Demand response
Changes in electricity consumption by end users, in response to price signals or operator requests, to balance the grid.
Demand response (DR) shifts or reduces load when power is scarce or expensive, and increases it when power is abundant. It turns consumers into a flexible resource that can substitute for peaking plants, storage or network reinforcement.
Two broad forms:
- Implicit (price-based): consumers face time-of-use, critical peak or real-time tariffs and adjust behaviour or automation accordingly. Dynamic tariffs require a smart meter.
- Explicit (incentive-based): aggregated loads are bid into wholesale, capacity or ancillary services markets and dispatched like a plant, often via a virtual power plant.
Sources of flexibility include industrial processes (aluminium smelters, electrolysers, cement mills), commercial HVAC and refrigeration, water heaters, heat pumps with thermal storage and EV charging. PJM clears several GW of DR in its capacity auctions; FERC estimated US wholesale DR potential at around 30 GW in recent assessments. The IEA's Net Zero scenario sees demand-side flexibility growing several-fold by 2030.
DR is typically characterised by available capacity (MW), notification time, duration (often 1 to 4 hours) and rebound effect, the increase in consumption after an event as deferred demand recovers. Studies of time-of-use pilots generally show peak reductions of about 5 to 15%, and larger with automation.
Related terms
All terms →- Virtual power plant (VPP)
A software platform that aggregates many distributed resources, such as batteries, EVs, heat pumps and rooftop solar, and operates them as a single dispatchable unit.
- Smart meter
An electronic meter that records consumption in short intervals and communicates the data remotely to suppliers and network operators.
- Peak load
The highest electricity demand recorded on a grid during a given period, which sets the capacity the system must be able to supply.
- Capacity market
A mechanism that pays resources for being available to supply power or reduce demand at times of system stress, alongside payments for energy.
- Ancillary services
Services beyond bulk energy that system operators procure to keep the grid stable and secure, such as frequency reserves, voltage control and black start.
- Vehicle-to-grid (V2G)
Bidirectional charging that lets a parked electric vehicle export battery energy to the grid, providing storage and grid services.