Demand response (Wikipedia)

Summary

Demand response (DR) is the adjustment of electricity consumption in response to supply conditions — typically reducing demand during peaks or increasing it during surplus. It flips the traditional paradigm: instead of only adjusting supply to meet demand, demand is adjusted to match supply. This becomes increasingly important as variable renewables make supply less controllable.

Key concepts

Three types of DR

1. Emergency DR — avoid involuntary service interruptions during scarcity
2. Economic DR — customers curtail when the value of consumption is less than the electricity price
3. Ancillary services DR — specialty services needed for secure operation of the transmission grid, traditionally provided by generators (the article elsewhere discusses contingency reserve and frequency regulation as the relevant services)

Implicit vs explicit DR

The article does not use the terms “implicit” and “explicit” DR; this split is the wiki’s framing (see Demand Response), applied to the article’s examples. The article itself contrasts price-based mechanisms (off-peak metering, time-of-use, real-time pricing) with explicit requests or incentive payments.

• Implicit (price-based): consumers respond to price signals — time-of-use tariffs, real-time pricing, day/night rates. The consumer decides whether and how to respond. Examples: Economy 7 (UK, since 1970s), Ontario smart meter TOU pricing.
• Explicit (incentive-based): consumers commit to reduce/shift load in response to utility/aggregator requests, and receive compensation. Examples: STOR (UK National Grid; the article notes about 750 of the 839 MW demand-side volume was back-up generation), California ELRP (credit of $1 per kWh in 2021, $2 in 2022), industrial load shedding agreements.

Price elasticity insight

A 5% lowering of demand is estimated (IEA, 2003) to have produced a 50% price reduction during the peak hours of the California 2000–2001 crisis. A Carnegie Mellon (2006) PJM study found a 1% shift in peak demand would give 3.9% savings; roughly a 10% peak reduction would save $8–28 billion at system level. Non-linear leverage: small demand reductions have outsized price effects because the wholesale price is set by the highest-cost generator running.

Smart grid and automation

Moving from event-based DR (utility sends signal, customer sheds load) toward continuous, automated DR via smart grids. Technologies include smart meters, automated building management systems, swarm logic for coordinating distributed loads, and EV aggregation. Key tension: customers want economic benefit but are reluctant to cede full control of their assets.

Industrial DR

Industrial customers offer advantages: large magnitude, existing control infrastructure, fast response. Examples: aluminum smelters as “nega-batteries” (Trimet, Alcoa/MISO), data center load migration between sites.

Regulatory evolution (US-focused but relevant)

• FERC Order 745 (March 2011): requires a certain level of compensation for economic DR providers in wholesale markets — controversial (e.g. Prof. Hogan argued it overcompensates DR); vacated by the D.C. Circuit in May 2014, then upheld 6-2 by the Supreme Court in January 2016 (FERC v. EPSA).
• FERC Order 2222 (September 2020): enables distributed energy resources to participate in regional wholesale markets; market operators submitted initial compliance plans by early 2022.

Key numbers

• US potential DR capacity (2004): ~20,500 MW (3% of peak), actual delivered: ~9,000 MW (1.3%)
• UK National Grid STOR (December 2009): 2,369 MW contracted, 839 MW (35%) from the demand side (89 sites), of which ~750 MW was back-up generation
• 10–20% of US electricity costs due to peak demand during only 100 hours of the year (per the Demand Response Smart Grid Coalition)
• Brattle Group (Faruqui, 2007): 5% US peak reduction → ~$35 billion savings over 20 years, exclusive of metering/communications costs; the article notes net benefits would be significantly less

Relevance to flexibility

Demand response is one of the primary mechanisms for implementing Flexibility at both transmission and distribution levels. The following mapping to the EU/Swedish context is the wiki’s own framing, not content of the article:

• Implicit flexibility (rules-based): tariff structures, network codes requiring demand-side participation
• Explicit flexibility (market-based): flexibility markets where aggregated DR competes with generation and storage

The article is US-heavy on regulation (its non-US examples are UK, Ontario and Australia). The EU approach — particularly the Clean Energy Package’s provisions for active customers, aggregators, and demand response — builds on these same concepts but with a stronger regulatory mandate for DSO-level flexibility.

The distinction between emergency, economic, and ancillary services DR maps directly onto different flexibility products being developed in European markets.