Demand Side Response in the Electricity Market

James Mwangi, Tony Gichuki

Abstract

Demand response can be defined as tariffs imposed on electricity based on the usage changes by end-
users for a specific period. Additionally, it refers to a way of reflecting the benefits of efficiencies in
production or the management of power companies. It can either be price based or incentive-based.
Examples of prices-based responses include Real-Time Pricing (RTP), Critical Peak Pricing (CPP), and
time of use (TOU) tariffs. An analysis of the role of electricity companies on their customers' consumption
behavior by exploring the cases of Bangladesh, Kenya, UK, and China has shown that there is a need to
ensure that the understanding of electricity rates in the global population is changed. The different
strategies adopted by electricity companies of the countries considered are all aimed at influencing
consumer behavior to reduce the stress on the electricity grid. The relationship between the price and the
supply of electricity in response to consumer demand is presented in this paper. The production,
management and supply of electricity by power companies has been extensively addressed, taking into
account four different countries, such as Bangladesh, China, Kenya and the UK. It provides an overview of
how demand side responses have been addressed on the premise of different time spans and
consumption according to consumer behavior.
I. Introduction
Most electricity consumers lack the understanding
of electricity rates as they vary over time concerning
demand factors and supply factors. Demand response can be
defined as tariffs imposed on electricity charges based on
the changes in the usage of electricity by end-users for a
specific period or as a way of reflecting the benefits of
efficiencies in production or the management of power
companies to the end-users [2],[11],[18]. Also, the tariffs
can be implemented to reduce the electricity costs when the
economy is going through a particular set of challenges or
when the grid's integrity is jeopardized [1]. A lot can be
achieved on the electric meter's consumer side in response Fig 1. Shows the number of biogas plants in Bangladesh
to certain conditions in the system, such as the PPN (peak [18].
period network) congestion, or peak prices that occur within Although energy production in the country has
designated times [11]. been growing steadily in response to the rapidly rising
Demand response can either be price based or incentive- demand for electricity, access to electricity has not
based. Examples of prices-based responses include Real- increased. Access to electric power has been a significant
Time Pricing (RTP), Critical Peak Pricing (CPP), and time issue in ensuring the gap between demand and supply is
of use (TOU) tariffs [2]. These tariffs are changed to show bridged.
the fluctuations in the cost of electricity through different
periods. Such prices inform the decision of the consumers to
optimize their usage of electricity. When the grid is
jeopardized or when the cost of producing electricity is high, Table 1: Electricity Access in Bangladesh
the management of power companies may opt to incentivize
Urb Rur
the participating customers through targeted offers. The
an al
main reason why electricity companies in both developed Total Access
Acce Acce
and developing countries adopt demand response
ss ss
approaches is to encourage the consumers to
optimize/manage their electricity usage in response to price 19 20 20 20 20
signals set by the electricity generating/distribution Year 2016 2016
90 00 10 14 16
companies [9]. This paper analyses the influences of
electricity companies on their customers' consumption %Popula
behavior by exploring Bangladesh, Kenya, the UK, and - 32 55 62 76 94 69
tion
China.
The demand response covers the tariffs that are imposed
by the electricity distribution institutions in countries around
In this case, the method is the implementation of
the world. There is a significant need to match the demand
power generation using solar photovoltaic (PV) technology
and supply of electricity consumption. exist some units that
that is not connected to the national grid. This will reduce
are expensive to operate and this may lead to the demand
the stress exerted on the grid by the excess demand for
being higher than the supply level being generated by the
power [4]. Solar photovoltaic technology is a type of
plants available. The demand response process tends to
technology that is being implemented by both governmental
cause adjustment of the power demand rather than causing
and non-governmental organizations to increase access to
changes to the supply side. China and the United Kingdom
energy in rural areas of the country to avoid jeopardizing the
are the effective states regarding the production and
performance of the already stressed national electricity grid
distribution of electricity for they have invested in quality
[3].
