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A Deeper Look at Electricity Markets

9. Some examples of demand response


If you’ve looked at different electricity provider offers, you will have probably seen that some of the electricity tariff examples (e.g. variable rate and time-of-use) offer opportunities for electricity users to modify their energy use and reduce energy costs. 

The latest types of contracts offer detailed insights into when energy is cheaper. Digitalisation enables us to respond to these opportunities when there is a price signal or offer of cheaper energy.  If you use smart appliances and apps to monitor and control your energy use, there are several different ways you could adjust your energy use and potentially save money. 

These opportunities include:  

  • Making ongoing decisions about when to make changes to your energy use. For example, your smartphone app informs you that there is a low-cost energy period at a particular time, and you to choose to set your washing machine cycle to run, or your electric car to charge, during these hours.  
  • Having pre-agreed preferences for when and how you use energy. These preferences are shared with a third party, which facilitates your use of electricity and can control your smart devices as needed, to help you get the best from what your electricity supplier is offering.

By agreeing how and what smart devices a third party can control remotely, you don’t have to make constant decisions about how and when to use energy. This means that your electric vehicle could automatically charge at times when energy is cheaper, as it’s pre-programmed or re-programmed to take advantage of this opportunity.  

Both of the above examples can be achieved through demand response. There are two categories of demand response:  

  • Implicit or price-based demand response: when you choose to use electricity during low-demand periods and subsequently lower your energy costs.  
  • Explicit demand response: when you receive payments from your electricity supplier to change your energy use. This can involve using less or more energy when required.  

Demand response contributes to ensuring that our electricity supply is stable and that the energy that is being used, and generated, is well matched. It means that when we switch on the lights, boil a kettle or turn on a fan, even if hundreds of thousands of people are doing the same simultaneously, our electricity supply is constant and continual.