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Demand response is a method used by electric utilities to balance the supply and demand of power in the short term. When demand for electricity is greater than the available supply of electricity, a grid is vulnerable to brownout and blackouts. To counter this vulnerability, a utility asks its users to participate in demand response by either:
- Voluntarily shifting their power usage to times of non-peak demand.
- Agreeing to allow the utility to remotely control their connected appliances (generally air conditioners).
Demand response usually occurs on hot summer weekdays when both homes and businesses are using climate control. When grids rely heavily on renewable wind or solar power, demand response may be necessary on days without wind or sun. It’s important to note that demand response doesn’t necessarily mean that total energy use is less. Rather, electricity is used at different, non-peak, times.
Generally, utility customers pay an average rate for power that accounts for times of both higher and lower electricity costs. Demand response adds transparency to this pricing by alerting customers about times when wholesale power costs will be higher. By shifting their demand, end users are helping to curb these power costs and stabilize the grid.
There is usually a financial incentive to participate in demand response programs. Benefits vary by utility. Some customers receive cheaper electricity (resulting in lower bills) or bill credits. Other utilities simply don’t raise rates for customers shifting usage from peak hours.
Demand Response vs. Demand Side Management
Demand side management refers to a power grid balancing supply and demand by using less power. The term includes both short-term efforts like demand response and long-term energy efficiency efforts.
Demand Response vs. Peak Shaving
When a facility participates in peak shaving, they reduce their total power consumption from the grid, specifically cutting back during times of peak energy usage. Demand response does not change a facility’s total energy consumption but instead shifts it to non-peak hours.
