Article: How demand response is shaping our global energy future

8 min

Electricity demand response programs have been used around the world for decades as a cost-effective resource for maintaining a reliable grid.

‘Demand response’ is when consumers change their energy consumption in response to an incentive.

By reducing or shifting their use during a limited number of hours each year, demand response can deliver a range of benefits. These can include deferring or reducing the need for new peaking power generator or transmission and distribution infrastructure, and reducing energy costs.

Demand response can also be in place where it is needed, much sooner and at lower cost than new generation and/or transmission capacity.

Here are some current examples of successful demand response programs involving households and businesses in different countries around the world. These examples focus on households and businesses reducing consumption at peak times, or shifting it to other times, in programs that help system operators manage these times of highest demand.


Queensland, Australia

In Australia, Energex (distributor for south east Queensland) has worked with customers on demand response since 2008. Its Positive Payback Program has now operated successfully for over five years, offering households, businesses, builders, developers, retailers, and tradespeople cash rewards for saving energy and helping manage peak demand in different ways.

One of the most successful programs is PeakSmart air-conditioning. PeakSmart air-conditioners in homes and businesses are fitted with a signal that automatically switches them to “demand response” mode, which is like an economy setting, a few times a year when demand on the network is unusually high. Customers are paid a cash reward when the air-conditioner is installed, and can also be rewarded for helping monitor the program’s effectiveness.

Over 70,000 PeakSmart air-conditioners have been installed in Queensland since the program was launched in 2012. PeakSmart was expanded to regional Queensland (where Ergon Energy is the distributor) as part of preparing for the 2017-18 summer.

Another Positive Payback Program option is for households to get cash back and ongoing tariff savings for switching their hot water systems to operate outside peak demand times. This change reduces peak demand without affecting households’ hot water use. “Off-peak” hot water is one of the most long-established ways to manage peak demand in Australia, and has operated for more than 50 years of operation in Queensland. Energex and Ergon Energy now have over a million electric storage hot water systems under direct control across the state.

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National distributor Transpower has been involved with demand response programs since 2007, and ramped up with demand response delivering over 200 megawatts (MW) (some 16% of peak demand) in the Auckland region in 2013. Its current five-year program awards contracts every year to participating businesses and facilities to help manage peak demand on the National Grid, focusing on customers with 20 MW or more of peak demand, as well as encouraging households and businesses with battery storage to enrol.

For every demand response event, participants say how much they want to be paid for reducing demand by nominating an “indicative strike fee” – the price at which they are likely to respond to a call for demand response. The agreed payments are then made directly after each event.

Transpower will also pay a performance-based “establishment fee” to cover the costs of setting up demand response capability, if participants respond regularly. Typically, a business or facility (such as a hospital) will use back-up generation during the demand response event so there is no impact on their operations or customers.

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South Island, New Zealand

Orion is the electricity distributor for central Canterbury, including the city of Christchurch. It operates a load management strategy for peak periods across eight distribution companies (Orion, Alpine Energy, Network Tasman, Marlborough Lines, MainPower, Buller Electricity, Westpower, and Electricity Ashburton) in the upper South Island of New Zealand, focused on electricity for water heating.

While meeting service level targets agreed with retailers, and ensuring no adverse impacts on customers, Orion delays water heating as needed during peak demand times. This primarily involves power to households, but can also extend to business customers’ water heating.

This demand management program has operated since 2009.

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North West England

Distributor Electricity North West began trials in 2014 for its CLASS (Customer Load Active System Services) project. This solution uses cutting-edge voltage controllers in electricity substations to reduce demand at peak times without any noticeable impact on customers. CLASS uses smart technologies to make small adjustments to voltage, lowering it at times of high demand and providing a new mechanism for frequency and voltage control to Britain’s National Grid.

The trial provided information about customer load types and behaviour, and ways new technologies can be integrated to provide demand response, as well as the potential for further commercial agreements to provide frequency response services and reactive power services for the grid.

CLASS was tested in trials covering 485,000 customers and 60 substations. After confirming CLASS could maintain lower voltage with customers not experiencing any service changes, Electricity North West has begun rolling out improved voltage controllers in up to 260 major substations across its operating region, serving nearly two million customers.

Electricity North West estimates the project will save customers in its region about £100 million over the next 25 years.

