IDEAS home Printed from https://ideas.repec.org/a/eee/rensus/v39y2014icp686-699.html

Benefits and challenges of electrical demand response: A critical review

Author

Listed:
  • O׳Connell, Niamh
  • Pinson, Pierre
  • Madsen, Henrik
  • O׳Malley, Mark

Abstract

Advances in IT, control and forecasting capabilities have made demand response a viable, and potentially attractive, option to increase power system flexibility. This paper presents a critical review of the literature in the field of demand response, providing an overview of the benefits and challenges of demand response. These benefits include the ability to balance fluctuations in renewable generation and consequently facilitate higher penetrations of renewable resources on the power system, an increase in economic efficiency through the implementation of real-time pricing, and a reduction in generation capacity requirements. Nevertheless, demand response is not without its challenges. The key challenges for demand response centre around establishing reliable control strategies and market frameworks so that the demand response resource can be used optimally. One of the greatest challenges for demand response is the lack of experience, and the consequent need to employ extensive assumptions when modelling and evaluating this resource. This paper concludes with an examination of these assumptions, which range from assuming a fixed linear price–demand relationship for price responsive demand, to modelling the highly diverse, distributed and uncertain demand response resource as a single, centralised negative generator, adopting fixed characteristics and constraints.

Suggested Citation

  • O׳Connell, Niamh & Pinson, Pierre & Madsen, Henrik & O׳Malley, Mark, 2014. "Benefits and challenges of electrical demand response: A critical review," Renewable and Sustainable Energy Reviews, Elsevier, vol. 39(C), pages 686-699.
    • Handle: RePEc:eee:rensus:v:39:y:2014:i:c:p:686-699
    DOI: 10.1016/j.rser.2014.07.098
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1364032114005504
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.rser.2014.07.098?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    References listed on IDEAS

