Within the context of energy, demand-side management (DSM) is a strategic approach to energy conservation. The goal of DSM is to manage consumer demand for energy rather than only supply energy.
This article will explain the importance and benefits of demand-side management and detail some DSM strategies utility companies, developers, government agencies and customers use.
Why Is Demand-Side Energy Management Important?
DSM strategies can lead to more efficient uses of energy resources. This makes DSM integral to addressing the energy transition and geopolitical challenges to energy supply. Demand-side energy management can also be a strategy to guard against costly capacity prices.
Demand-Side vs. Supply Side Energy Management
The demand is the consumer, so the demand side focuses on ways to help the consumer use energy more efficiently. The supply comprises the generation, transmission, and distribution of energy, so the supply side looks for efficiencies in these processes.
Demand-side energy management focuses on reducing energy consumption by incentivizing customers to change how they use energy. Supply-side management seeks to optimize energy generation, transmission, and distribution.
The Benefits of Demand-Side Energy Management
An effective DSM strategy can:
- Reduce market prices for electricity.
- Reduce the cost of managing an electrical grid.
- Even out demand, resulting in a more efficient and reliable energy network.
- Ease the transition to renewable energy.
The Four Types of Demand-Side Management
Within the energy sector, DSM initiatives typically focus on one or more of four primary types. These are:
Energy Efficiency
The focus here is to encourage customers to use less energy by switching to energy-efficient appliances, lighting, and building designs.
Demand Response
Demand response provides incentives for customers to reduce their energy consumption during peak demand periods.
Load Management
Utility companies can implement technologies and practices to control specific loads directly, such as heat pumps, car chargers or air conditioners, to balance the supply and demand of electricity.
Distributed Energy Resources
By integrating small-scale, customer-owned generation sources into the grid, such as solar panels and battery storage systems, overall demand evens out.
Key Demand-Side Energy Management Strategies
Here are some of the most common DSM strategies:
Demand Response Programs
Demand-side response programs aim to optimize energy use and cost. This can both boost efficiency and help achieve sustainability goals. Demand response programs, also called energy demand-side management, center on electricity companies offering incentives to consumers who voluntarily reduce their power consumption during peak demand periods.
The goal is to balance the electrical supply with demand by encouraging businesses to reduce their usage or shift the timing of their most energy-intensive activities in response to price signals. A typical demand response program might work like this:
- Commercial or industrial consumers choose to enroll in the demand response program.
- When the electricity grid is experiencing high energy demand, the utility or grid operator notifies the enrolled participants.
- Upon receiving this notification, participants then reduce their energy consumption via manual adjustments, automated controls, or load management.
- The participants then receive compensation for reducing their energy use. This could be a direct payment, a credit on their utility bill, or some other financial incentive.
Demand-side management programs are often very appealing to consumers. This is because enrollment is cost- and risk-free. There are no penalties for not reducing energy use, but if consumers do reduce their electricity consumption, they lower their own energy cost while receiving compensation from the utility.
Time-of-Use Pricing & Smart Metering
A utility company may take a component of demand-side management and implement it more assertively. Time-of-use (TOU) pricing is already a key part of demand response, as it offers incentives to those who reduce their usage when electricity demand is high.
TOU pricing builds energy demand into its pricing, automatically charging more for electricity during peak periods. This can persuade many people and businesses to shift certain energy-intensive activities—such as laundry or running the dishwasher—to periods when there’s less electricity demand.
Smart metering can help with this effort. These meters track and record electricity usage by the hour and communicate this data to the utility company. Smart energy management provides greater transparency for energy companies and consumers when energy demand is highest.
Energy Efficiency Measures
Businesses and individual consumers can achieve their own energy savings by purchasing energy-efficient appliances. Such an appliance performs the functions needed but does so more efficiently. Governments may offer rebate programs or other incentives for organizations and individuals who purchase energy-efficient appliances.
Load Shifting and Distributed Energy Resources (DERs)
Distributed energy resources are small-scale energy systems that power a nearby location. DERs can connect to electric grids or operate isolated, with energy flowing only to specific sites or functions. DERs include both energy generation technologies and energy storage systems. They can be crucial in easing grid congestion.
One of the key mechanisms of this process is load shifting. Real-time monitoring and adjustments help optimize electricity costs while stabilizing the grid. DERs, such as home batteries and smart thermostats, can absorb excess renewable energy generated when electricity demand is low and use it when demand rises again, thus reducing the need to draw from the main grid.
Automation and AI in Demand-Side Management
The use of large-scale data and the frequent need for near-real-time decisions mean that artificial intelligence (AI) has become very useful to demand response programs. Optimization algorithm methods can help address numerous issues, such as selecting the best set of consumers to respond to and learning their behaviors and needs. AI can also help implement and fine-tune dynamic pricing and device scheduling and determine the most effective way to incentivize and reward participants’ demand response programs.
Utility Data Management
By analyzing back-end data from energy utilities, organizations can track usage trends, identify inefficiencies, and figure out the best methods for reducing costs and increasing sustainability. This data is often complex, though, so a utility data management tool that can collect data and provide actionable insights is valuable.
ECX Marketplace: Analyze does just that. It’s a powerful utility data management platform that’s easy to implement and which automates the tedious processes of collecting, managing, and storing data. With ECX Marketplace: Analyze, you can make informed decisions and optimize costs while working toward sustainability goals.
How EnerConnex Can Help With Demand-Side Energy Management
Learn more about EnerConnex Demand Management strategies and ECX Marketplace. You can also download our white paper.
