The Council’s definition of demand response (DR) is “a non-persistent intentional change in net electricity usage by end-use customers from normal consumptive patterns in response to a request on behalf of, or by, a power and/or distribution/transmission system operator. This change is driven by an agreement, potentially financial, or tariff between two or more participating parties.” The need for DR arises from the mismatch between power system costs and consumers’ prices. While power system costs vary widely from hour to hour as demand and supply circumstances change, consumers generally see prices that change very little in the short term. The result of this mismatch is that consumers do not have the information that might incent them to curb consumption at high-cost times and/or shift consumption to low-cost times. The ultimate result of the mismatch of costs and prices is that the increased power system needs require building more peaking capacity, building more transmission, and incurring more system upgrades than would be necessary if customers changed their use in response to price changes in the market. Programs and policies to encourage demand response are efforts to provide this information to consumers and create the infrastructure to allow them to respond to price signals in the market.
Evaluated in the 2021 Plan are demand response products that impact residential, industrial, commercial, and agricultural sectors, as well as the utility distribution system. DR products evaluated include utility controllable and price-responsive options across the sectors. Utility controllable products are those for which the utility can change the operation of an end-use equipment to reduce peak. Price-responsive products are those for which the end-use customer can choose how to modify their loads based on a price signal from the utility.