The Importance of Demand Side Management
Discuss about the Demand Side Management for Demand Reduction.
Demand Side Management (DSM) is used in the implementation of strategies that aid in saving energy. The amount of electrical energy used in the U.K. is expected to increase due to the use of electricity in transport and spaces (Woolf et al., 2014). One of the ways of meeting this increased demand would be the increase of power generation, which would increase the cost of electricity. Therefore, this demand necessitates the implementation of smart systems, which are cost effective and energy saving. Through DSM, the use of demand side response, distributed energy generation, and demand reduction strategies can help to reduce the electrical energy being consumed. Ultimately, this would reduce the need for more generation of electricity.
Demand Side Response (DSR) is a form of energy saving technique. It occurs when organizations, such as supermarkets and factories, are given incentives to aid in balancing demand and supply of electrical energy by turning off processes that are non-essential during peak periods or consuming more energy during off-peak periods when a signal is given (Heinzelman, 2016). This technique saves energy because demand is reduced. Heinzelman (2016) states that it would not be viable to increase the supply of electricity during peak periods since such high demand is only witnessed for a few hours in the year. Therefore, using this strategy is economical because it will save money for all parties involved. Additionally, the low demand will ensure there is less pollution compared to increasing the supply of electricity. Evidently, the use of DSR is beneficial to the consumer and the power generating plant.
Using the demand side response has the following advantages. Firstly, it reduces the cost of electricity. According to Heinzelman (2016), demand can be reduced using other methods of electricity generation such as wind and solar. The use of these alternative sources of energy in the U.K. reduced the cost of electricity by approximately one billion Euros in 2014 (“Wind and Solar Reducing Consumer Bills,” 2014). Evidently, the use of DSR assists in reducing the cost of living. Secondly, organizations can earn revenue from the use of DSR. Kimmett (2016) states that most of the businesses that participated in this strategy received approximately 5 percent return on their electricity bill. This estimate reveals that there is value in participating in this project. Additionally, to attract more participants the rate of return is expected to increase (Kimmett, 2016). This information shows that using the DSR is advantageous.
One of the drivers of demand side response is the use of aggregators. Aggregators are organizations that acquire licenses from the regulator (Ofgem) to supply electricity under the demand side response strategy (Pratt, 2018). According to Pratt (2018), Flexitricity became an aggregator after acquiring a supply license, and it promised to provide more access to revenue gained from the implementation of the DSR strategy. This example shows that aggregators work under regulations set by Ofgem to drive the implementation of DSR.
Another driver of the demand side response is the use of the Grid Data and Measurement System (GDMS). According to Power Responsive (2016), GDSM connects the national grid in the U.K. with the entities involved in the DSR strategy to provide information in real time. This information is used by the entities to make changes when demand is low or high. This system drives this strategy because without it a lot of money would be incurred in providing real-time information making it undoable.
Demand Side Response and its Advantages
The U.K. government is also a driver of the demand side response. According to a report provided by the Department for Business Energy and Industrial Strategy (2016), the government has put measures in place to provide households with smart meters that would support the DSR strategy. The report further states that the meters would provide support by the provision of load control capabilities and real-time information (Department for Business, Energy and Industrial Strategy, 2016). These devices would make it easier for households to participate in the DSR strategy.
The demand side response strategy also has the following barriers. The first barrier is that majority of the eligible stakeholders do not trust the electricity market. The distrust makes it difficult for businesses to participate in the program despite the incentives (Torstensson, and Wallin, 2015). Johnson (2016) also states that in the U.K. majority of the businesses do not know about the market. The lack of knowledge makes the business seem risky hence businesses opt not to participate.
Another barrier is the technical difficulties associated with the implementation of the demand side response system. Research carried out in the U.K. indicated that some businesses experience problems in the implementation process due to the incompatibility of their systems to the one used by the DSR strategy (Ofgem, 2016). This incompatibility affects integration thus businesses may not participate in the program.