    as
    1. Hedegaard, K. & Meibom, P., 2012. "Wind power impacts and electricity storage – A time scale perspective," Renewable Energy, Elsevier, vol. 37(1), pages 318-324.
    2. Thorsnes, Paul & Williams, John & Lawson, Rob, 2012. "Consumer responses to time varying prices for electricity," Energy Policy, Elsevier, vol. 49(C), pages 552-561.
    3. Faruqui, Ahmad & Sergici, Sanem & Sharif, Ahmed, 2010. "The impact of informational feedback on energy consumption—A survey of the experimental evidence," Energy, Elsevier, vol. 35(4), pages 1598-1608.
    4. Bente Halvorsen & Bodil M. Larsen, 2013. "How serious is the aggregation problem? An empirical illustration," Applied Economics, Taylor & Francis Journals, vol. 45(26), pages 3786-3794, September.
    5. Zarnikau, Jay W., 2010. "Demand participation in the restructured Electric Reliability Council of Texas market," Energy, Elsevier, vol. 35(4), pages 1536-1543.
    6. repec:aen:journl:2005v26-03-a05 is not listed on IDEAS
    7. Kim, Jin-Ho & Shcherbakova, Anastasia, 2011. "Common failures of demand response," Energy, Elsevier, vol. 36(2), pages 873-880.
    8. Walawalkar, Rahul & Blumsack, Seth & Apt, Jay & Fernands, Stephen, 2008. "An economic welfare analysis of demand response in the PJM electricity market," Energy Policy, Elsevier, vol. 36(10), pages 3692-3702, October.
    9. Schleicher-Tappeser, Ruggero, 2012. "How renewables will change electricity markets in the next five years," Energy Policy, Elsevier, vol. 48(C), pages 64-75.
    10. Torriti, Jacopo & Hassan, Mohamed G. & Leach, Matthew, 2010. "Demand response experience in Europe: Policies, programmes and implementation," Energy, Elsevier, vol. 35(4), pages 1575-1583.
    11. Allcott, Hunt, 2011. "Rethinking real-time electricity pricing," Resource and Energy Economics, Elsevier, vol. 33(4), pages 820-842.
    12. Keane, A. & Tuohy, A. & Meibom, P. & Denny, E. & Flynn, D. & Mullane, A. & O'Malley, M., 2011. "Demand side resource operation on the Irish power system with high wind power penetration," Energy Policy, Elsevier, vol. 39(5), pages 2925-2934, May.
    13. Strbac, Goran, 2008. "Demand side management: Benefits and challenges," Energy Policy, Elsevier, vol. 36(12), pages 4419-4426, December.
    14. Zarnikau, Jay & Hallett, Ian, 2008. "Aggregate industrial energy consumer response to wholesale prices in the restructured Texas electricity market," Energy Economics, Elsevier, vol. 30(4), pages 1798-1808, July.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Boßmann, Tobias & Eser, Eike Johannes, 2016. "Model-based assessment of demand-response measures—A comprehensive literature review," Renewable and Sustainable Energy Reviews, Elsevier, vol. 57(C), pages 1637-1656.
    2. Paterakis, Nikolaos G. & Erdinç, Ozan & Catalão, João P.S., 2017. "An overview of Demand Response: Key-elements and international experience," Renewable and Sustainable Energy Reviews, Elsevier, vol. 69(C), pages 871-891.
    3. Pina, André & Silva, Carlos & Ferrão, Paulo, 2012. "The impact of demand side management strategies in the penetration of renewable electricity," Energy, Elsevier, vol. 41(1), pages 128-137.
    4. Bertsch, Valentin & Devine, Mel, 2019. "The Role of Demand Response in Mitigating Market Power A Quantitative Analysis Using a Stochastic Market Equilibrium Model," Papers WP635, Economic and Social Research Institute (ESRI).
    5. Good, Nicholas & Ellis, Keith A. & Mancarella, Pierluigi, 2017. "Review and classification of barriers and enablers of demand response in the smart grid," Renewable and Sustainable Energy Reviews, Elsevier, vol. 72(C), pages 57-72.
    6. Heshmati, Almas, 2012. "Survey of Models on Demand, Customer Base-Line and Demand Response and Their Relationships in the Power Market," IZA Discussion Papers 6637, IZA Network @ LISER.
    7. Almas Heshmati, 2014. "Demand, Customer Base-Line And Demand Response In The Electricity Market: A Survey," Journal of Economic Surveys, Wiley Blackwell, vol. 28(5), pages 862-888, December.
    8. Zhou, Kaile & Yang, Shanlin, 2015. "Demand side management in China: The context of China’s power industry reform," Renewable and Sustainable Energy Reviews, Elsevier, vol. 47(C), pages 954-965.
    9. Mel T. Devine & Valentin Bertsch, 2023. "The role of demand response in mitigating market power: a quantitative analysis using a stochastic market equilibrium model," OR Spectrum: Quantitative Approaches in Management, Springer;Gesellschaft für Operations Research e.V., vol. 45(2), pages 555-597, June.
    10. Lopes, Marta A.R. & Henggeler Antunes, Carlos & Janda, Kathryn B. & Peixoto, Paulo & Martins, Nelson, 2016. "The potential of energy behaviours in a smart(er) grid: Policy implications from a Portuguese exploratory study," Energy Policy, Elsevier, vol. 90(C), pages 233-245.
    11. Seungmi Lee & Jinho Kim, 2018. "Analytical Assessment for System Peak Reduction by Demand Responsive Resources Considering Their Operational Constraints in Wholesale Electricity Market," Energies, MDPI, vol. 11(12), pages 1-15, November.
    12. Bertsch, Valentin & Devine, Mel & Sweeney, Conor & Parnell, Andrew C., 2018. "Analysing long-term interactions between demand response and different electricity markets using a stochastic market equilibrium model," Papers WP585, Economic and Social Research Institute (ESRI).
    13. Liu, Yingqi, 2017. "Demand response and energy efficiency in the capacity resource procurement: Case studies of forward capacity markets in ISO New England, PJM and Great Britain," Energy Policy, Elsevier, vol. 100(C), pages 271-282.
    14. Clastres, Cédric & Khalfallah, Haikel, 2021. "Dynamic pricing efficiency with strategic retailers and consumers: An analytical analysis of short-term market interactions," Energy Economics, Elsevier, vol. 98(C).
    15. Jan Stede & Karin Arnold & Christa Dufter & Georg Holtz & Serafin von Roon & Jörn C. Richstein, 2020. "The Role of Aggregators in Facilitating Industrial Demand Response: Evidence from Germany," Discussion Papers of DIW Berlin 1840, DIW Berlin, German Institute for Economic Research.
    16. Wang, Yong & Li, Lin, 2015. "Time-of-use electricity pricing for industrial customers: A survey of U.S. utilities," Applied Energy, Elsevier, vol. 149(C), pages 89-103.
    17. Olmos, Luis & Ruester, Sophia & Liong, Siok-Jen & Glachant, Jean-Michel, 2011. "Energy efficiency actions related to the rollout of smart meters for small consumers, application to the Austrian system," Energy, Elsevier, vol. 36(7), pages 4396-4409.
    18. Woo, C.K. & Li, R. & Shiu, A. & Horowitz, I., 2013. "Residential winter kWh responsiveness under optional time-varying pricing in British Columbia," Applied Energy, Elsevier, vol. 108(C), pages 288-297.
    19. Cédric Clastres & Haikel Khalfallah, 2021. "Dynamic pricing efficiency with strategic retailers and consumers: An analytical analysis of short-term market interactions," Post-Print hal-03193212, HAL.
    20. Dranka, Géremi Gilson & Ferreira, Paula, 2019. "Review and assessment of the different categories of demand response potentials," Energy, Elsevier, vol. 179(C), pages 280-294.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:rensus:v:39:y:2014:i:c:p:686-699. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/wps/find/journaldescription.cws_home/600126/description#description .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.