Draft:Demand-side Flexibility

Demand-side flexibility (DSF) refers to the general ability of a power system (electricity grid) to reduce, increase or shift electricity demand during a specific time period. The term DSF is often used interchangeably with the term demand response (DR), though the former can be thought of as a more generalized form of the latter. DSF can involve having electricity users reduce or shift their consumption during periods of peak demand, which can strain the grid, or increasing consumption during periods of excess renewable supply. DSF balances supply and demand more effectively, reduces costs and enhances grid stability, which allows power systems to accommodate more renewable energy, and handle higher degrees of electrification, making DSF a crucial pillar of the energy transition .

DSF can broadly be achieved through smart appliances , demand response programs or automation technologies . There are two main forms of DSF . Implicit DSF relies on using price signals from the electricity market to steer consumer behavior through providing incentives and disincentives for consuming electricity at certain times. This approach relies on equipping consumers with smart meters and encouraging or enforcing the adoption of dynamic pricing, flexible contracts or variable grid tariffs . Users would then be expected to adapt their consumption according to the market price of electricity, which could vary by the hour. Explicit DSF instead relies on a contractual arrangement, whereby consumers agree to curtail their consumption at specified times in exchange for a fixed level of compensation .

Theoretically, DSF and DR could benefit power systems in a variety of ways that include but are not limited to relieving gird congestion, reducing the risk of outages, deferring network investments, reduced costs and accelerating the energy transition . The efficacy of current measures and policies remain mixed and ambiguous, however, particularly in the case of households. While there are studies that show consumers responding to price signals, these are typically field trials or pilot studies with small sample sizes and participants who systematically differ from the general population . Voluntary participation is low, however, with a considerable variation in consumers’ response and the wider applicability of DSF amongst consumers remaining uncertain . DSF policies have overwhelmingly relied on the use of price signals, market mechanisms and incentivizing consumers to change their individual behavior . Less attention has been given to wider governance aspects and how different institutions could be made more responsible .