Typically, in traditional power delivery systems, energy is supplied to the customers using non-renewable energy sources. Therefore, the energy generators are based on fossil fuels. Consequently, carbon emission in the environment is very high, and there is potentially a great impact on the environment. In contrast, in the smart grid system, energy is supplied to the end-users using renewable and non-renewable energy sources. Additionally, the implementation of distributed energy sources plays an important role for real-time energy management in the smart grid. Consequently, in the presence of distributed energy sources at the customers’ end, electricity consumers can schedule their shiftable appliances to the off-peak hours to relieve the extra load on the grid during on-peak hours. This mechanism is widely known as demand response (DR). The objective of any demand response mechanism is to reduce energy consumption cost to the customers and reduce imbalance between the energy supply and demand, while modifying the energy consumption pattern according to real-time price signals.

Fundamentals of Demand Response and Challenges

Different technologies are introduced in a smart grid system in order to establish the demand response mechanism – demand scheduling, online energy monitoring, and deployment of distributed energy sources. As mentioned earlier, customers can schedule their shiftable appliances to off-peak hours so as to minimize their energy consumption cost. Additionally, the real-time energy demand to the grid can also be relieved during peak hours. In the traditional power delivery system, such strategies cannot be deployed by the service providers in order to schedule the customers’ energy demand. Therefore, we have on-peak and off-peak hours in which energy demand is more and less, respectively, than the energy supply to the grid. On the other hand, using the demand response mechanism, the energy demand from the customers can be modified according to the energy supply to the grid in order to minimize the imbalance between the energy supply and the demand to the grid. However, there are several challenges that should be considered in order to install demand response mechanisms in real-life environments.