Managing Energy Resources: Demand Side Response, Distributed Generation, and Demand Reduction

This article discusses three approaches to managing energy resources: demand side response, distributed generation, and demand reduction. It covers the incentives, obstacles, and policy factors affecting their implementation. The article also highlights the impact of technology on these approaches and their effect on the environment and economy.

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MANAGING ENERGY RESOURCES
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1. Demand side response
Demand side response is about the use of electricity rather than electricity generation. For
example, the total demand for electricity in UK is highest; therefore with the use of DSR,
electricity in UK can be utilized more efficiently rather than generating more electricity to meet
the huge demands during short periods (Torriti 2015). There are few times of the year when
demand is very high, so rather than building a power station and use that for few hours, it is
wiser to reduce the overall demand. This will help to efficiently use the existing resources.
Further, it will reduce the cost of electricity as well. High demand for electricity is tends to be
more polluting as less efficient fossil fuel generator are used to meet the increasing demand.
Demand side response limits the number of hours the generators are run for and helps to
efficiently utilize the resources and increase the use of renewable generation (Siano 2014).
The Incentives of implementing demand side response is that it helps to shed loads during
the periods of high demand (Aghaei and Alizadeh 2013). During this time it is beneficial to use
demand response activities. Firstly, it significantly reduces peak prices and reduces the overall
cost of the consumers. Secondly, demand response might reduce the need for expensive
generations and distribution facilities to meet the needs during peak demand reasons. Financial
savings are reduced and payback cycle is lengthened (Qadrdan, Cheng and Jenkins 2017).
Demand side responses are advantageous as they have a long term effect on the sustainability
and reduce the usage of energy. Along with the financial savings, it reduces greenhouse gas
emission and increased environmental sustainability (Torriti 2015).

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The technology affects implementation of demand side response as it requires emerging
business models for different market segmentations, high level of innovation is required for the
implementation for bridging the gap, and various technological developments are obstacles for
the implementation of demand side response (Siano 2014). The rapid pace of technological
advancement also influences the way electricity is generated, distributed and consumer. There is
an obstacle in the implementation of demand side response that is lack of investment in enabling
technologies. If there is an absence of timely investment in technologies, rate of success in
managing the demand might be reduced (Aghaei and Alizadeh 2013). Sufficient flexibility is
required to balance electricity supply and demand and it is provided by the electricity generation
side which is an obstacle for implementing demand side response. This way the institutional
factors affect implementation of demand side response. However, various societal and regulatory
changes in terms of energy transitions have influenced the way in which electricity is generated
and distributed. Implementing demand side response that is available to reduce the demand will
reduce the cost of electricity by approximately £ 30 million if used for 100 half hourly periods.
By implementing this method savings will be around £ 300 per month (Qadrdan, Cheng and
Jenkins 2017). It implies that implementing DSR would enable net saving to the consumer. Thus
implementing demand side response increases financial savings (Siano 2014). The policy factors
affecting the implementation can be categorized into regulatory, market, fiscal, information
based and other voluntary policies. These factors also affect the implementation of demand side
response (Torriti 2015).

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Figure 1: Effects of energy efficiency
Description: it shows the effect of energy efficiency on a facilities’ electricity load. The effect of
implementing demand side response is load reduction for a particular day.
Source: (Aghaei and Alizadeh 2013)

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Figure 2: Effect of demand response
Description: reducing electricity usage during high price. it shows that the facility reduced it
demand in the particular hours when the price of electricity spiked.
Source: (Aghaei and Alizadeh 2013)
2. Distributed generation
Distributed generation is known as an approach which uses small scale technologies to
generate electricity that is close to the end users of electricity (Qadrdan et al. 2017). The
technologies of of distributed generation include modular that is renewable energy generators.
The distributed generators help to provide low cost electricity and offers higher power reliability
and security. Distributed generations have fewer environmental consequences. The current
model that is used for electricity generation and distribution in the United Kingdom is dominated
by centralized power plants. The power plants dominated in United Kingdom is usually nuclear
generated (Georgilakis and Hatziargyriou 2013). The centralized power models provide
distribution facility from the center to the outlining customers. The distributed power generations
takes place on local level and end point level. The local power generations include wind turbines,
solar systems and geothermal energy production. These plants tend to be less cost efficient and
are more reliable (Rao et al. 2013). The end point level users are modular internal combustion
engine. It is used to backup RVs and homes.
The huge power plants are based on fossil fuels, nuclear energy as expensive to build and
have a long payback period. The utilities require adapting to the advantaged technologies at a