technology. Kenya and Bangladesh are still lagging behind
mainly due to the inability to adopt quality systems and high The national government has been able to manage
corruption levels. and control consumer behavior about power generation and
consumption over the years. Previous studies show that solar
II. The case of Bangladesh electricity usage as an alternative source of energy has
increased at a rapid rate from 513218 users in 2010 to
Bangladesh is a densely populated country with no
1655201 users in 2015 [9],[18]. This corresponds to the
electricity connection in many rural areas due to limitations
increased usage of alternative renewable energy sources,
on the supply side. It has become necessary to explore
such as solar cookers, water heating systems, biomass
methods of managing and controlling consumers' behavior
systems, etc. There are many potential areas that Bangladesh
to avoid exerting more stress on the national electricity grid
can turn to reduce the stress on the electric grid and increase
[3], [18].
access to power. These include wind energy and tidal
energy. Bangladesh boasts a 710km coastal line that offers
the perfect conditions for harnessing wind energy and tidal
energy [18]. The power generated from these sources can
either be connected to the electric grid or distributed parallel
to the grid.
Bangladesh boasts a 710km coastal line that offers
the perfect conditions for harnessing wind energy and tidal
energy [18]. The power generated from these sources can
either be connected to the electric grid or distributed parallel
to the grid.
When the electricity demand exceeds the supply,
especially during peak hours, the only way that the stress on
the grid can be solved is through load shedding. This is a
process that involves disconnecting the power to some areas
of the country [9], [13], [18]. This has negative impacts both
on a commercial, industrial, and domestic scale. Therefore,
Fig. 3 Demand for electric power for a weekday during
commercial and household consumers must change their
winter [12]
electricity consumption behavior to cope with the situation.
Most consumers are left with the option of putting in place As shown in Fig. 3, the peak power demand occurs
alternative sources of energy for their use. The power at around 11 am and accounts for approximately 15GW of
distribution company has continually encouraged most the peak energy consumption on a typical winter weekday.
commercial users to adopt renewable and cost-effective The UK aims to use demand other demand
alternative energy sources and optimize their energy uses. response measures to transform the electricity market and
This will reduce the need for shutting down the system for the power generation paradigm through the application of
load shedding. technology [4], 6], [11]. Automated timers, building systems
Production and Management capable of managing power usage, direct or dynamic
demand control devices, are used to encourage the efficient
In Bangladesh, The Power Grid Company of
utilization of energy on an industrial and commercial level.
Bangladesh is involved in the transmission of electricity. It
The devices are examples of new technologies that have
is government-owned, and it runs the power-grid system as
shown considerable effectiveness in overcoming the
a Bangladesh Power Development Board subsidiary. The
challenges of demand response and improving the British
institution is working towards ensuring that the entire
National Grid [11].
country is getting the desired distribution of electricity.
However, the country has not managed to realize the Production and Management
optimal level due to various factors that are causing In the United Kingdom, the production of electricity is
inefficiencies. done in various ways that includes nuclear, fossil fuels,
Handling Demand Response imports, and renewable energies that rely on wind, solar,
and wave. The burning of fossils, coal, and fuels provides
Bangladesh is one of the developing countries in the
the region with electricity. It makes use of imports, for it is
world, and this means that there is a rising demand of
connected to the grid system in the French territory, Ireland,
electricity that is needed in this country. The nation has a
and the Netherlands through the interconnectors. The region
single national grid, and this has a significant control over
has a National Grid that tends to cover a significant section
the electricity production in the country, and the existence of
of Great Britain.
a single system is have an effect on the ability to run the
production process effectively. Handling demand response
In the United Kingdom, the demand response is realized
through the process of raising the efficiency levels of the
III. The case of the UK production process to realize a balance between the supply
and demand processes. The region has heavily invested in
The electricity system of the UK is well placed to the latest technological systems that are optimally utilizing
meet the peak demand. Although this occurs rarely, there is the available resources to generate power for the countries
a need to encourage consumer behavior that shifts the usage.
