Short-term Inconvenience For Long-term Benefits
Shedding loads during peak demand is important because it reduces the need for new power plants. To respond to high peak demand, utilities build very capital-intensive power plants and lines. Peak demand happens just a few times a year, so those assets run at a mere fraction of their capacity. Electric users pay for this idle capacity through the prices they pay for electricity. According to the Demand Response Smart Grid Coalition, 10%-20% of electricity costs in the United States are due to peak demand during only 100 hours of the year. DR is a way for utilities to reduce the need for large capital expenditures, and thus keep rates lower overall; however, there is a economic limit to such reductions because consumers lose the productive or convenience value of the electricity not consumed. Thus, it is misleading to only look at the cost savings that demand response can produce without also considering what the consumer gives up in the process.
Read more about this topic: Demand Response
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