Energy Demand-Side Management: Customer Benefits

Turning your lights on in your home perhaps doesn’t elicit much thought about the amazing systems and processes that provide your electricity. The electric grid has the capacity to supply everyone with the power they require, from charging your laptop to keeping your home warm during winter days, at a moment’s notice. Utilities are constantly working to provide the reliability we all expect. Power demand is not consistent throughout the day. Utilities must be able to manage numerous power plants to ensure you are receiving a reliable power supply.

An increasing portion of our energy supply comes from renewable energy. Because renewable energy is the cheapest resource when it is available. But the sun may not be shining or the wind may not be blowing during times when demand is highest.

What tools exist for utilities to tackle these factors? Demand-side management is an approach that can be used to remedy several of the problems listed.

What is Demand-Side Management?

Demand-side management programs motivate customers to lower their energy consumption when energy demand is at its highest and/or switch their usage to times when cheap, renewable energy is abundant on the grid.

Examples of DSM programmes include:
  • • Energy efficiency investments.
  • • Time-dependent electricity pricing, such as time-of-use rates.
  • • Demand response programs.

Each of these programs helps reduce the need for new power generators. Energy efficiency investments enable each unit of electricity to be used more efficiently, reducing demand all day long. Time-dependent electricity pricing such as time-of-use rates, better adjust electricity pricing with the cost of generation. This indicates that the cost will be higher during high demand. Customers are encouraged to use less during those times and to use more when demand is low, and power is inexpensive. Lastly, demand response programs offer financial incentives to lower energy consumption during periods of peak demand. For instance, a utility could pay customers to lower their usage on a hot summer afternoon.

Benefits of Demand-Side Management

Demand-side management programs can benefit consumers—those who participate in the programs and those who don’t. Participating customers gain by spending a small amount of money on electricity bills. Non-participating customers can also save money because the programs shift electricity consumption from times when demand is highest to times when energy is least expensive (e.g., when the wind is blowing). This lowers the need to build new power plants and limits our dependency on the expensive fossil-fuel power plants that are currently in service. Lastly, demand-side management can serve the environment by increasing the use of renewable energy when it is accessible and lowering fossil fuel usage.

Many customers with electricity-intensive processes currently use the demand-side management programs described above. Industries invest in the most energy-efficient equipment to lower their running costs. They mostly participate in demand response programs too, lowering consumption when they get the signal from their utility in exchange for reduced electric rates.

Residential customers also take part in demand-side management. Many utilities provide programs to quickly cycle off customers’ air conditioners when demand is high or heat up their electric water heaters all night when demand is low. Residential customers of most utilities also participate in energy-efficiency programs.

There are a lot of new opportunities for demand-side management to help our energy system and save consumers money. Domestic appliances are constantly becoming more energy efficient, which lowers the overall demand for energy all day long. Electric vehicles, smart water heaters, and smart thermostats offer new possibilities to coordinate with time-of-use rates automatically. Customers can participate in demand response programs where they receive alerts and receive incentives for reducing energy consumption.