Energy demand management
Energy demand management, also known as demand side management (DSM), is the modification of consumer demand for energy through various methods such as financial incentives  and behavioral change through education. Usually, the goal of demand side management is to encourage the consumer to use less energy during peak hours, or to move the time of energy use to off-peak times such as nighttime and weekends. Peak demand management does not necessarily decrease total energy consumption, but could be expected to reduce the need for investments in networks and/or power plants for meeting peak demands. An example is the use of energy storage units to store energy during off-peak hours and discharge them during peak hours. A newer application for DSM is to aid grid operators in balancing intermittent generation from wind and solar units, particularly when the timing and magnitude of energy demand does not coincide with the renewable generation.
The term DSM was coined following the time of the 1973 energy crisis and 1979 energy crisis. Governments of many countries mandated performance of various programs for demand management. An early example is the National Energy Conservation Policy Act of 1978 in the U.S., preceded by similar actions in California and Wisconsin. Demand Side Management was introduced publicly by Electric Power Research Institute (EPRI) in the 1980s. Nowadays, DSM technologies become increasingly feasible due to the integration of information and communications technology and the power system, resulting in a new term: Smart Grid.
Electricity use can vary dramatically on short and medium time frames, largely dependent on weather patterns. Generally the wholesale electricity system adjusts to changing demand by dispatching additional or less generation. However, during peak periods, the additional generation is usually supplied by less efficient ("peaking") sources. Unfortunately, the instantaneous financial and environmental cost of using these "peaking" sources is not necessarily reflected in the retail pricing system. In addition, the ability or willingness of electricity consumers to adjust to price signals by altering demand (elasticity of demand) may be low, particularly over short time frames. In many markets, consumers (particularly retail customers) do not face real-time pricing at all, but pay rates based on average annual costs or other constructed prices.
Energy demand management activities attempt to bring the electricity demand and supply closer to a perceived optimum, and helps give electricity end users more direct price signals to adjust their usage or automated signals to change load depending on system conditions. These system conditions could be peak times, or in areas with levels of Variable renewable energy, during times when demand must be adjusted upward to avoid overgeneration or downward to help with ramping needs.
Adjustments to demand can occur in various ways: through responses to price signals, such as permanent differential rates for evening and day times or occasional highly priced usage days, behavioral changes achieved through home area networks, automated controls such as with remotely controlled air-conditioners, or with permanent load adjustments with energy efficient appliances.
Demand for any commodity can be modified by actions of market players and government (regulation and taxation). Energy demand management implies actions that influence demand for energy. DSM is originally adopted in electricity, today DSM is applied widely to utility including water and gas as well.
Reducing energy demand is contrary to what both energy suppliers and governments have been doing during most of the modern industrial history. Whereas real prices of various energy forms have been decreasing during most of the industrial era, due to economies of scale and technology, the expectation for the future is the opposite. Previously, it was not unreasonable to promote energy use as more copious and cheaper energy sources could be anticipated in the future or the supplier had installed excess capacity that would be made more profitable by increased consumption.
In centrally planned economies subsidizing energy was one of the main economic development tools. Subsidies to the energy supply industry are still common in some countries.
Contrary to the historical situation, energy prices and availability are expected to deteriorate. Governments and other public actors, if not the energy suppliers themselves, are tending to employ energy demand measures that will increase the efficiency of energy consumption.
Types of energy demand management
Energy Efficiency: Using less power to perform the same tasks. This involves a permanent reduction of demand by using more efficient load-intensive appliances such as water heaters, refrigerators, or washing machines.
Demand Response: Any reactive or preventative method to reduce, flatten or shift demand. Historically demand response programs have focused on peak reduction to defer the high cost of constructing generation capacity. However, demand response programs are now being looked to assist with changing the net load shape as well, load minus solar and wind generation, to help with integration of Variable renewable energy. Demand Response includes all intentional modifications to consumption patterns of electricity of end user customers that are intended to alter the timing, level of instantaneous demand, or the total electricity consumption. Demand Response refers to a wide range of actions which can be taken at the customer side of the electricity meter in response to particular conditions within the electricity system (such as peak period network congestion or high prices).