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faster rate. Distributed generation requires various power generating technologies. The incentives
for using distributed generation are enhanced voltage profile and decrease of power loss (Keane
2013). However, the obstacles includes mal operations, there is a high probability of instable
conditions and occurrence of islanding. Implementing distributed generation requires technology
that is cost effective. The installation cost of implementing the distributed generations is
approximately around £ 30,000 (Georgilakis and Hatziargyriou 2013). The overall result of
implementing distributed generations is cost effectiveness and increases savings. The use of
technology is marginal on costs. It saves carbon (Rao et al. 2013). However, there are negative
costs that remain in the domestic sector. Implementing distributed generations adds to the cost
benefit for the UK system. The savings in implementing distributed generations is an incentive
for improving the balance between the supply and demand for electricity. The success of
implementing distributed generation highly depends on institutional arrangements and the policy
domains of electricity and power (Keane 2013). Better exploitation of resources and reducing
dependence are the main lines of Dutch policy. The utilities require new tools, technology and
sufficient amount of funds which obstructs the implementation of distributed generation. The
institutional nature affects the implementation as there are structural impediments in the electric
sector in UK along with the actions of other policy actors (Muñoz-Delgado 2015). Another
obstacle is that the institutional conditions are not favorable in UK for effective measures to
stimulate the implementation of distributed generations.

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Figure 3: Distributed generation system
Source: (Muñoz-Delgado 2015)
3. Demand reduction
According to Fernandez and Sun (2013), the demand for demand reduction is to use
funds to reduce the energy demands on their power systems and coordinate with the electricity
supply companies and utilities. The demand reduction policies and techniques are coordinated
through utility or independent system operator. The concept of demand reduction is to reduce the
demand for energy and reduce the maximum power or excessive requirements of the overall
consumers for a long term. According to Fujimori et al. (2014), reducing the demand for energy
and improving the efficient use of energy are highly considered the most reliable, cheapest and
faster means to save resources and mitigate climate change. There is range of policies that helps

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to deliver the reductions in demand for energy. According to UK energy research centre (2018),
reducing the demand for energy reduces the exposure to risks including increase in price and
shortage of energy in UK. Reducing the demand has various incentives as it has positive impact
on the system reliability. It helps to enhance security by lowering the costs and increasing
diversity. It was stated by Pye Usher and Strachan (2014), the electricity system security can be
enhanced significantly by investing in conventional supply resources besides improving system
flexibility with the use of demand side response.
The new and advanced technological factors affect the implementation and transform the
way resources are generated and consumed. According to Steinberg et al. (2016), the energy
efficient technologies are an incentive for demand reduction as it helps to bring down the cost of
renewable energy. It has significant effects on UK economy’s energy. According to Pye Usher
and Strachan (2014), on the supply side, the energy generators are able to deploy range of
technologies in the operations thereby raising the efficiency of extraction techniques, enabling
predictive maintenance and effectively manage resources. Technologies help to get access to
sophisticated data analysis and manage resources efficiently. According to Steinberg et al.
(2016), reducing the demand improves reliability and less demand reduces the stress on energy
transition and distribution system which in turn helps to reduce the financial stress and saves
costs. Reducing the electricity demand leads to lower wholesale prices. According to Fernandez
and Sun (2013), as the demand for the power is decreased, use of expensive forms of electricity
generation can be avoided, this is an incentive for the utilities as it keeps the energy cost in
check. The demand response strategies require to be active for specific period of time, the
utilities may include taking measures for energy reduction during the times of high demand.
However, it was mentioned by Fujimori et al. (2014), that there are obstacles to implement a

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demand response program as it put significant stress on the operation. Another obstacles is that
implementation of the DSM strategies are sensitive to integrity and safety. The policy CRC
energy efficient scheme requires mandatory reporting and pricing policy which implies
improving energy efficiency in large private and public sector organization. The policy is UK is
to cut down the greenhouse gas emissions by 2050 at about 80% (Fernandez and Sun 2013).
Hence this is an incentive for the private and public utilities to use less energy as there is a
support from the government. According to Steinberg et al. (2016), the public and private
utilities in UK are highly price sensitive, as utilization of energy increases operating costs.
Therefore, implementation of DSM strategies is an incentive for the utilities.

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References
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