• at a residential level, with smart appliances linked to automated solutions in order to minimize the impact of demand response on daily life, motivated through commercial offers – which are usually proposed by aggregators so as to reach the critical number of consumers needed to make demand response impactful in the wider electricity system.

In Re-powering Markets, the IEA emphasises the need deploy demand response technologies and the importance of increasing the demand elasticity through price signal responsiveness. A large deployment of demand response technologies will also have to address data privacy challenges and foster the development of smart metering and automated technologies.

See also Empowering Customer Choice in Electricity MarketsSaving Electricity in a HurryRe-powering Markets and the proceedings from ESAP Expert Workshop II: Demand Response (2014)

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