Demand response

Lore & Background

Demand response involves voluntary rationing accomplished by price incentives, offering lower net unit pricing in exchange for reduced power consumption in peak periods. Users not reducing usage during peak periods pay 'surge' unit prices. Involuntary rationing, if employed, is accomplished via rolling blackouts during peak load periods, such as summer heat waves or winter deep freezes, if voluntary incentives fail to reduce load adequately.

Reader's Guide

Demand response is significant as a cost-effective alternative to adding generation capabilities to meet peak demand and occasional demand spikes. It actively engages customers in modifying their consumption in response to pricing signals, reflecting supply expectations through consumer price signals or controls. By lowering peak demand, it reduces overall plant and capital cost requirements, as electrical generation and transmission systems are generally sized to correspond to peak demand. Demand response can also be used to increase demand at times of high production and low demand, for example through Bitcoin mining to consume cheaper power during surplus hours. It differs from energy efficiency, which means using less power to perform the same tasks continuously. Current schemes are implemented with large and small commercial as well as residential customers, often through dedicated control systems to shed loads according to preplanned prioritization during critical time frames.

Did You Know?

• Demand response can involve actually curtailing power used or by starting on-site generation which may or may not be connected in parallel with the grid.
• Bitcoin mining is used to increase demand during surplus hours by consuming cheaper power.
• Demand response is generally used to refer to mechanisms used to encourage consumers to reduce demand, thereby reducing the peak demand for electricity.
• In many respects, demand response can be put simply as a technology-enabled economic rationing system for electric power supply.