Factors Influencing Demand Side Management Strategies

Contents

Executive Summary

Factors Influencing Demand Side Management Strategies

Demand Side Management

Types of Demand Side Management Strategies
1. Demand Side Response
1.1. Financial Aspects
1.2. Technological Aspects
1.3. Institutional Aspect
2. Distributed Generation
2.1. Financial Aspects
2.2. Technological Aspects
2.3. Institutional Aspect
3. Demand Reduction
3.1. Financial Aspects
3.2. Technological Aspects
3.3. Institutional Aspect

Conclusion

Recommendations

References

Executive Summary

The future of UK's energy industry is currently facing significant threats attributed to dwindling energy resources and escalating energy demand. Demand side management strategies can play a central role in facilitating the UK to smoothly transition from relying on conventional energy production systems to modernised systems that are more reliable due to reduced production costs and enhanced yields (Torstensson & Wallin 2015). The DSM strategies are predominantly divided into three types namely demand side reaction, distributed generation, and demand reduction.

Demand-side responses are concerned mainly with short-term actions characterising the consumers in attempts to modify their power consumption patterns. Distributed generation seeks to establish localized energy generation and distribution to offset the demand load in macro grid power systems. Demand reduction is caused by escalating population growth and the increase of technological appliances and seeks to reduce the energy stress in macro grid power networks. Reducing energy demand explores significant ways to influence consumer behaviours and to enhance power consumption efficiency (Owens & Driffill 2010).

Each of DSM groups is affected by technological, financial, and institutional factors. Financial aspects explore monetary benefits and barriers while technological factors deal with technical potential and challenges inhibiting successful implementation of DSM strategies. The institutional elements mostly focus on regulatory issues influencing demand-side management strategies. Thus, the primary recommendations in the UK’s context are concerned with technical developments and policy reconstitution to facilitate secure and sustainable energy management.

Factors Influencing Demand Side Management Strategies

The United Kingdom is facing the currently undergoing a trial moment due to growing concerns regarding the future of its energy system. More than two-thirds of the UK's power stations depend on old coal, gas, or nuclear-powered stations, which are expected to close by the year 2030. The closure of these stations is attributed to regional treaties such as the European Large Combustion Plant Directive, which compares the European Union signatories to honour clean air obligations (Torriti, Hassan, & Leach 2010). Besides, the existing energy system in the UK is incapable of achieving growing power demand and sustaining marketing requirements. This demonstrates that energy security, efficiency, and sustainability are some of the critical priorities in the UK's energy system.

Demand Side Management

Demand-side management (DSM) entails a series of strategic plans designed to reduce electricity or energy use through innovative programs and activities in efforts to promote energy efficiency and conservation, mainly through efficient energy management. It involves the planning, execution, and assessment of energy utilities targeting the consumers in attempts to promote efficient energy consumption and demand patterns (Torstensson & Wallin 2015). Therefore, effective DSM strategies are paramount in facilitating the accomplishment of secure, sustainable energy system in the UK. These strategies are particularly relevant to the future UK energy system as they are likely to facilitate a smooth transition from fossil fuel-dependent power stations to modernised energy generation, conservation, consumption, and distribution techniques. The UK’s future energy system is more likely to benefit from DSM strategies in the midst of growing energy demands and declining fossil fuel resources in the energy system (Domínguez et al. 2012). Consequently, three major types of DMS strategies include demand-side response, distributed generation, and demand reduction, in which each of these categories has financial, technological, and institutional aspects.

Types of Demand Side Management Strategies

1. Demand Side Response

Demand side response also referred to as demand response (DR) are programs designed to encourage end-user consumers to enact short-lived energy demand in reaction to certain variables regulated by power grid operator or price signals from usual market ratings (Leeflang & Wittink 2013). The action is deemed to last from one to four hours and includes reduction of power consumption such as through turning off unnecessary lighting, dimming unnecessary lighting, shutting down complementary lighting or manufacturing processes and turning off superfluous residential, commercial or industrial components in attempts to off-load power demand from the power grid operator. These activities may also include using the onsite generator to displace the demand burden placed on the power grid (Segu 2012). DR encourages energy consumers to reduce the amount of energy consumed from their power grid at a specific time in reaction to predetermined indicators.

