Demand Response

Demand Response is a voluntary change in normal consumption patterns by end-use customers in response to market or price signals, or grid operator notifications. Metropolitan Energy's demand response programs are designed to reduce demand spikes, thereby bolstering grid reliability and curtailing price fluctuation.

Demand spikes increase long-term prices by creating an exceedingly high potential demand that requires new generation and delivery capabilities to be constructed. Electricity, unlike other commodities, cannot be stored and must be consumed almost immediately after it is created. Energy supply needs to be in a constant balance with energy demand—yet the electric industy must be able to meet the peak consumption level at any time.

But with consumer consumption constantly changing between summer and winter, day and night, hour to hour, and even intra-hour, the actual market demand may reach the annual maximum peak consumption for only a few hours out of the entire year. Still the industry must build enough power generation and delivery capacity to be able to support this brief window. Outside of this time, the resources sit idle. However, by keeping annual demand spikes in check, demand response movements can help reduce investments in building additional capacity—and the long-term price increases that occur alongside. End users with the ability to reduce their demand when called upon can be treated just as generation, and get paid for doing so.

Reducing Short-Term Price Volatility

Demand spikes also increase short-term prices by requiring the use of the most expensive generation.

The most cost-efficient electric generation cannot be quickly ramped up and down. With the development of competitive markets for electricity, this immobility leads to price volatility because the least expensive supply is somewhat inelastic. By keeping daily demand spikes in check, demand response helps keep the most expensive generating stations offline, allowing short-term price increases to be reduced.

Increasing Grid Reliability

Demand spikes reduce short-term reliability.

On the hottest days of the year, demand can spike to the point where even if generating capacity is available, the grid still might fail. Demand response can be used at these times to reduce spikes and increase grid reliability. This could involve customers waiting to be dispatched by grid operators when demand spikes and equipment failures are possible. Demand response can also optimize the regular operations of the grid. In the second-to-second operation of the electric grid, generation and demand must be constantly balanced. By allowing end users to respond automatically to "regulation" signals, demand can be balanced with supply.