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IT In Power | November 2014

Electrical Demand Response - Benefits and challenges

Demand response programs offer incentives to participating consumers to reduce their power use in response to a utility's call due to a high, system-wide demand for electricity or emergencies that could affect the transmission grid and lead to instability or a grid disturbance.

Demand response activities are defined actions to be taken by consumers or utility (direct load control). In the last decade, stakeholders have evinced interest in Demand Response Programs (DRP) and these are in vogue in developed countries. Demand response programs offer incentives to participating consumers to reduce their power use in response to a utility's call due to a high, system-wide demand for electricity or emergencies that could affect the transmission grid and lead to instability or a grid disturbance.

The emergence of new communication technologies, control and forecasting methods have drawn attention of utilities towards DR which is more effective and viable, quite attractive to consumers and is a money saver. Under emergencies these enable power systems to operate in a more effective and flexible manner as reduced load work as a capacity resource.

From direct load control to systematic reduction in load through DRP, demand response is poised to play an increasingly important role as a resource that can act in balancing the grid, make it more flexible and strengthen the utility-customer relationship. But despite the great opportunities, challenges still remain to be faced by utilities integrating demand response into their portfolios.

Types of demand response programs

The most conventional form of demand response is systematic load shedding. However, more sophisticated approaches have been implemented in developed countries.

Auto-demand response program

Automated demand response is a utility term for reducing or shutting down loads automatically through the use of technology, rather than manual switching operations. Utilities often provide communications equipment to monitor and control motors, thus automating the Demand Response process. In DLC Program, the utility or aggregator remotely shuts down or cycles a customer's electrical equipment, e.g., air-conditioner, water heater, lighting, on a very short notice. Direct load control programs are primarily offered to residential or small commercial customers.

Interruptible load program

In this, electric load is subject to curtailment or interruption either by utility or consumer under tariffs or contracts that provide a rate discount or bill credit for agreeing to reduce load during system contingencies utility

Critical Peak Pricing (CPP)

Critical Peak Pricing (CPP) with direct load control is an event-based tariff scheme with a pre-specified high price for use during designated critical peak periods triggered by system contingencies such as deficit condition, transmission constraint, etc. It is also generally employed for larger industrial and commercial consumers.

Capacity resource (load)

A load works as capacity resource when load reductions during system contingencies is required to assist the grid.

Synchronised reserves

Synchronised Reserves are online demand-side resources and are ready to provide energy supply within the first few minutes of an Emergency Event, say, within 10 minutes.

Non-synchronised reserves

Non-synchronised reserves are offline demand-side resources that may not be immediately available, but may provide energy supply after a delay of 10 minutes or more.

Emergency demand response

It provides incentive payments to consumers for load reductions achieved during an Emergency Demand Response Event.

Regulation service

Regulation service is a type of Demand Response service in which a Demand Resource increases and decreases load in response to real-time signals from the system operator. Demand Resources providing Regulation Service are subject to dispatch continuously during a commitment period. This service is usually responsive to Automatic Generation Control (AGC) to provide normal regulating margin. It is also known as regulation or regulating reserves, up-regulation and down-regulation.

Demand bidding and buy-back

A demand bidding and buy-back program allows a demand resource in retail and wholesale markets to offer load reductions at a price, or to identify how much load it is willing to curtail at a specific price.

Peak time rebate programme

Peak time rebates allow customers to earn a rebate by reducing energy use from a baseline during a specified number of hours on critical peak days. Like Critical Peak Pricing, the number of critical peak days is usually capped for a calendar year and is linked to conditions such as system reliability concerns or very high supply prices.

Real-time pricing programme

In real-time pricing programmes, the retail price for electricity typically fluctuates hourly. These are determined from wholesale market prices giving actual cost of electricity to the consumer.

Time of use tariff programme

Instead of single flat rate there are two or three rate periods of peak, partial peak and peak period. The objective of TOU Scheme is to flatten the load curve.


When utilities plan generation and transmission capacity there is always a mismatch with the targeted planning and actual commissioning. Further the error of judgment in forecasting coupled with coal and gas scarcity always leads to peak deficit. The benefit of demand response include the ability to balance load with generation, absorb fluctuations due to renewable generation and create a win-win situation for the consumer and utility. With the evolution of Advanced Metering Infrastructure (AMI), power system can be operated in a more flexible manner by employing different DRP. To take care of fluctuations in the renewable generation demand response can provide and maintain system security. Demand response provide planning, operating and economic benefits if employed judiciously. With the demand response program, the utility can meet the electricity requirements of all consumers; secondly, participating consumers pay less for electricity. The utility may defer construction of power plans and transmission lines.


Designing a demand response program is a complex process. It should be done in consultation with the consumers. More complex than designing is its successful implementation. In times to come demand response will play an important role in Indian environment.

Basically DRs are designed to help utilities to maintain a stable grid during peak time. Aggregators will also play a major role in helping customers in participating in a Demand Response Program. With the advancement of metering and communication technologies, utilities may not face managing peak demand and in implementing DRP. The most basic DR program is structured to maintain system reliability and security. These are designed to avoid blackouts and brownouts.

This article has been authored by Alok Gupta, Member, Madhya Pradesh Electricity Regulatory Commission (MPERC).

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