Energy demand management

Energy demand management, also known as demand-side management (DSM) or demand-side response (DSR), is the modification of consumer demand for energy through various methods such as financial incentives and behavioral change through education. Energy demand management, also known as demand-side management (DSM) or demand-side response (DSR), 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 American electric power industry originally relied heavily on foreign energy imports, whether in the form of consumable electricity or fossil fuels that were then used to produce electricity. During the time of the energy crises in the 1970s, the federal government passed the Public Utility Regulatory Policies Act (PURPA), hoping to reduce dependence on foreign oil and to promote energy efficiency and alternative energy sources. This act forced utilities to obtain the cheapest possible power from independent power producers, which in turn promoted renewables and encouraged the utility to reduce the amount of power they need, hence pushing forward agendas for energy efficiency and demand management. 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, new terms such as integrated demand-side management (IDSM), or smart grid. Electricity use can vary dramatically on short and medium time frames, depending on current 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 help give electricity end users benefits for reducing their demand. In the modern system, the integrated approach to demand-side management is becoming increasingly common. IDSM automatically sends signals to end-use systems to shed load depending on system conditions. This allows for very precise tuning of demand to ensure that it matches supply at all times, reduces capital expenditures for the utility. Critical 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 over-generation or downward to help with ramping needs. In general, 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 was originally adopted in electricity, but today it is applied widely to utilities 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.