consumption of power to times when the demand is low
[11]. Most of the power in the UK's electricity grid is
underutilized, probably due to the industrial impacts of the IV . The case of China
financial crisis of 2008, and the economic implications of
Brexit [18], [19]. However, to ensure the reliability of the China uses a combination of several Smart Demand
system, various measures have been proposed. For instance, Response (SDR) initiatives to reduce the stress exerted on
Economy 7 is a tariff program in the UK that targets the electricity grid by the increased supply-demand deficit
household consumers, especially those that use electricity and consumer power utilization behaviors [4], [6]. The SDR
for heating [4]. The tariffs lower the price of electricity strategy of China plays a crucial role in the integration of
overnight when the demand for electric power in the UK is renewable energy into the grid, load shedding, peak shaving,
lower. [12] Suggests that this influences domestic reduction of the emissions from the use of fossil energies,
consumers' consumption behavior as they shift the usage of and enhances the reliability of the electricity grid [12],[15].
electrical heating systems to nighttime when the costs are The government of China has put measures meant to ensure
more favorable. that the challenges of implementing the SDR are overcome.
 distribution in the country. China is currently the largest
producer of electricity in the world before the United States.
Handling Demand Response
The key technologies that are needed for the
implementation of the demand responses are already
available. China is using these policies to handle its
economic growth programs and energy planning process.
The country has developed a mechanism that it intends to
use to ensure that it is raising the level of consumption at
times of low demand

V. The case of Kenya

Fig. 4 The increasing electricity consumption of China [6]
The main challenge that deters the efforts to
Fig. 4 shows that the electricity consumption/demand of balance supply and demand of electricity in Kenya is the
electricity in China has been increasing at a rate of 8.8% rapid growth of the economy and the emergence of new
from 594.72 billion Kwh in 2011, to 652.1 billion Kwh in household and commercial users [16].
August 2018. This can be attributed to the increase in the
number of household and industrial users who have been
recently connected to the grid. The usage/consumption
behavior is one of the leading causes of the immense
pressure exerted on the national electric grid during peak
hours.
China leverages the advances it has made in
technology to implement a smart system that offers two-way
communication meters. These devices inform the consumers
of the pricing signals. They are also crucial in helping users
monitor and control their electricity usage by providing
potential load alerts [6],[12]. One of the reasons why SDR is
an essential issue for China is that despite being the global
leader in renewable energy production, it faces many
challenges in integrating the new energy into the electric Fig. 5 Electricity consumption in Kenya [16]
grid. Successful integration of the massive reserves of
renewable energy into the national network will eliminate Table 2: Electricity consumption of Kenya [16]
the need for load shedding, which affects the productivity of
200 200
industrial and commercial users due to the disruptions that Year 2002 2006 2008
0 4
occur during peak hours. Also, implementing a demand
response system that will enhance the grid's reliability will Keny
reduce the need for sources of power responsible for 4.08 4.43 3.98 4.24 5.12
a
greenhouse gas emissions.
201 201
The potential benefit of implementing an SDR Year 2012 2016 2018
0 4
strategy in China is that it will reduce market efficiency.
Stakeholders in the wholesale electricity market hoard Keny
power and fail to distribute it to meet the demand [7], [11]. 4.86 5.74 6.15 6.63 7.86
a
This has the effect of increasing the cost of power,
especially during peak hours, when the demand is high. This
puts unnecessary stress on the grid, leading to further
inconveniences in the market caused by the need to switch
off the power for load shedding. Statistics show that only 15% of the Kenyan
Production and Management population has access to electricity. This means that the
population that has been growing at a fast rate results in
China relies on the China Southern Power Grid and State alternative energy sources such as kerosene or charcoal,
Grid, and a significant amount of electricity generated in the which translates to 55%. The current number of households
country is from coal. Initially, the State Power Corporation's connected to the national grid is equivalent to 42% of the
(SPC) was involved with the provision of electricity in the population. The households' usage behavior means that the
nation to lower its monopolistic influence; it was broken national grid has to supply more power to meet the excess
down into 11 smaller entities. The central government has electric energy drawn from it as a result of user behavior.
instituted a unified national grid system, and this is aimed at Because the national grid of Kenya supplies 1429 MW, and
raising efficiency levels of electricity generation and the demand is 1600 MW, more pressure is exerted on the
grid dominated by two major government corporations.
