Demand response is a strategy that compensates electricity customers for reducing their consumption in response to instructions sent out electronically from the grid operator (in the case of Massachusetts, the Independent System Operator for New England, ISO-NE).
Facilities that generate electricity (like power plants) are paid for the amount of energy they put on the grid. Customers that participate in demand response programs are paid for reducing the amount of energy they take off the grid. How much either type of resource gets paid depends on real-time energy prices.
Smart meters, of the kind currently being deployed to customers in Massachusetts, provide the ISO with detailed information about the electricity use of each demand response participant. Traditional meters provide the same information on your electricity use, but only on a monthly basis. In order for demand response to operate efficiently, the data must be available minute-to-minute, and that’s where smart meters come in.
When a demand response event is actuated, the customer’s actual energy use is subtracted from their baseline usage to calculate the demand reduction in megawatt-hours (MWh). The resulting compensation to the customer is priced as though they had generated the same number of megawatt-hours during that period.
The demand response system is usually triggered either by unusually high wholesale prices in the electricity market or by system reliability risks (such as when the weather is producing unusually high or low temperatures, e.g., the Winter Peak or Summer Peak).
Demand response can play a significant role environmentally. Increases in electricity demand from the electrification of transportation and home heating, and the increased use of intermittent renewable energy sources like solar and wind place increasing demands on the power grid. Along with smart grids and energy storage, demand response can help to accommodate these impacts and reduce the need for costly new transmission and distribution infrastructure. For example, on a particularly hot day in the summer of 2024, demand response programs yielded an estimated 379 MW drop in demand, shifting energy consumption away from the peak. Peakers (power plants that only come online during peak power demand) are primarily powered using fossil fuels like methane gas or diesel fuel. By shifting power consumption away from the peak, a significant source of emissions can be avoided.
Connected devices and other technologies can help to automate demand response, harnessing the growing potential of distributed energy resources such as rooftop solar panels, electric vehicle batteries and home energy storage systems.
Both Eversource and National Grid offer a demand response program called ConnectedSolutions. Customers can participate in ConnectedSolutions after installing an approved smart thermostat, and financial incentives are available (see their respective websites for details).
Reducing electric use during periods of high energy demand will reduce emissions, infrastructure costs, and utility prices.
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