Understanding Demand Response Solutions
The concept behind Demand Response (DR) solutions or what can also be referred to as Active Demand Management, is not new and have been in use in electrical grid systems in various parts of the globe, particularly in areas that experience upsurges in peak demand levels that threaten the stability of the grid and putting energy reserve capacities in jeopardy. DR mechanisms are activated during these times of electrical emergencies to take control of daily usage peaks and avoid the onset of rolling outages.
This concept involves limiting electricity usage and loads during high energy demand periods. Residential, commercial and industrial consumers who have agreed to participate in the Demand Response network in exchange for energy rebates and other incentives are required to reduce their electrical load during a Demand Response request – with most responding by shutting down lights, reduce or shut down air conditioning and other appliances or machineries.
The advent of smart grids saw the evolution of better and more efficient Demand Response Solutions, using the most advanced technologies (hardware, software and services) to achieve better and more efficient interactions between energy demand, supply and transport. In a smart grid, mechanisms are integrated into appliances and machineries that consume considerable amounts of electricity. During peak demand times, spikes in electrical consumption, or a sudden surge in energy market prices, these mechanisms will automatically reduce the electrical consumption of these appliances and machines – and in some abnormally high cases shut them down.
Issues and Challenges for Demand Response Solution
With Demand Response solutions,consumers from all sectors can actively participate in making the entire electricity grid become more efficient, less costly to operate, and produce less carbon emissions through a more efficient streamlining of their energy demand profiles during critical periods. The problem however is that not all existing energy grids have already been upgraded to successfully integrated Demand Response profiling into the network.
For businesses participating in the Demand Response programs, requests to limit or reduce electrical consumption will come in a period when their businesses need electrical load the most, particularly for running critical production equipment or maintaining a comfortable environment for both their employees and their customers. The results include lower staff and employee morale as well as significant loss in sales due to customers availing someone else’s products or services. Because of this, many businesses pull out of the Demand Response program as the energy savings they can gain will not be able to compensate for the losses their businesses incurred from lost sales.
Market Outlook for DR and Solutions
Still, the Demand Response market is still continuously evolving and is projected to move up from the current estimated worldwide spending of $1.3 billion last year. The market is projected to enjoy a robust compound annual growth (CAGR) rate that could reach as high as 37%, making the industry a multi-billion market by the year 2016. This is due mostly to positive market forces, such as the continuously growing installation rates for smart meters and the emergence of more Demand Response vendors as well as systems integration and consulting services.