Strategically Use Demand Response | Clean Power Hub

Strategically Use Demand Response

Demand response is the change in a consumer’s use of energy in response to price signals or (manual or automated) control of end-use equipment to better match grid conditions. For example, distribution utilities can control air-conditioners to pre-cool buildings in the late morning when solar generation might be high and demand otherwise low, or they can offer dynamic tariffs to incentivize demand when the grid most needs better balance between supply and demand.

Historically, demand response targeted large industrial consumers through interruptible tariffs or direct energy curtailment, but demand aggregation is also appearing at the residential and consumer scale in some countries. Demand aggregators reward customers for either raising or lowering demand during certain portions of the day.

First, Read This

There are several potentially confusing terms related to influencing electricity demand in power systems. Demand response (DR) refers to short-term measures to reduce demand during peak periods or increase it during valley periods. Recently, in response to changes in the shape of the net load curve due to variable renewable resources, some practitioners have started to use the term demand flexibility. This refers to DR with more automated controls that shift demand to different times rather than simply reducing it when needed.

Demand-side management (DSM) is a broader term that includes DR, but also encompasses long-term reductions in energy use from energy efficiency measures like building retrofits or appliance standards. When DSM is combined with distributed generation (DG) resources like distributed photovoltaics (DPV) and storage, these resources are collectively known as distributed energy resources (DER).

Now, Read This

The evolution of advanced metering, automation, and other technologies can unlock more benefits and services from demand response. Demand response can lower peak demand, reduce overgeneration, mitigate steep ramping requirements and support higher shares of solar and wind integration across power systems with varying power market structures.

Next, Read This

Various measures now available for demand response can support targeted transmission and distribution capacity deferrals, load shifting, and ancillary services.

Finally, Read This

Demand response programs in market-based systems often allow the aggregation of demand side resources that can provide load response, including smart thermostats, EV charging, commercial and industrial responsive loads, and more. In systems without markets, distribution utilities offer retail customers time-based tariffs or direct load control programs.

Demand response has been implemented in wholesale electricity markets through regulations and market rules that allow demand response resources to participate side-by-side with supply-side resources in energy, ancillary service, and capacity markets. In these markets, demand response has been implemented primarily by allowing load aggregators, that is, traditional load-serving entities or third-party companies focused on providing demand response solutions, to submit load modification or other grid service offers directly into the wholesale market on behalf of their customers. Large customers can also offer load resources directly into markets in some regions, but this practice is less common.


Many countries that have not undergone electric market restructuring and do not operate wholesale electricity markets nevertheless have utilities that offer demand response opportunities to residential, commercial, and industrial consumers at the retail level, mostly through time-based tariffs, dynamic pricing programs, interruptible load tariffs, and direct load control programs.

Text excerpts from pages 3 and 6 of NREL: Potential Roles for Demand Response in High-Growth Electric Systems with Increasing Shares of Renewable Generation

Decide if This Option Is Right for You

  • Research: Is demand response used in your system today? What opportunities do you see for additional DR measures?
  • Consider the Strengths: Demand response measures can be simple and low-cost and targeted for specific times. Compare this option to other flexibility options in this chart.
  • Consider the Limitations: Demand response measures can potentially have limited, varying availability, and require policy and stakeholder participation.
  • Look at Case Studies: Leveraging demand response in parallel with increasing shares of renewable generation is being explored in several countries including China, India, and South Africa. Innovative demand response programs have also been used in Arizona, Finland, and Australia.
  • Read More: IRENA released a short brief on time-of-use tariffs and a short brief on aggregators, including for demand response.
Need help deciding?Talk to somebody who has done it before. Join the discussion in the Clean Power Hub Community.

Ready to Get Started?

  • Begin exploring the right demand response options for your power system. Refer to this framework from NREL.
  • Engage with distribution utilities, policymakers, regulators and customers to establish new demand response programs.
  • Note that physical (often manual) approaches to controlling power, such as directly curtailing industrial power use during times of demand exceeding supply, are effective but often very costly in terms of lost production. More sophisticated approaches to influencing consumer behavior further in advance of any supply-demand imbalance are available and typically have lower overall costs.
  • Consider introducing new information technology systems, advanced metering infrastructure, and aggregation techniques that allow better control of residential and commercial customer loads.
  • Explore the use of dynamic tariffs (time-of-use, real-time, on-peak/off-peak) and capacity charges to shift demand away from expensive periods of supplying peak demand. See this example from the Ontario Independent Electricity System Operator.
  • Prepare for emerging electric vehicle technologies and approaches including smart charging of electric vehicles (V1G) and vehicle-to-grid (V2G). Smart charging allows electric vehicles to receive full power when grid conditions allow it. Vehicle-to-grid could allow electric vehicles to support the grid by reversing the flow of power when conditions encourage it.
Considering moving forward with this flexibility measure?You may want to talk to an expert. We can connect you.
Want to see other flexibility options?Go back to the selection tool


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