Availability of risk also hinders the implementation of demand side response. Majority of the businesses in the U.K. are afraid that this strategy may interfere with their primary processes, especially those who are already participating (Ofgem, 2016). Another risk factor is the addition of third parties who control the process of DSR because they may provide bad services, which may negatively impact the running of the business (Ofgem, 2016). Overall, risky processes, such as the DSR, are not viable for businesses.
Distributed generation (DG) is an efficient method of providing electricity. Distributed generation entails a process where generation and distribution of electricity are done in one place by connecting the source of electricity to a distribution channel (Chen, Zhu, and Xu, 2010). It can also be used to supplement the national grid when demand is high. In the U.K., DG occurs in different types such as wind, solar and hydroelectric power (“Distributed Generation,” 2018). The use of these sources of energy is encourage because they are renewable. Mainly, DGs are used by Distribution Network Operators because they are authorized to provide electricity in the U.K. (“Distributed Generation,” 2018). Overall, the use of DGs in the U.K. has improved the distribution of power.
In the U.K., the use of distributed energy has the following benefits. The first benefit is that it increases the number of suppliers (Reckon, 2006). The increased number of suppliers makes electricity cheaper and more reliable. The second benefit is that it makes the distribution of electricity flexible (Reckon, 2006). The use of DG makes it possible to use demand side response, which ensures there is flexibility in the use of energy. Lastly, the use of DGs reduces the emission of carbon (Reckon, 2006). This reduction is possible renewable energy sources are used, and it assists in the conversion of energy.
Drivers of Demand Side Response in the UK
One of the drivers of distributed energy generation is the need for the development of a unified national electricity grid, which reduces the cost of electricity. According to Reckon (2006), the generation of electricity initially relied on two systems, which were the national grid system and the low voltage supply system. With the increased demand earlier mentioned, the cost of electricity would have increased (Reckon, 2006). However, the use of DGs ensures that supply is increased to meet the excess demand thus stabilizing the price.
Another driver of distributed energy generation is the use of technology through innovative projects to provide incentives to develop the implementation process. Through Ofgem, the U.K. government provided funding to innovative projects geared towards enhancing DGs (such as network management) in 2009 (Energy Networks Associations, 2014). This method is beneficial because it provided new technologies that made the integration of the DCs and the transmission system more manageable. Additionally, the funds were an incentive that enabled more organizations to participate in the DGs strategy thus increasing competition. Eventually, the competition would lead to more innovative ideas.
The impact of energy generation on the environment is another driver of distributed energy generation. In the U.K., the majority of electricity generation is through the use of fossil fuels that emit carbon which is harmful to the environment (Energy Networks Associations, 2014). Therefore, the use of alternative sources of energy especially those that do not emit carbon would be beneficial.
Licensing is one of the barriers to distributed energy. According to Reckon (2006), the U.K. government requires that all distributed energy generators are licensed to control the quality of electricity supplied. Additionally, licensing ensures that consumers are protected from sub-standard products. However, the licensing procedures also discourage businesses from joining the distributed energy sector due to the bureaucracy involved. Reckon (2006) states that the licensing entails the participation in a Balancing and Settlement code, which stipulates trading arrangements for distributing the electricity. This code also makes the distributed energy generator to incur extra costs. Ultimately, distributed energy generators may prefer to avoid the strain involved in acquiring the license.
The tasks involved in the connection process also hinder the implementation of the distributed generation. The requirements of the connection process vary depending on the size of the generator. In most cases, the largest generators have more requirements. For example, plants with large generators are required by law to have a thirty minutes metering and renewable energy while those with small generators are not (Energy Networks Associations, 2014). This barrier prevents the implementation of large plants because the requirements are more.
The implementation of the distributed energy generation is also hindered by the integration of the current power system and the distributed energy system. According to Strbac, Ramsay, and Pudjianto (2007), the current system would have to undergo some structural changes to withstand the requirements of DGs. For example, the integration of DGs at various points in the distribution channel would require technical compatibility between the current and the new system. These changes may require a lot of capital, which slows down the implementation.
