Design Of A Demand Response System: Economics And Information Systems Alignment

The lack of real-time pricing in many retail electricity markets requires implementation of a response mechanism for curtailing demand, particularly during peak load periods. Following a review of transaction cost economics and an analysis of options available, a market based on the exchange of consumption rights is suggested as an alternative to the commonly used hierarchical methods of demand response management. The implementation of smart metering and wireless communication creates the conditions for establishing such a market. Information systems will be required to collect real-time metering data for forecasting demand and monitoring use at the customer and utility grid level, to operate a real-time consumption rights market, to automate individual curtailment plans, and to support market makers to create marketable parcels. The potential outcome is an efficient marketbased system for curtailing demand during peaks and thus avoiding the use of expensive reserve generators that are often high emitters of greenhouse gases and other pollutants.