The size, causes, and equity implications of the demand-response gap

Abstract

Our analysis of policy options was motivated by an inexplicable under-investment in demand response (DR) in the U.S. state of Georgia. In addition to estimating the size of the DR gap, we identify its causes and consequences. By modifying parameters of the U.S. flagship National Energy Modeling System (NEMS), we generate a baseline DR forecast with a default 4% maximum on-peak demand reduction, an achievable case with a DR limit of 20%, and a technical scenario that also halved the cost of storage. The results document many benefits of DR including a demand-reduction induced price effect (DRIPE), which makes DR more equitable than many other clean-energy policies that shift costs to non-participants. Our modeling results, literature review, and focus group analysis enable identification of DR barriers and motivators related to financial costs, electricity rates, consumer bills, pollution emissions, public health, energy equity, and inclusion. Our results suggest that the DR gap is caused less by technology limitations than by the need for financing initiatives, market innovations, infrastructure modernization, and enablers of socio-economic inclusion. By studying a state that lags in DR implementation, other countries and sub-national entities where DR is under-utilized can learn from our findings and methods.