Knowledge » Demand-side flexibility » What is Demand Response? 

What is Demand Response? 

…and how it can benefit you!

The role of a power system is to generate and distribute energy. For a power system to work correctly, there needs to be a perfect balance at all times between the electricity injected into the grid and the one withdrawn from it.

While this might seem straightforward, keeping the balance is highly complex. Fluctuations in consumption and production of electricity not only influence the frequency of the grid – which has to be kept at 50Hz, but also have an impact on the wholesale costs of electricity in the long run, making them uncertain.

Balancing services help stabilise grid frequency and enable the efficient handling of imbalances or congestion. Balancing services have historically been provided by fossil fuel power plants, but now can also be delivered by end-users (such as industrial and commercial businesses and households). 

Many companies around Europe are turning towards demand response to lower the costs of their electricity bills, have more insights into their electricity usage, and at the same time positively contribute to a more sustainable and reliable power grid.

 

demand response definition

 

Demand Response – definition 

 

Demand response, also referred to as demand-side response, is a change in electricity consumption by end-users (such as commercial and industrial businesses) to help balance the electricity grid during peak production or peak consumption times. It is designed to induce lower electricity use at times of high prices (market signal) or when system reliability is jeopardised (Transmission System Operator signal). For example, when electricity demand rises, participating end-users are given a signal to reduce their usage at a given moment to restore the balance of the grid.

Without suppliers of grid balancing services, such as demand response (DR), power systems are vulnerable to fluctuations in demand and supply. That can lead to issues such as power outages and even blackouts that are dangerous to the whole system and can also severely damage the equipment connected to the grid. 

Historically, the responsibility to balance the electricity grid was on the supply side (mainly large traditional, coal-fuelled power plants). To always be prepared for a fluctuation in supply and demand, traditional power plants operate at a lowered capacity, leaving room to supply the electricity in case of unexpected increases in demand. That, however, leads to lower efficiency of their production, high emissions, and increasing prices for electricity.

Instead of having large power plants running at, for example 80% to adjust production in case of an imbalance, it is possible, with the help of an aggregator, to group assets from different industries, to adjust their consumption in case of imbalances.

 

What are the benefits of Demand Response?

 

The most important benefit of demand-side response is improved resource-efficiency of electricity production, which leads to several benefits for the grid:

 

  • Lower electricity costs 

One of the main benefits of demand response is the reduction of electricity bills. Given its positive impact on grid reliability, utilities and system operators incentivise participation in DR by providing end-users and industrial and commercial businesses with financial rewards. Especially given the current high electricity prices, participating in demand response programs can lead to substantial electricity bill savings as well as additional revenues.

  • A more reliable grid

Reliability of the grid is another important benefit of demand response. Demand response lowers the likelihood and negative consequences of forced and unplanned power outages that cause stress to the system and inconvenience for end customers. 

  • Lower wholesale market prices

Demand response reduces the reliance on the most costly-to-run power plants during periods of otherwise high demand. This can benefit the wholesale market prices and eventually translate into bill savings for end-users.

  • Accelerating the energy transition

The energy transition aims to phase out traditional fossil fuels by integrating more renewables in the energy system and electrifying the grid. High integration of renewable energy resources poses a specific set of challenges, mainly the intermittent nature of their production. 

 

This is an urgent issue to address amid the rising demand for constant and reliable electricity. By helping tackle the challenges of renewable energy resources and making the grid more reliable, demand response is a crucial building block for a successful energy transition and will play an increasingly important role in helping countries to reach their net-zero targets.

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