Smart Grids and Demand Response: Conceptual Review: September 2019
Smart Grids and Demand Response: Conceptual Review: September 2019
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REPORT ON
SMART GRIDS AND DEMAND RESPONSE: CONCEPTUAL REVIEW
Abstract
The traditional grid system only provides a one-way control over electricity power supply and
consumption. It does not allow communication between electricity suppliers and customers for
efficient and effective power management. This creates lots of inconveniences and economic
losses. One of the ways to make electricity supply and consumption efficient, convenient, reliable
and cost-effective is to use a grid system called Smart Grid. To achieve the ultimate goal of Smart
Grid a concept called Demand Response is applied. This report reviewed 25 published research
between 2010 and 2018 on Smart Grid and Demand Response for a detailed understanding of their
fundamental concept. The review has shown that Smart Grid is a modern and future grid system
that uses embedded digital and information technologies to make possible the communication
between producers and consumers to make decisions on how and when to produce and consume
electrical power. On the other hand, Demand Response is a program that is designed to help
achieve the fundamental objective of making electricity supply and consumption more convenient
and cost-effective through Smart Grids. They are designed with the purpose to actively engage
customers to modify their electricity consumption in response to pricing changes and other
incentives.
Key words: Smart Grid, Demand Response, electricity, utility, price, consumption
Introduction
Electricity is an inevitable commodity in modern societies. Industries and service sectors need it
for the production of goods and services while homes use it for comfort and entertainment. It is
therefore very important to prevent the wastage of electricity. However, the conventional grid used
for transmitting electric power only provides a one-way control over electricity power supply and
consumption. It does not allow communication between electricity suppliers and customers for
efficient and effective power management [1, 2]. This creates lots of inconveniences and economic
losses on the part of both the utility supplier and the customer [2].
Customers tend to overuse or sometimes abuse the use of electricity when they do not readily have
information on how they consume electricity and the cost they pay for their consumption.
Electricity suppliers also face challenges when they have to manually monitor and control what
goes on in the grid. There is, therefore, the need for a smart and automatic way of simultaneously
informing customers about their consumption patterns and the price they pay as well as utility
suppliers on what happens in the grid in other to save electric energy and money. One way to
achieve this is through the application of a system called Smart Grid (SG) [4, 6].
SG is a grid system that allows a two-way communication between the supplier and the customer.
This system monitors and controls electricity transmission on the grid and customer consumption
using embedded digital and information technology gadgets such as sensors, computers, and
smartphones. SG systems provide the benefit of providing time-based pricing for the customer.
Those customers who pay a fixed price for energy consumed may set their threshold and regulate
their usage to take advantage of changing prices [4, 5].
To help reduce or prevent electricity wastage, a program called Demand Response (DR) is applied.
DR achieves its objective through the operation of SG. The main aim of a DR program is to
actively engage consumers in modifying their consumption in response to pricing signals. The goal
is to reflect supply expectations through consumer price signals or controls and enable dynamic
changes in consumption relative to price. DR programs play a central role in the electricity market
to achieve supply-demand balance by taking advantage of the load flexibility. DR has dual benefits
of saving energy and money for both the utility provider and consumer. This report reviews the
concept of DR as applied in electricity use management in smart grid systems [11,12]. This report,
therefore, presents a detailed review on the concept of SG and DR.
Smart Grids
SG may not have one definition but basically it is an intelligent grid system that bases on digital
and information technology to supply electricity to customers through a two-way digital
communication system [1]. It is able to overcome the problems of monitoring, analysis, control
and communication in the traditional grid system to help increase efficiency, reduce energy
consumption and cost, and maximize the transparency and reliability of the energy supply chain
[1, 2, 3]. SG is conceived as an electric grid able to deliver electricity in a controlled, smart way
from points of generation to consumers that are considered as an integral part of the SG since they
can modify their purchasing patterns and behavior according to the received information,
incentives and disincentives [2].
One of its key features is to use the demand-side resources in order to reduce the stress at the
supply side. It increases the chances for demand response by providing real-time data to electricity
producers and customers. In traditional instances where utility suppliers control power supply
through load shedding, SG emergency control technology allows customers to shift from event-
based demand response to a more 24/7 based demand response where the customer gets incentives
to control the load all the time. The communications between suppliers and customers increase the
chances for demand response, however, customers are still influenced by economic and
environmental incentives and are not ready to take total control of their assets from utility
companies [4, 5].
