Source - 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

Emergency DR — avoid involuntary service interruptions during scarcity
Economic DR — customers curtail when the value of consumption is less than the electricity price
Ancillary services DR — demand-side resources providing grid services traditionally supplied by generators (frequency regulation, reserves)

Implicit vs explicit DR

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), California ELRP ($1–2/kWh credits), industrial load shedding agreements.

Price elasticity insight

A 5% reduction in peak demand could produce a 50% price reduction during critical periods (estimated for California 2000–2001 crisis). A 1% shift in peak demand → 3.9% system cost savings (PJM study). Non-linear leverage: small demand reductions have outsized price effects because peak generation is the most expensive.

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 (2011): DR providers must be compensated at LMP in wholesale markets — controversial, challenged, upheld by Supreme Court in 2016.
FERC Order 2222 (2020): opened wholesale markets to distributed energy resources, including DR aggregations.

Key numbers

US potential DR capacity (2004): ~20,500 MW (3% of peak), actual delivered: ~9,000 MW (1.3%)
UK National Grid STOR (2009): 2,369 MW contracted, 839 MW (35%) from demand side
10–20% of US electricity costs due to peak demand during only ~100 hours/year
Brattle Group estimate: 5% US peak reduction → ~$35 billion savings over 20 years

Relevance to flexibility

Demand response is one of the primary mechanisms for implementing Flexibility at both transmission and distribution levels. In the EU/Swedish context, DR maps onto:

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 but the principles are universal. 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.