A Deeper Look at Electricity Markets

7. What is demand response?

Demand response is one way electricity companies can manage consumer energy use and provide opportunities for lower cost energy during periods of reduced demand. Demand response is voluntary and enables you to reduce or shift your energy use, primarily during periods of high prices or grid stress, in exchange for financial incentives.  Digitalisation supports this process by sharing real-time information from your electricity supplier about when you could use energy for a reduced cost or another incentive.  

Smart appliances and apps enable us to respond to these opportunities by allowing us, or third parties, to programme our smart appliances to turn on/off at specific times.  Smart appliances support demand response through Auto-DR, where appliances respond without user input. This is a key part of scaling demand response effectively.

Digital appliances have a critical role in demand response as these enable us to use real-time information and make immediate adjustments to our own electricity consumption (e.g. choosing to reschedule our laundry cycle to an off-peak, and less costly, time). Smart appliances and apps, including smart meters also enable electricity companies to better understand how and when electricity is being consumed and to plan for times of peak use.  Aggregated consumption data is used to support grid forecasting and flexibility services, not just retail planning.