Demand-side response (DSR) is a change in the power consumption of an electricity consumer to match the available supply of electricity. Other terms to describe DSR are demand-side flexibility or simply demand response.
For the electricity grid, production and consumption must be kept closely in balance – here in Europe, the objective is to keep the frequency at 50 Hz. If this balance is not sustained, it may result in problems like power outages, blackouts, and harm to grid-connected devices.
The supply of electricity tends to fluctuate largely because of the number of renewable energy sources that are incorporated into the grid – solar and wind are variable because the amount of electricity generated is relative to the changing weather patterns. Other events such as the repair and maintenance of power plants also affect the relative supply. Due to increasing installations of solar and wind because of energy security issues, the need for DSR will rise over time.
Because electricity generation is unstable and tends to upset the balance of the grid, DSR provides a solution to that problem by either curtailing use or shifting consumption to a different time, depending on the available capacity of the grid.
How does it work
DSR works by incentivizing energy consumers to reduce energy consumption at times of peak demand. The best example is either a reduction in the cost of energy via spot tariffs or reimbursement via participation in flexibility or ancillary services markets. There are different mechanisms for compensating balancing incentives depending on the market, but these two are the most common:
- Flexibility - Devices are deactivated depending on the relative imbalance in the intraday markets. For example, when there is not enough energy production when it's not sunny or windy enough for a given period.
- Ancillary services - Devices are bid day ahead in the ancillary services auction, depending on operating parameters, such as how many hours they can be available in a given day. If the auction is accepted, those devices can be compensated for offering reserve services and also get additional value for being turned on during times of need.
The challenge in both of these examples is making sure that the interruption of operations does not adversely affect normal business. However, with a thorough analysis and the right plan and setting of operating parameters, this is possible.
Peak shaving involves reducing energy consumption during short-term spikes in energy demand. For example, you can imagine a factory shutting down production during peak hours, ideally during this time maintenance or other non-energy-intensive activities could be performed. In the example of peak shaving, overall energy consumption is reduced.
Load management involves shifting demand to times when the supply of energy is highest, for example, precooling a cold storage center during times of lower demand in anticipation of a time of high demand from the grid - while all the time maintaining the temperature within half of a degree of the optimal temperature.
What industries are suitable for DSR?
In order to provide flexibility or ancillary services to the grid operator, it should be necessary that a reasonable amount of energy can be managed at one time. The best candidates are industries such as cold storage, cement, or steel-making. Any industry that has production equipment that consumes a large amount of electricity can be a candidate as well.
Heating, ventilation, and air conditioning systems when large enough can be managed or combined with other devices to achieve the desired amount of energy under the management of such a system.
It's important to consider that during a DSR event, the energy assets in question will be switched off, or curtailed. Therefore, it's necessary to plan to staff accordingly or prepare planned maintenance during downtimes. Usually, the prevalence of such downtimes can be predicted in advance, and the scheduling of DSR events will not adversely affect normal business operations.
The Role of the aggregator in DSR
The aggregator is responsible for the bulk of DSR activities. The role of the aggregator is to enable the participation of individual resources that would not otherwise meet the minimum capacity requirement of DSR products on their own. The aggregator groups devices and bids in ancillary services and flexibility markets on behalf of the asset owner. The aggregator supports the reliability and business operations by diversifying resources within a single portfolio.
Benefits of DSR
- Lower energy costs & additional revenue
The main advantages of consumer demand response participation are lower overall energy prices. Because demand responses increase grid reliability, it has a large role in offsetting energy expenses, especially during times when the cost of electricity is rising.
- Reduce wholesale market prices
DSR reduces the need to activate more expensive power plants when demand is high. Therefore based on merit order, when supply can be curtailed, those more expensive plants will not need to be activated, and overall production costs are reduced. This has an effect on decreasing costs for not only the DSR participant, but everyone using grid services.
- A more stable grid
Implementing DSR is oftentimes the least expensive and most effective means of improving energy security and ensuring the stability of the energy grid. Most of the focus of energy security policy is on increasing supply, such as adding new solar power plants, etc. However, this invariably reduces the stability of the grid because of the volatility of these sources. Implementing DSR can act like adding energy storage without the need for additional investment in those technologies.
- Support the energy transition
DSR is needed primarily because of the inherent variability of renewable energy sources. It is in some ways a replacement for more costly battery storage. In some cases, it can require changes to operational schedules and etc. but mapping energy consumption to energy production remains one of the best technological solutions to the energy transition.
Nano Energies can analyze your energy use at no cost, and provide a custom operational plan that will help you to be able to provide your energy assets to the flexibility markets. We can help dramatically reduce your energy costs while minimally affecting your operations.