SG systems provide the benefit of providing time-based pricing for the customer. Those customers
who pay a fixed price for energy consumed may set their threshold and regulate their usage to take
advantage of changing prices. Adjusting electric energy consumption by customers require the use
of energy management tools or systems to control appliances and equipment and may involve
economies of scale. For large customers with electricity generation, SG provides the advantage of
closely monitoring, shifting, and balancing load such that the customer will save peak load and
trade what they have saved in an energy market. This also needs advanced energy management
systems, incentives and Again this involves sophisticated energy management systems, incentives,
and a feasible trading market [4, 6]. Some of the market driving forces of Smart Grid are: More
efficient transmission of electricity, rapid restoration of power disturbances, reliable power-
maintenance and grid stability, improve energy efficiency, renewable sources power-Integrate,
electric vehicles, and reduced peak hour demand.
The magical benefits of SG in modern electric power generation, transmission and consumption
is readily realized from its features. The following paragraphs explain the features of SG.
Reliability: SG uses digital and information technologies to discover fault and allow self-healing
of the network without the intervention of technicians. This permit reliable electricity and reduced
susceptibility to natural disasters or attack.
Flexible Network Topology: SG allows for flexible incorporation of other sources of electric power
generation such as solar photovoltaic, small and mini-hydro, biogas, biodiesel and charging to and
from batteries and fuel cells which the traditional grid could not provide.
More Efficient: SG is more efficient in comparison to the classic grid due to its ability to
communicate between the supplier and the customer so the demand for power can be managed
effectively. It has technology that is able to detect faults on transmission line without the
involvement of a technician which reduces cost of operation which lead to reduced power prices.
Load Adjustment: SG technology is able to adjust to and respond to rapid increase in power
consumptions. In SG system, some spare generators are put on a dissipative standby mode to
rapidly respond to a rapid increase in power consumption. The system also has the ability to send
warning signals to customers to reduced their loads temporarily or continuously. In the traditional
grid, the failure rate can only be reduced at the cost of more standby generators. In a smart grid,
the load reduction by even a small portion of the clients may eliminate the problem.
Peak Leveling and Time of Use Pricing: During peak hours, SG send signal to customers indicating
to them the amount of electric energy they are using or have used and the cost. SG also allow the
utility companies to control their energy consumption by communicating to devices directly in
order to prevent system overloads. Because prices of electricity go high on high demand and less
on low demand customers will tend to consume less during high demand periods if it is possible
for consumers and consumer devices to be aware of the high price premium for using electricity
at peak periods.
Sustainability: SG allows the penetration of highly variable renewable energy sources without the
addition of energy storage facilities. Current network infrastructure is not built to allow for many
distributed feed-in points, and typically even if some feed-in is allowed at the local (distribution)
level; the transmission-level infrastructure cannot accommodate it. Rapid fluctuations in
distributed generation, such as due to cloudy or gusty weather, present significant challenges to
power engineers who need to ensure stable power levels through varying the output of the more
controllable generators such as gas turbines and hydroelectric generators. Smart grid technology
is a necessary condition for very large amounts of renewable electricity on the grid for this reason.
Demand Response Support: SG has components such as sensors, digital and information
technology gadgets that allow generators and loads to communicate in an automatic mode in real
time to manage demand in order to reduce consumption during spikes. This demand response
support removes the fraction of demand that occurs in these spikes and reduce the cost of adding
reserve generators and help users to cut their energy bills by telling low priority devices to use
energy only when it is cheapest.
SG system is composed of Smart Meter (SM) and phasor measurement unit. The following sub-
headings explain them respectively.
Smart Meter
Wang and Li (2016) defined smart meter to be an electronic device that records and communicates
electricity consumption the electricity supplier for monitoring and billing. It records electric energy
in per hour and report at least per day. Smart meters permit two-way communication between the
meter and the central system [7]. Smart meters are able to measure energy consumption in more
detail than a conventional meter. It forms the basis for SG system due to its two-way
communications between utility and user. Smart meter is composed of a meter capable of recording
electricity consumed or generated by a customer, computer for logging and processing data and
controlling interconnected devices and a modem to communicate with nearby meters of network
infrastructure. Figure 1 shows a sample of smart meter. Smart meter has is very safe and reliable.
