Demand response refers to the change in electricity usage by an end-user in response to signals from the grid operators or utilities. The end-user’s participation in a program of this nature is a response to factors such as: greater awareness, an increased sense of responsibility, incentive pricing and new tariff schemes. Demand response programs are designed primarily to shift or curtail load for a short period of time; they are primarily of two types: price-based response (voluntary) and incentive-based demand response (contractually mandatory).
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Price-based demand response is change in electricity usage by end-users in response to the price signals. Price-based demand response includes: critical-peak pricing (CTP), real-time pricing (RTP), and time-of-use (TOU) rates. Incentive-based demand response programs are established by grid operators, utilities, or load-serving entities. The participating customers are paid to reduce their power consumptions as requested by the market participants. Incentive-based demand response programs includes: ancillary service market programs, capacity market programs, emergency demand response programs, demand bidding/buyback programs, direct load control, and interruptible/curtailable services.
Burgeoning power demand propels the adoption of demand response programs. The roll-out of smart grid technologies, including smart meters and communication systems are likely to augment growth in the global smart demand response market. Increasing demand for power supplemented by capacity constraints is projected to boost growth in the global smart demand response market. Additionally, policies that encourage demand response programs are likely to accelerate the global smart demand response market growth in the future.
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Moreover, increasing installations of smart meters and other smart grid technologies are estimated to bolster growth in the global smart demand response market. Albeit, limited customer awareness of demand response programs and their benefits can restrain market’s growth. Further, high cost of technology and equipment for implementing demand response programs is likely to dampen the global smart demand response market’s growth. However, technological advancements and developments by leading market players are likely to augment the market’s growth.
Unprecedented energy challenges such as increased dependence on energy imports, lack of grid access to customers, growing energy security and environmental concerns, electricity infrastructure challenges, and surging power demand necessitates the modernization of electricity grids. Investment in demand response offsets investments in additional power infrastructure, averting the heavy cost of new power generation, transmission and distribution infrastructure. It further limits greenhouse gas emissions.