Demand side response (DSR) is where energy users change their electricity consumption patterns in response to a signal or incentive to help balance the system.
Businesses which are able to be flexible in their energy use can take advantage of price fluctuations in the energy market and receive payments for their dynamic interactions with the grid.
The DSR market is growing and in Europe, where DSR is more prevalent, large consumers can reduce their annual energy bills by up to 10% by particpating in DSR.
There are broadly three types of demand side energy activities:
1. Demand response
Demand response is when energy users are provided with a financial incentive to turn down or turn off non-essential processes at times of peak demand helping the grid to balance supply and demand without the need for additional generation (e.g. power stations) to be used. Energy users can also be asked to use excess energy from the grid, for example on a windy day.
Typical processes that are turned down or off include lighting, air conditioning, electric heating, pumps, and other non-essential equipment. Participating in demand response is voluntary and is designed not to impact on day to day business operations or comfort. Demand response participants include supermarkets, industrial manufaturers, universities, commercial and public buildings, and hospitals.
2. Demand reduction
Demand reduction is the long-term reduction of demand through effective energy management, including investing in energy efficiency by upgrading lighting, insulation, refrigeration, motors and pumps. Read more about the Government's Electricity Demand Reduction Pilot here.
3. Distributed generation
Distributed generations is the local generation of heat or electricity to be used either on site or exported to the electricity grid or a heat network. Distributed generation includes combined heat and power, heat networks, heat and air pumps, hydro, solar thermal and PV, and wind.
Financial incentives for demand response
The Capacity Market will ensure security of electricity supply by providing a payment for reliable sources of capacity. It is designed to both encourage the investment needed to replace older power stations and provide back up for more intermittent and inflexible low carbon generation sources.
The Capacity Market has also been designed to support the development of more active demand management in the electricity market. The Transitional Arrangements auctions will offer targeted support to Demand Side Response (DSR), to encourage enterprise, and increase levels of participation in the two years preceding full Capacity Market delivery in 2018/19.
Power Responsive | National Grid's vision for the future of DSR