Benefits and challenges of electrical demand response: A critical review

Niamh O'Connell, Pierre Pinson, Henrik Madsen, Mark O׳Malley

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Advances in IT, control and forecasting capabilities have made demand response a viable, and potentially attractive, option to increase power system flexibility. This paper presents a critical review of the literature in the field of demand response, providing an overview of the benefits and challenges of demand response. These benefits include the ability to balance fluctuations in renewable generation and consequently facilitate higher penetrations of renewable resources on the power system, an increase in economic efficiency through the implementation of real-time pricing, and a reduction in generation capacity requirements. Nevertheless, demand response is not without its challenges. The key challenges for demand response centre around establishing reliable control strategies and market frameworks so that the demand response resource can be used optimally. One of the greatest challenges for demand response is the lack of experience, and the consequent need to employ extensive assumptions when modelling and evaluating this resource. This paper concludes with an examination of these assumptions, which range from assuming a fixed linear price–demand relationship for price responsive demand, to modelling the highly diverse, distributed and uncertain demand response resource as a single, centralised negative generator, adopting fixed characteristics and constraints.
Original languageEnglish
JournalRenewable and Sustainable Energy Reviews
Pages (from-to)686-699
Publication statusPublished - 2014


  • Demand response
  • Real-time pricing
  • Economic efficiency
  • Electricity markets
  • Direct load control
  • Indirect load control


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