Historically, the US power grid has primarily treated electricity demand as a (mostly) unalterable requirement that must be met by ramping dispatchable generation up or down to adjust the electricity supply. This system creates several drawbacks, including i) challenges associated with integrating intermittent renewable energy sources (such as solar and wind) that cannot be dispatched; and ii) inefficient use of resources, since the transmission, distribution, and generation systems must be built to meet the peak demand even though the peak occurs only a few hours during each year.
Demand-side management (DSM) approaches can alter the net electricity required from the grid rather than altering the electricity supply to meet the demand. Electricity pricing schemes like time-of-use charges and demand charges are one DSM approach. According to the Rocky Mountain Institute, electricity pricing schemes offer significant potential for altering electricity demand, but customers struggle with understanding more complex rate structures. Additionally, electricity costs are not high enough to drive behavioral change for many residential customers.
A second demand-side management approach is energy storage, which can be charged during low electricity demand and dispatched during high demand. A third DSM approach is improving transmission and distribution infrastructure to better link supply, demand, renewable energy, and storage resources in different geographical regions. Finally, DSM via demand-response (DR) allows utility signals to alter when or how electrical loads will run. Although DR has historically had narrow uses, today many residential and commercial buildings have communications infrastructure and access to computational power (via wifi or mobile internet), and many customers have user interface devices (smartphones), significantly increasing the potential for controlled DR of internet-connected devices.
DSM overall offers many potential advantages. Some proposed demand-side management policy approaches include (but are not limited to):
1. Support for transmission and distribution infrastructure and land;
2. Development of new sites for pumped hydro or compressed air energy storage;
3. Support for new hydroelectric dams;
4. Funding for research and development on flow (or other?) batteries;
5. Requirements and guidelines for electricity pricing schemes;
6. Cyber-security for internet-connected devices;
7. Mandates for energy storage or demand response, as was done in California