1.1. Financial Aspects

1.1.1. Drivers

Demand response is mostly concerned with monetary savings for both utilities and consumers. In other words, these strategies provide the energy market with monetary incentives in efforts to promote reduced or regulated energy consumption. Thus, the return on investment for both the consumers and DR utilities is one of the most fundamental aspects of this scenario. Policies and regulatory frameworks influencing the market charges and return on investment in DR utilities is likely to impact the reliability of managing demand side patterns (Kemp, 2011).

1.1.2. Barriers

Residential markets largely remain untapped which inhibits the acceleration of DSM strategies focusing on DR. Price incentives aiming at demand side response may be unsustainable due to market forces. This obscures the development of a structured market aiming to the demand-side reaction. Apparently, increasing financial incentives for the consumers do not always translate to reduced energy demand, restricting potential DR benefits in DSM.

1.2. Technological Aspects

1.2.1. Drivers

Numerous DR technical applications are designed to offset the energy demand from conventional power stations. On the other hand, solar systems and other renewable energies aiming to reduce the demand load are characterised by unreliable energy supply. Therefore, a breakthrough in efficient, reliable, and efficient storage technology is one of the critical drivers in DR approaches (Arteconi, Hewitt, & Polonara 2012). Cost-effective storage technologies are some of the major factors facilitating a faster integration of DR into the contemporary micro and macro power grids.

1.2.2. Barriers

Most DR utilities are essential in mitigating power uncertainties in macro-grids but cannot provide long-term technical solutions. Therefore, system reliability is a significant concern in the management of demand-side response and may affect consumer behaviours in adopting conservative energy behaviours (Pholboon, Sumner, & Kounnos 2016). In other words, DR utilities are designed to offer short-term demand solutions, and hence incapable of facilitating the achievement of secure, sustainable energy demand and supply.

1.3. Institutional Aspect

1.3.1. Drivers

The availability of legislative policies and regulatory frameworks that directly facilitate the implementation of DR utilities is fundamental in DSM. Such legislation and regulations create a favourable environment for the execution of DR plans, which is fundamental in the acceleration of demand-side reaction.

1.3.2. Barriers

Regulatory uncertainties are fatal to the full realisation of DR approaches. This is attributed to the confusion caused by political interferences, hindering the adoption of healthy conservative behaviours in the market. Moreover, the presence of ambiguous policy clauses is likely to discourage the exploitation of demand response utilities.

2. Distributed Generation

Distributed generation (DG) is used to describe decentralized or localized energy generation and storage through small-scale combined heat powering systems that include renewable sources of energy. DG connections are different from traditional power stations, including hydroelectric resources and large solar power stations. Most DG systems are based on small grid connections and often produce up to 50 megawatts (Drude Junior, & Rüther 2014). The small grid can easily be disconnected from macro grid systems to operate independently. DG systems are expected to have a central role in the UK's future energy security and management. These facilities will facilitate the integration of renewable resources into macro-grid methods to enhance the effectiveness of demand-side management (Vardakas, Zorba & Verikoukis 2015). Nevertheless, UK's ability to exploit distributed energy generation resources may be enhanced or hindered by economic, technical, and institutional factors.

2.1. Financial Aspects

2.1.1. Drivers

The installation, maintenance, and production costs of simplified solar power panels has declined in the last few years with more than 50% due to increased awareness and intensified conceptualisation of micro-grid power stations. Moreover, the intensification of micro-turbines and biomass power generation is increasingly becoming cheaper, promoting the integration of distributed energy resources to derive maximum benefits are relatively lower prices.

2.1.2. Barriers

Reliable power supply obtained from DG utilities interprets to an uninterrupted power supply to the consumers. Nonetheless, this necessitates regular maintenance, recalibration, and installation of advanced DG systems, which are relatively expensive to common consumers. Additional charges are resulting from contractual issues, legal and compliance requirements also hinder efficient installation of DG utilities, especially in small-scale consumers. The initial cost of installation is also relatively prohibitive, which hinders the acceleration of DG and microgrid power station development (Haney et al. 2010).

2.2. Technological Aspects

2.2.1. Drivers

The adoption of homogenous technical requirements in the UK is likely to enhance the interconnectedness of the DG power grid Universal DG technical tools encourages efficient integration and networking of micro-power grid systems into the macro-power grid infrastructures (Roldán-Blay et al. 2017). These measures are paramount in accelerating the development of DG planning, implementation, control, and monitoring expertise and systems, increasing the efficiency of DG utilities in addressing the existing energy demand and supply issues facing the UK.

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