It operates at a level of 1.4 % less than the allowable maximum exposure radio frequency limits.
Fig. 2: Phasor representation [1, 7]. Fig. 3: PMU device [1, 7].
The National Institute of Standards and Technology (NIST) of United State has proposed a
conceptual model of SG which involves domain and actors in the domain as displayed in Table 1.
However, technically SG is sub-grouped into three systems [8]. These systems are briefly
explained in the following subsections.
Customers The end users of electricity. May also generate, store, and manage
the use of energy
Bulk generation The generators of electricity in bulk quantities. May also store
energy for later distribution
Transmission The carriers of bulk electricity over long distances. May also store
and generate electricity
Electricity supply depends, primarily, on the installed capacity and therefore there are limits to its
supply than demand. This is because some of the electricity generating units may take a longer
time to reach full power while the operation cost of some other units may be very expensive.
Nevertheless, electric energy demand may sometimes exceed the available electric power supply.
To help alleviate the imbalance that normally occurs in power supply and demand, the unlimited
demand pattern of customers can be adjusted using designed programs. When electricity prices
become high during peak hours, consumers responsively change the pattern of their electricity
consumption by reducing their energy use or rescheduling using equipment or appliances that use
high power. This attitude of responding to changes in the prices or other incentives of supplied
electricity is normally called Demand Response (DR). Its main focus is to consciously engage
consumers to adjust their consumption in response to pricing signals [1].
According to The Federal Energy Regulatory Commission, DR is “the changes in the pattern of
electricity consumption by end-use customers from their regular consumption patterns in response
to changes in the price of electricity over time or to incentive payments intended to persuade them
to lower their electricity use at times of high wholesale market prices or when system reliability is
jeopardized” [2, 3, 4]. Torriti and Jacopo (2016), also explain DR to be a wide range of actions
that may be taken by customers in response to particular conditions within the electricity system.
These conditions may be peak period network congestion or high prices [5]. From these
definitions, it is obvious that DR is a planned adjustment to consumption patterns of electricity by
utility providers in order to induce customers to change the timing, level of instantaneous demand
or the total electricity consumption [6]. DR makes possible the fundamental motive of embarking
on Smart Grid systems to manage demand-side electricity consumption and electric power
transmission and consumption efficiency.
Generally, DR programs are designed to help customers adjust their electricity usage patterns in
order to decrease consumption or shift it from on-peak to off-peak hours [7]. It is a more cost-
effective way of using electricity than increasing generation capabilities to meet the peak and
occasional demand spikes. DR also helps to avoid supply system emergencies. The goal is to reflect
supply expectations through customer price signals or controls and enable dynamic changes in
consumption relative to price [1,7]. It seeks to adjust the demand for power instead of adjusting
the supply.
DR programs have been in existence for decades now and have proven to be an effective means
for utility suppliers to consciously manage system peaks by regulating customer loads. For
residential customers, DR programs basically involved direct load control of large electrical
appliances at the home such as heat, ventilation and air condition systems (HVAC) and pool
pumps. These systems were one-way systems that were monitored and controlled by signals sent
through pager, power line communications, energy management system, or telephone to the
controlling devices to temporarily turn off or cycle the desired appliance during peak conditions.
This approach helped the utility suppliers to better manage demand and supply of electricity while
the customer profited from financial incentives for taking part in the program. This approach of
demand control solution continues to work well today [8].
The activities of end-users to change their electricity consumption pattern for mitigating system
problems is called Demand Response Program [15]. These programs are attractive due to increased
consumption levels for system operators as well as customers [16,17]. Other reasons for encouraging
customers to participate in DR programs aside monetary savings are the aspiration to help avoid
blackouts to a sense of responsibility [18]. There are three classes of DR programs. These are rate-
based or price DR programs; Incentive or event-based DR programs and Demand reduction bids [19].
1. Time of Use rates (TOU). In this program rates with fixed price block those that differ by time
of day.
2. Critical Peak Pricing (CPP). In this program rates involved in this program include a pre-
specified, extra-high rate that is triggered by the utility and is in effect for a limited number of
hours.
3. Real-Time Pricing (RTP). In this program, the rates vary continually (typically hourly) in
response to wholesale market prices.
