Demand Side Electricity Management

Electricity grids need to be designed to be responsive to the changing load requirements of electricity consumers. The most costly and challenging component of this is providing for the peak load demands, especially when the electrical load peaks rapidly and well above the median load.  In most electricity markets, peak load tends to take place in the mid to late afternoon as consumers begin to return home from the workplace. During this time, both commercial and household electrical loads are high. On especially hot days, very high peak loads can be experienced because of the increased use of energy hungry air conditioning.  

The marginal cost of supplying electricity during times of peak load, particularly if these peaks only occur sporadically, can be astronomical, and this cost flows through to all electricity consumers. Accounting for peak load is most commonly handled on electricity grids through the use of peaking power plants which are natural gas driven turbines which can be started very quickly and respond to fluctuating output requirements.

In addition to the high capital expense of peaking power plants, demand side mechanisms are becoming increasingly popular to manage peak load requirements because they offer considerable cost and efficiency savings. At the most basic level, demand side management involves informing and educating consumers of the cost of peak power generation and encouraging electricity users to reduce their consumption at peak times.  Here in California, consumers are alerted of the need to reduce their electricity usage through the issuing of a Flex Alert by the state’s Independent System Operator but many such systems are in place in electricity markets around the world.

Commercial electricity consumers, in particular industrial operations with large power demands, can be more directly involved in demand side management by engaging with network operators and receiving compensation to reduce or eliminate their electrical consumption during times of peak load. A more sophisticated implementation of this strategy is sometimes referred to as a virtual power plant, where operations with large electrical loads can coordinate and adjust their electrical consumption to help electricity grids function more efficiently.