Two kinds of demand-response

This briefing by Energy Innovation describes two distinct applications of demand-response (DR) programs: as a capacity resource to mitigate peak demand and as a balancing tool to integrate variable renewable energy. The document argues that DR is a cost-effective alternative to building new power generation or investing in expensive grid-scale battery storage.

• Demand-response as capacity allows grid operators to meet peak electricity demand without constructing new power generation. In the U.S., the potential for this is estimated between 3 and 9 percent of summer peak demand, while Europe's potential is between 5 and 11 percent. A 2007 Brattle Group study indicated that a 5 percent reduction in U.S. peak demand could save $3 billion in annual electricity costs.
• The PJM grid region in the eastern U.S. demonstrated rapid growth in demand-response capacity due to its market structure, which includes a market for capacity (kilowatts) rather than just energy (kilowatt-hours). For the 2012/2013 delivery year, PJM added over 8.5 million kilowatts of DR capacity, representing nearly 5 percent of its 2011 total capacity, which contributed to an 85 percent drop in the price of capacity within one year.
• Automated demand-response serves as a balancing mechanism for variable renewable energy by adjusting electricity use in real-time. In California, existing infrastructure could provide between 180 and 900 thousand kilowatts of load control, potentially reaching 1.8 million kilowatts with modest upgrades—an amount exceeding 30 percent of the state's then-current installed wind and solar capacity.
• Automated demand-response can be implemented through various technologies, including building HVAC and lighting systems, smart appliances (such as dishwashers and washing machines), and electric vehicles. These technologies allow demand to be shifted to periods of abundant renewable electricity or provide frequency regulation services for the grid.

APA

Aggarwal, S., & Gu, J. (2012). Two kinds of demand-response. Energy Innovation. https://energyinnovation.org/wp-content/uploads/Two-Kinds-of-Demand-Response.pdf

Chicago

Aggarwal, Sonia, and Jeffrey Gu. Two kinds of demand-response. Energy Innovation, 2012. https://energyinnovation.org/wp-content/uploads/Two-Kinds-of-Demand-Response.pdf.

Wikipedia

{{cite report |last1=Aggarwal |first1=Sonia |last2=Gu |first2=Jeffrey |title=Two kinds of demand-response |publisher=Energy Innovation |date=November 2012 |url=https://energyinnovation.org/wp-content/uploads/Two-Kinds-of-Demand-Response.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{aggarwal2012two, author = {Aggarwal, Sonia and Gu, Jeffrey}, title = {{Two kinds of demand-response}}, institution = {Energy Innovation}, year = {2012}, month = nov, url = {https://energyinnovation.org/wp-content/uploads/Two-Kinds-of-Demand-Response.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }