Demand Response (DR)

What it means

Demand response treats reduced consumption as a supply resource. Programmes fall into two families: price-based, where consumers respond to time-varying tariffs, and incentive-based, where a utility or aggregator pays participants to curtail load on request during scarcity events. Typical industrial and commercial participants include cold storage, water pumping, cement and steel, EV charging depots and data centres; residential programmes rely on thermostats and water heaters. Demand response is the foundation on which virtual power plants were built, and the distinction is increasingly one of sophistication rather than kind — DR reduces load, while a modern VPP can also export stored energy. The persistent methodological problem is measurement and verification: proving that consumption would have been higher without the intervention depends on a counterfactual baseline, and baseline gaming is a recognised weakness of DR markets.