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In June 2016, Eirgrid and Electric Ireland began a joint pilot demand response program with up to 1,500 residential customers in Ireland. Over 18 months, each household has been asked to switch off appliances for about 30 minutes on 10 occasions, in return for a reward of up to €100 off their bills.

The program has been enabled by smart control technology for electricity users in Ireland. Its goal has been to test whether a group of residential customers can reduce demand by enough, for a specified time period, and without prior notice, to help Eirgrid manage the grid.

Participants use Smart Energy Controllers, including Smart Plugs on energy-intensive appliances like dryers, dishwashers, and washing machines, to monitor their energy usage and remotely control appliances from their phones. Part of the pilot is also testing smart hot water cylinders.

After the first four demand response events, Eirgrid reported that participants had reduced their electricity consumption by 290 kilowatts (kW). The pilot program will be completed in March 2018.

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Mosaic Power operates in the PJM grid, and currently has customers across Illinois, Maryland, Ohio, Pennsylvania, Virginia, and the District of Columbia. Its Water Heater Efficiency Network (WHEN) system links over 14,000 water heaters in multi-family housing, owned by many different organisations and authorities, to optimise the timing of the heaters’ operations against the power needs of the grid. With every 1,000 participating water heaters achieving one megawatt hour (MWh) of energy, the network is able to shift a substantial load to help manage peak demand periods.

Mosaic installs its load controllers to the electric line running to existing water heaters, to bring them into the WHEN system. Installation and equipment is free, and Mosaic pays the owners each quarter for being part of the program.

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Texas, USA

Austin Energy, which serves close to a million people, has been working in residential demand response since 2001. It has estimated that its combined demand response programs save customers some US$2.25 million a year (money that would otherwise have been spent on generation).

Since 2013, it has offered households incentives to enrol in the Power PartnerSM Thermostats program. Under this voluntary program, launched in 2013, residential customers can be rewarded for choosing from a range of pre-approved, wifi-connected thermostat devices. Customers can use these devices remotely to manage the temperature of their home and achieve energy efficiency savings on top of the rebate.

For an additional cash incentive, customers can also opt in to allow Austin Energy to briefly adjust their thermostat settings by up to 4 degrees (Fahrenheit) if needed during peak energy demand. This energy cycling can happen once a day for up to 17 days during summer, typically between 4.00 pm and 6.00 pm Monday to Friday.

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Nevada, USA

NV Energy’s demand response programs for its 1.2 million customers include Cool Share and PowerShift Smart Thermostat.

Cool Share participants are given devices that enable NV Energy to signal their air-conditioners during peak demand if necessary during the Cool Share Season (1 June to 30 September each year). The temperature in the house may briefly rise a little, but this may not be noticeable. NV Energy asks customers to expect at least four events during summer each year, which are likely to last about three hours between 4.00 pm and 7.00 pm. In exchange, customers get a monthly bill credit and an annual dividend payment after summer.

The PowerShift Smart Thermostat (formerly mPowered) program installs smart thermostats free in customers’ homes, and provides free software for customers to manage temperature remotely. At peak times in summer, NV Energy initiates voluntary Community Energy Events, pre-cooling houses to lower the temperature before raising the thermostat by 4 degrees (Fahrenheit). Customers who choose to participate are then rewarded by rebates in their next monthly bill.

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California, USA

College of the Sequoias participates in EnerNOC’s demand response program. During peak periods, the community college’s energy management system reduces power use by some 250 kilowatts (kW) by temporarily increasing the temperature across the campus by 4 degrees (Fahrenheit) and switching off air-conditioning in hallways and other public spaces.

With no impact on students or college activities, these actions earn cash rewards of over US$10,000 a year, which go into a special account for energy conservation initiatives.

EnerNOC also provided the college with advanced metering that helps identify energy waste and opportunities for power and cost savings.

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New York, USA

The Government of New York City has participated in demand response programs run by the New York Independent System Operator (NYISO) and major energy utility ConEdison since 2002.

Since partnering with third party aggregator NuEnergen in 2013 to manage its demand response program, the City’s committed demand response capacity has grown to 75 megawatts (MW). Participation has expanded to over 380 facilities across 22 agencies, including courthouses, college campuses, sanitation garages, wastewater treatment plants, office buildings and museums. The program has so far earned revenue of more than US$22 million, which has been distributed to participating agencies to fund a range of initiatives.

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