Dynamic Demand: Advance or delay appliance operating cycles by a few seconds to increase the Diversity factor of the set of loads. The concept is that by monitoring the power factor of the power grid, as well as their own control parameters, individual, intermittent loads would switch on or off at optimal moments to balance the overall system load with generation, reducing critical power mismatches. As this switching would only advance or delay the appliance operating cycle by a few seconds, it would be unnoticeable to the end user. In the United States, in 1982, a (now-lapsed) patent for this idea was issued to power systems engineer Fred Schweppe. This type of dynamic demand control is frequently used for air-conditioners. One example of this is through the SmartAC program in California.
The government of the state of Queensland, Australia plans to have devices fitted onto certain household appliances such as air conditioners, pool pumps, and hot water systems. These devices would allow energy companies to remotely cycle the use of these items during peak hours. Their plan also includes improving the efficiency of energy-using items, encouraging the use of oil instead of electricity, and giving financial incentives to consumers who use electricity during off-peak hours, when it is less expensive for energy companies to produce.
In 2007, Toronto Hydro, the monopoly energy distributor of Ontario, had over 40,000 people signed up to have remote devices attached to air conditioners which energy companies use to offset spikes in demand. Spokeswoman Tanya Bruckmueller says that this program can reduce demand by 40 megawatts during emergency situations.
California has several demand side management programs, including automated and critical peak pricing demand response programs for commercial and industrial customers as well as residential consumers, energy efficiency rebates, non-event based time-of-use pricing, special electric vehicle charging rates, and distributed storage. Some of these programs are slated to be added into the wholesale electricity market to be bid as "supply side" resources that can be dispatched by the system operator. Demand side management in the state will be increasingly important as the level of renewable generation approaches 33% by 2020, and is expected to be increased beyond that level in the long-term.
Demand-side management can apply to electricity system based on thermal power plants or to systems where renewable energy, as hydroelectricity, is predominant but with a complementary thermal generation, for instance, in Brazil.
In Brazil’s case, despite the generation of hydroelectric power corresponds to more than 80% of the total, to achieve a practical balance in the generation system, the energy generated by hydroelectric plants supplies the consumption below the peak demand. Peak generation is supplied by the use of fossil-fuel power plants. In 2008, Brazilian consumers paid more than U$1 billion for complementary thermoelectric generation not previously programmed.
In Brazil, the consumer pays for all the investment to provide energy, even if a plant sits idle. For most fossil-fuel thermal plants, the consumers pay for the “fuels” and others operation costs only when these plants generate energy. The energy, per unit generated, is more expensive from thermal plants than from hydroelectric. Only a few of the Brazilian’s thermoelectric plants use natural gas, so they pollute significantly more. The power generated to meet the peak demand has higher costs—both investment and operating costs—and the pollution has a significant environmental cost and potentially, financial and social liability for its use. Thus, the expansion and the operation of the current system is not as efficient as it could be using demand side management. The consequence of this inefficiency is an increase in energy tariffs … passed on to the consumers.
Moreover, because electric energy is generated and consumed almost instantaneously, all the facilities, as transmission lines and distribution nets, are built for peak consumption. During the non-peak periods their full capacity is not utilized.
The reduction of peak consumption can benefit the efficiency of the electric systems, like the Brazilian system, in some senses: as deferring new investments in distribution and transmission networks, and reducing the necessity of complementary thermal power operation during peak periods, which can diminish both the payment for investment in new power plants to supply only during the peak period and the environmental impact associated with greenhouse gas emission.
Problems with DSM
Some people argue that demand-side management has been ineffective because it has often resulted in higher utility costs for consumers and less profit for utilities.
One of the main goals of demand side management is to be able to charge the consumer based on the true price of the utilities at that time. If consumers could be charged less for using electricity during off-peak hours, and more during peak hours, then supply and demand would theoretically encourage the consumer to use less electricity during peak hours, thus achieving the main goal of demand side management.
Another problem of DSM is privacy: The consumers have to provide some information about their usage of electricity to their electricity company. This is less of a problem now as people are used to suppliers noting purchasing patterns through mechanisms such as "loyalty cards".
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