Kenya Power (KP), on the transmission side, and KenGen services to its citizens, and this is an issue that countries
on the generation side work under the supervision of the such as Kenya and Bangladesh can take note, and ensure
energy regulatory commission to ensure that they meet the that they are working toward raising the level of services
supply needs of the Kenyan population [4], [9],[16]. The that they are offering. The United Kingdom is raising the
increasing demand has led to the implementation of several efficiency level in the generation of electricity through
response measures. For instance, there was a measure that investing in quality technological systems. It is a move that
led to the compensation of commercial users who had is helping to manage the production of carbon dioxide gases
alternative sources of power, such as backup generators, that are damaging the environment.
solar energy, or wind energy. The project was implemented
in 2000 when the supply of electricity was profoundly Comparison
affected by the drought that negatively the highly The electricity production in these four countries is
hydroelectric power reliant national grid [2]. being done with the idea of having a system that will ensure
Besides encouraging the use of alternative sources that these respective nations have adequate electricity to run
of energy to reduce the stress on the national grid, the their factories and meet ether needs. Among these four
government has leveraged the advances made in Information states, China is one of the most prosperous and has a high
and Communication Technology (ICT) to implement an production capacity due to the high technology levels that it
electricity metering strategy that has dramatically influenced has adopted. The United Kingdom has made significant
consumers' behavior about efficient power consumption [7], investments in electricity production, and this is an issue
[10]. The prepaid metering system rolled out in 2011, saw that is making it a successful state. Bangladesh and Kenya
the installation of over 118,698 prepaid meters across are developing states, and they are experiencing significant
significant regions of the country [10],[12]. This, in issues that are causing inefficiencies in the production and
conjunction with the 66% ownership of private power distribution of electricity. These states experience frequent
sources, offers a demand response strategy that can be used power outages that are either caused by inadequate people
to ensure the demand and supply of electricity are balanced supply process of a low-quality distribution system. Cases of
to avoid load shedding that requires disconnection of transformer malfunctioning are a constant problem that
specific regions [20]. Shutting down the national grid for a adversely affects the distribution process. Therefore, there is
short period has detrimental effects on a commercial, a significant difference between these states, for it seems
industrial, and domestic scale. that the United Kingdom and China are in an advanced stage
of development and the electricity production in the region
Production and Management is also well developed. On the other hand, Kenya and
Bangladesh are still struggling for their systems are not
The Kenya Electricity Generating Company PLC efficient. Corruption cases are a rampant issue affecting
(KenGen) is the institution that is involved in the production Bangladesh and Kenya for the officers that are running the
and generation of electricity in Kenya. It manages and power distribution companies are engaged in illegal
facilitates the operations and development of power plants activities that are playing a major role in the inefficiency
in the country, and the Kenya Power & Lighting Company levels. Illegal electricity connections are leading to the
is contracted to be involved in the distribution of electivity power companies lose a significant amount of money.
in the region.
Suggestions
Handling Demand Response
Some of the measures that Bangladesh and Kenya can
The institution involved in the generation and adopt to raise the efficiency levels include investing in
distribution of electricity in the country is relying on the quality technological tools. It has been noted that China and
digitization of the national grid, and this is a move that is the United Kingdom have managed to realize a quality
helping to alleviate the energy supply insecurity. The production and distribution process due to the quality
country is working on findings ways that can help to drive technological tools that they have adopted. Additionally,
the production level but the programs adopted are not there is a need to end the monopoly that is enjoyed by the
realizing the desired outcome due inadequacy of funds and power generation companies in Kenya and Bangladesh, for
rising corruption cases. this is a move that will ensure that the organizations that are
distributing electricity are raising their efficiency levels to
avoid losing their market share. Corruption is another
Efficiency in China and the United Kingdom problem causing issues in the electricity production process
in these countries, and the authorities have a major role to
The two regions tend to have high efficiency levels play towards making sure that they have instituted measures
compared to what is happening in Kenya and Bangladesh. In to curb corruption in their respective jurisdictions.
China, there was the monopolization of the electricity
generation process, and the country dissolved the single
entity involved. Several small companies were instituted and
VI. Conclusion
given the mandate to undertake the operations. Due to the There is a need to ensure that the understanding of
rising competition levels among these entities, it means that electricity rates in the global population is changed to ensure
the organizations were working towards offering quality that users change their consumption behavior according to
services to ensure that they can gain more clients in the changes in the price indicators. Demand response on a price
market, raising the efficiency levels. The high technology based or incentive-based dimension has proven that a
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