Barriers to Implementing Demand Side Management
Demand reduction in the electrical energy sector is an essential strategy in demand side management. The demand may be reduced by changing some processes used in the business or households such as the lighting used may be switched to LEDs (“2010 to 2015 government policy,” 2016). The aim of implementing the demand reduction strategies in the U.K. is the reduction of harmful gas emissions (Department of Energy and Climate Change, 2012). Demand reduction would also assist in the demand side response strategies. Evidently, these strategies have a positive impact on the households, businesses and the environment.
Demand reduction has various benefits for the consumers and businesses. For instance, for the consumers, it may aid in reducing the overall cost of electricity (“2010 to 2015 government policy,” 2016). The reduced cost would raise the living standards of U.K. citizens. Demand reduction also benefits businesses by lowering the cost of production (“2010 to 2015 government policy,” 2016). The reduced cost allows businesses to invest in other income generating schemes. The last benefit is the low emission of carbon, which is beneficial for all parties involved (“2010 to 2015 government policy,” 2016). The reduced demand will lower the generation of energy using fuels that emit carbon.
One of the drivers for demand reduction is the U.K. government. The government runs an efficiency scheme aimed at reducing the emissions by encouraging large organizations to use energy saving methods (“2010 to 2015 government policy,” 2016). Under this scheme, organizations incur a cost for every emission that exceeds the limit set. Additionally, the government provides allowances to organizations that invest in measures to save energy (“2010 to 2015 government policy,” 2016). These methods assist in discouraging the use demand reduction methods to reduce emission. Therefore, the government increases the implementation of measures to reduce demand.
Financial incentives are another driver of demand reduction in the U.K. Through the government, organizations that reduce the demand of electrical energy receive payments even after gaining revenue from the process (“2010 to 2015 government policy,” 2016). Presently, the government is also running a program where it pays organizations that adopt demand reduction techniques in a bid to evaluate the suitability of this measure in meeting the overall energy saving goals (“2010 to 2015 government policy,” 2016). These financial incentives are motivating factors for those organizations that can participate in the strategy.
Another driver of demand reduction is the use of organizations that aid in the implementation of demand reduction strategies. For example, the Carbon Trust assists organizations that choose to use energy saving methods of production (“2010 to 2015 government policy,” 2016). Additionally, some of these organizations, such as Salix Finance, provide loans for the organizations that implement energy saving mechanisms (“2010 to 2015 government policy,” 2016). Overall, these organizations assist the government in fostering the implementation process.
Demand reduction is hindered when the parties involved cannot agree on an implementation strategy. For example, in rental situations, the landlord is supposed to incur the cost of reducing the use of energy through energy saving lighting while the tenants benefit (Department of Energy and Climate Change, 2012). In such a situation, the landlord may lack the motivation to implement the energy-saving techniques. This case also applies to businesses since most of them use rent their offices and factory sites. To overcome this barrier, both parties may have to agree to share the initial cost, or the government can offer incentives.
The Benefits of Distributed Generation
Lack of information about demand reduction also hinders its implementation. In most cases, households are unaware of the benefits accrued from reducing the demand for electrical energy (Department of Energy and Climate Change, 2012). Therefore, they do not take advantage of the demand reduction strategies offered by the government. Additionally, the lack of information makes the venture seem risky. These risks can be mitigated by making such information accessible to the public.
The implementation of demand reduction strategies entails some hidden costs. For instance, households may need to research the available options that are beneficial to them and the suitable suppliers to provide the implementation strategies (Department of Energy and Climate Change, 2012). These hidden costs may make the whole process expensive for the households. Alternatively, for some businesses and households the cost of implementing the demand reduction strategies may be too expensive (Department of Energy and Climate Change, 2012). In such cases, these companies may choose to continue using their current energy methods.
Conclusion
Application of demand side management strategies is used in improving energy efficiency. For instance, the implementation of demand side response allows companies to participate in the reduction of demand for electrical energy by turning off non-essential processes while demand reduction is achieved by using alternatives that reduce energy. Though the U.K. government has provided incentives to increase the use of DSM, the barriers mentioned earlier make the implementation difficult. Nevertheless, the report shows that the application of DSM is ongoing and beneficial.
Reference List
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