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Demand response is a tariff or program established to motivate changes in
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Demand response (DR) is a short-term, voluntary decrease in electrical consumption by end-use customers that is generally triggered by compromised grid reliability or high wholesale market prices. In exchange for conducting (and sometimes just committing) to curtail their load, customers receive a rate discount, a bill credit or some other remuneration.
The majority of U.S. utilities offer their commercial and industrial customers at least some kind of DR option. In addition, the country''s seven independent system operators/regional transmission organizations (ISO/RTOs) each sponsor DR programs or enable owners of demand response capabilities to bid into their markets for energy, capacity or other grid-support services. Demand-response capabilities often involve the ability to reduce consumption or use a behind-the-meter generator to serve a load that otherwise would be served by the grid or some combination of the two.
Time-variable pricing (TVP)—in which electricity prices vary at different times of day (and often seasonally)—is also widespread in the electricity markets. Most utilities offer at least one TVP option for any given customer class. These often include simple time-of-use (TOU) rates, where prices move at set times and amounts through the day—generally with an afternoon peak period, overnight off-peak hours, and two "shoulder" periods in the hours in between.
Additional TVP types are:
DR programs and TVP arrangements reflect the dynamic nature of electricity availability, delivery, and production costs. These costs can vary significantly over time, even every few minutes. These programs provide incentives for electricity consumers to manage loads by encouraging load curtailment and/or shifting, thereby mitigating some of these fluctuations and risks. Customers stand to gain substantially from participating in DR and TVP options, especially if they can adjust their electricity usage occasionally in response to market signals such as DR event notifications or price fluctuations.
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In recent years, Demand Response programs have gained traction as a key tool in managing electricity demand and reducing strain on the power grid. These programs let electricity consumers voluntarily reduce their electricity usage during times of high demand. That lets the power companies conserve and distribute power during hot summer afternoons when air conditioning use peaks.
Demand response is a short-term disruption in consumer electricity usage initiated by the local power company. This change is either mandatory (through legislation) or voluntary. The latter happens when government creates an incentivized agreement between the consumer and the regulating body or energy provider.
For the most part, Demand Response programs in the United States work through a voluntary sign-up system. However, some states have made it mandatory on certain new appliances as of 2023. In particular, Oregon and Washington State mandate that any new hot water heaters include this technology.
Effective demand response programs provide various economic and environmental benefits, including:
By reducing demand during peak times, utilities can avoid having to build expensive new power plants and transmission lines to meet the highest levels of demand. This in turn can lead to lower electricity bills for consumers. Utilities can avoid passing on the costs of new infrastructure to customers.
In addition, demand response programs can help to reduce greenhouse gas emissions. The do this by letting utilities rely more heavily on renewable energy sources such as wind and solar. When demand is high, power companies have to turn to fossil-fuel power plants to meet the extra demand. This invariably leads to increased emissions. By reducing demand during these peak times, utilities reduce fossil fuel usage. These facilities can continue relying on a higher percentage of renewable energy sources for longer periods of time.
One recent example of the success of these programs comes from California. There, utilities have been using demand response programs to manage electricity demand during heat waves. During a particularly severe heat wave in August of 2020, utilities were able to reduce peak demand by nearly 4,000 megawatts through the use of demand response programs.
Basically, they turned off people’s air conditioners during a heat wave. Technically, we suppose that was a success.
This certainly helped to avoid blackouts. It also prevented the need for expensive new infrastructure—for now at least. It did not, however, solve the primary issue of actually meeting the desired demand.
Appliances and products with built-in Demand Response support include a CTA-2045 port. The CTA-2045 port adapter and Universal Communication Module (UCM) communicate power grid conditions to your water heater so it can respond intelligently. If these modules are installed and your water heater’s Grid Enabled feature is turned on, your water heater can help support the power grid by turning itself off during peak periods of demand.
The following types of equipment, depending upon the manufacturer, can support Demand Response via CTA 2045 adapters and UCM modules:
Several jurisdictions in the United States have passed laws or regulations related to demand response programs. Some examples include:
These are just a few examples of jurisdictions that have established demand response programs.
Despite the benefits of demand response programs, there are still challenges to their widespread adoption. One challenge is the need for reliable communication between utilities and consumers. In order for these programs to work effectively, power companies need to be able to quickly and reliably communicate with consumers. They also need to provide incentives for reducing electricity usage. This can be difficult in areas where internet connectivity is poor or where there is a lack of communication infrastructure.
Another challenge is the need to educate consumers about the benefits of demand response programs. Many people may be hesitant to reduce their electricity usage during peak times, especially if they are not familiar with the potential cost savings and environmental benefits. Many consumers also want “override” capabilities so they can “deny” the power shut-off command.
Overall, demand response programs have the potential to be a key tool in managing electricity usage and reducing strain on the power grid. With careful planning and effective communication, these programs could play an important role in creating a more sustainable and resilient energy system.
When he''s not playing with the latest power tool, Clint DeBoer enjoys life as a husband, father, and is an avid reader—especially the Bible. He loves Jesus, has a degree in recording engineering, and has been involved in multimedia and/or online publishing in one form or another since 1992.
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