Demand variability is a predominant feature of electricity consumption in India. Since demand forecasting is mainly done on a day-ahead basis in the country, the actual electricity demand has neither been fully met nor accurately determined so far. In addition, supply variability has also a regular feature in the sector with the introduction of renewable energy. This has led to an increase in the power demand-supply gap, especially during peak hours, forcing distribution utilities to resort to load shedding.
Utilities need to take measures to balance the load curve by creating enough reserves, adopting efficient electricity storage technologies, and undertaking demand-response initiatives. In the Indian context, demand response offers a reliable solution to bridge the gap by sending out appropriate signals to consumers that encourage them to redistribute their power consumption.
Demand response versus DSM
Demand response is essentially a dynamic form of demand-side management (DSM) with a time component. Under DSM, the utility asks consumers to reduce their load and compensates them for doing so in case of a demand-supply gap, while in the case of demand response, the utility asks consumers to not just reduce the load but also to do so at a particular time. The compact fluorescent lights (CFLs) programme, in which state discoms offered incentives to promote CFL adoption, is an example of a successful DSM programme.
The time-of-day (ToD) metering system is an essential element of demand response as it enables the implementation of time-varying prices. Under this, the price per unit of electricity varies, with higher rates during peak hours and lower rates during off-peak hours. ToD tariffs send price signals to consumers so that they can curtail or shape demand to reduce the load on the electricity system during peak hours.
The presence of an adequate pricing signal is the key for consumers to voluntarily adjust their demand. ToD tariffs have been introduced in Karnataka, Maharashtra and Delhi, but the pricing signal has been low. The tariffs should be fixed in a way that consumers are willing to reduce their load rather than having to pay higher electricity bills for certain time blocks. Further, the utilities should take steps to procure short-term power to meet the increased demand during peak hours. At present, only a few states such as Maharashtra and Delhi systemically procure peaking power due to higher costs of up to Rs 8 per kWh. In order to mitigate this, utilities can either raise tariffs for all consumers or make those consumers who draw more power pay more. However, the utilities would rather resort to load shedding, not realising that the cost of backup power is even higher. Therefore, a viable solution to meet the peak demand is to introduce ToD pricing and demand-response programmes. However, given the present state of utility finances, they will undertake the latter only if the incentives to be offered to consumers are cheaper for them than buying peaking power.
Challenges in implementation
Demand response is typically a grid-level exercise as the load despatch centre will indicate its need. However, a key challenge is the absence of ancillary services, necessary to support transmission. These serve as the backbone of the demand-response programme by enabling the load despatch centre to effectively adjust the power supply corresponding to the change in demand.
Most importantly, there should be an appropriate pricing signal to encourage consumers to participate in the programme. There is also a need for greater automation and better technology to strengthen the grid and for deploying smart meters to monitor electricity consumption. Apart from these aspects, building of management systems and energy management systems can facilitate demand response.
However, the utilities should not rely only on demand response but also invest in a strong and stable grid – more so because demand response increases costs for the consumers, who have to resort to diesel-based backup power systems. Going forward, stringent measures should be taken to end power cuts because as long as utilities are allowed to shed load freely, the demand-response programme will lose its significance.
Based on a presentation by Dr Rahul Tongia, Adviser, India Smart Grid Task Force; Adviser, India Smart Grid Forum; Adjunct Professor, Carnegie Mellon University; and Fellow, Brookings India