The concept Demand Side Management (DSM) is increasingly being used in very different circumstances and with different purposes. This wide use is a positive trend, but there is a risk that some actors may start to narrow the definition of DSM. The result could be that DSM means different things to different people and the broader picture gets lost.
What is DSM? In fact, it refers to all kinds of technological changes to the electrical system that originate from the demand side of the market. The purpose of DSM can be multifold, but large scale energy efficiency improvement is certainly a primary goal. The IEA’s DSM Program structures its activities into two clusters, depending on the desired impact on the load curve of the energy system.
1) The Load Shape Cluster includes tasks that aim to improve the shape of the load curve over short (minutes-hours-days) or longer (days-weeks-seasons) time periods. This will primarily increase the reliability and operability of the system, although it can also indirectly improve energy efficiency.
2) The Load Level Cluster includes tasks that aim to lower demand levels or shift the load from one energy system to another. This cluster primarily targets energy efficiency improvement and the reduction of Greenhouse Gas emissions, although it can also improve the reliability and operability of the system.
A more detailed classification according to the final purposes of DSM could be as follows:
1) DSM as a tool for matching local loads with grid supply (load shifting) (Tasks 8, 11, 13, 18, 19, 22)
This is the dominant view of DSM. It is most often mentioned as a smart grid tool and is often linked to smart metering. However, load management without smart metering is also perfectly feasible. With the predicted growth of grid-connected renewable energy systems, compensating the intermittent output of those systems will continue to grow in importance. Users taking part in this compensation are expected to gain an advantage. In the future, heat pumps and plug-in electric vehicles could serve as buffer storages and balancing elements to compensate supply (cost) variations. Note that a shortage in grid supply (and the resulting high cost of electricity) can also have its origin in congestion that can occur in the transmission system. This type of DSM system is of particular value to Transmission System Operators who can plan and dispatch their loads more effectively thanks to DSM.
2) DSM as a facilitator for a decentralized system with (largely) independent local grids (Tasks 6, 9, 15, 17, 19, 20, 21, 22)
DSM can be used to make maximal use of the existing local grid with local generation systems. This requires both load shape changes (load shifting) and load level changes (reducing energy demand by improving energy efficiency). This local grid can be a building or a factory that wants to reduce its dependency upon grid electricity and its cost fluctuations. It can also be a larger entity such as an island, for which the geographical borders are difficult and costly to overcome by transmission line connections. The wish or need to be largely independent from the main electricity grid can also have security reasons, quite apart from purely economic arguments.
3) DSM to improve the business model of electricity supply (Tasks 6, 9, 15, 18, 19, 20, 21, 22)
The story goes that Thomas Edison originally wanted to sell the light from the electric bulbs that he invented, and not the energy to supply them. His investors however convinced him that it was easier to measure a kWh than a Lumen. This separation of the service (the light) from the electricity supply has functioned as a demotivation for utility companies to show interest in the quantity and quality of electricity end use ever since. DSM wants to restore this broken equilibrium. Energy Service Companies (ESCOs) and Energy Performance Contractors (EPCs) are one way to create a business model in which the service provider has an interest in maximizing the energy service and instead of the energy sales. In practice, however, both ESCOs and EPCs have been a limited success. The search for a better business model continues.
Of the 16 Tasks of the IEA DSM Program that have been completed or are on-going, 6 are related to this purpose.
4) DSM for spreading welfare (Tasks 6, 9, 14, 17, 18, 20, 21, 22)
In some parts of the world, the economy is growing rapidly, or such growth is at least highly desired. Many people around the world are still deprived of a legal electricity connection. In such countries, the demand for infrastructure development is very high (or should be very high). However, physical and/or financial barriers often hamper this development. With DSM, energy services can be increased significantly without an equally significant investment in new infrastructure. DSM can also avoid the situation where older infrastructure concepts and technologies are used out of haste or financial necessity. Should that occur, it would have the effect of locking-in an obsolete system in which users grow dependent on a high and costly energy supply. With DSM, developing countries can step directly into the use of highly efficient technologies, resulting in a wider choice of potential energy sources and create a more sustainable system.
Out of those four groups of purposes, it is clear that all links in the electricity market chain have strong reasons to focus upon the implementation of DSM measures: from power station and network operators, to the end-user. However, when reading technical and scientific journals on DSM, it is obvious that the end-user and customer seldom take part in the story. The technologies and advantages of DSM are clearly demonstrated, but the question remains whether the customer likes them and how they want them to be served. The IEA DSM Program made a working point of end-user commitment. Without such commitment, the road of DSM will be difficult.