1. Direct Load Control (DLC). In this program, customers receive incentive payments for
allowing the utility provider some degree of control over certain equipment.
3. Capacity Market Programs (CMP). In this program, customers receive incentive payments
for providing load reductions as substitutes for system capacity.
In 2011, Palensky and Dietrich stated that the various DR programs can be grouped into market
DR and physical DR. Market DR consists of real-time pricing, price signals, and incentives while
physical DR consists of grid management and emergency signals. Market DR is activated by
economics whereas physical DR depends on reliability requirements. DR that focuses on
improving system reliability is generally implemented through emergency-based, system-led,
load-response, incentive-based, direct-load control programs. However, DR aiming at reducing
system costs is generally implemented through price-based, market-led, price-response which uses
time-based rates and passive load control programs.
DR programs are made possible through a number of sophisticated modern devices. these devices
allow for residential customers to support DR programs. Some of the control devices for DR are
load control switches that are used to control specific consumer loads such as motors and
compressors and softer control which is used to remotely control smart thermostats by the
consumer. The communication between the utility provider and customer is made possible through
Home Area Network (HAN) and In-Home Displays (IHD) [4]. Control devices may be connected
directly to appliances that consume large amounts of electricity, and programmable
communicating thermostats to automatically manage heating, ventilation and air condition
(HVAC) systems through a fully deployed home area network (HAN). In-Home Displays (IHD)
provides real-time electricity consumption information to inform customers on critical energy
pricing in order to manage energy consumption. Another way to make DR programs possible is to
use backup generators so that industrial and commercial customers can switch between these
storage facilities and the grid in exchange for utility payments [4, 16].
Some of the monitoring systems used in DR programs are Smart Meters (SM), Energy
Management Systems (EMS), Advanced Metering Infrastructure (AMI) and Energy Information
Systems (EIS). Smart-meter systems comprise an electronic box and a communications link.
Electricity consumption and other parameters are measured using SM within certain time-interval
and send this measured information to the utility over communication network which may then be
shared with the customer about his or her consumption and price to pay. SM is connected to
controllable electrical devices via HAN [4, 15]. AMI measures, stores and analyses energy
consumption by receiving data from electric meters in a predefined time interval. It consists of
interconnected smart meters, wide-area networks (WAN), home (local) area networks (HANs),
meter data management systems (MDMS), operational gateways and systems for data integration
into software application platforms, neighborhood area networks (NANs) [4, 16].
EMSs consist of a series of sensors, switches, controls and algorithms that uses to monitor, control
and analyses building systems. It saves energy and reduces peak-hour demands as well as carries
out automated functions. EIS is installed to give a two-way communication between the utility
provider and the customer on information about energy consumption. It gathers data and makes
available information about system performance [4].
DR provides lots of benefits based on factors such as the target, design and performance on system,
operation and expansion and market efficiency. These benefits may be classified into the following
groups [4, 22, 25]:
Participant Bill Savings: DR programs increase the income of customers through the money they
get from electricity bill savings and incentive payments for accepting to adjust loads in response
to current supply costs or other incentives.
Bills Savings for Other Customers: the market price for electricity is lowered when demand for
electricity is lowered through the use of less energy when prices go up to when prices go down.
Other customers also benefit from this lowered wholesale prices.
Reliability Benefits: Through DR programs, customers enjoy reliable power supply resulting from
a reduced probability of involuntarily power cut and suffering higher financial costs and
inconvenience.
Market Performance: DR allows customers to have a say in the electricity market to avoid market
monopoly by electric power producers. It makes customers decide on when to buy and consume
electricity giving them the chance to also influence the power market.
Improved Choice: DR provides customers with more choices for electricity costs management.
System Security: with DR, system operators are able to meet power contingencies.
Conclusion
SG allows electric power producers and consumers to communicate with each other to make
decisions on how and when to supply and consume electrical power. A major feature of SG is to
deploy demand-side resources to reduce the stress at the supply side. SG provides real-time data
to producers and consumers.
None of the papers reviewed did a study on finding efficient ways in which customers on the
demand side will consciously reduce energy wastage on their own in the DR proposed programs,
such as finding ways to detect leakages in rooms that use HVAC systems as part of the DR models.
Therefore, I recommend it for future research works in DR programs.
REFERNCES