Market Demand and Response to Smart Grids and Dynamic

Pricing
Management of energy can be defined to make the best and most efficient use of one of the ever
created and developed that is, energy system. The demand side receives the most attention by
doing research, when there is lot of knowledge and skill to optimize the generation and scattering
of electricity. The Demand Side Management is the collection of implementation measures with
which the energy system can be improved. The efficiency of energy can be improved by the use
of better materials to stylish yet complicated control of dispersed energy resources.
In modernized and well-run electricity markets, the costs and sales of providing electricity varies
on and off, throughout the day. On contrary, the prices customers pay to buy electricity in the
market have been static and unchanged. This is the biggest difference between the two
backgrounds. This has become the major cause why the electricity providing market is not so
responsiveness and sensitive, thus requires generation to meet the demands at this continuous
pace, which sometimes is fulfilled at a great cost. In future, the smart grids are expected to
integrate dynamic pricing for the users. Smart grids are a network of electricity supply that avails
digital communication network system in order to know about the changes occurring in the usage
of the locals and then react accordingly. It will thus improve the competence of the market
through demand response.
Demand Response is known as the changes in the use of electricity by the consumers from their
normal use with the fluctuation in price of electricity; and also when the reliability is put at risk
by designing incentive payments to persuade lower usage of electricity.

The goal and the eventual aim are to design dynamic pricing scheme that not only turn out to be
efficient, effective but also are centric to the consumers who use it. The smart grid is envisaged
as an electric grid that not only transfers electricity in a controlled and restricted, smart way from
the time it is started to generate till it reaches its clients. Demand response offers a variety of
benefits to its customers with its operation and distribution, through promoting its efficiency and
sensitivity among the consumers. In order to improve the dependability of the power system and
by decreasing the peak demand, demand response reduces capital cost assets and puts off the
need to improve the network.
The most competent and resourceful pricing model is no doubt real-time pricing where selling
prices alter on an hourly basis which reflect the true cost of supply. These real time prices are
mostly unstable and yet unpredictable. This can harm the consumers and as a result dishearten
participation in controlled programs of dynamic pricing.
Critical peak pricing and like time made in use are some of the other options but are not so in
demand and liked if they are considered as a point of view. It is because of the reason that price
is not in connection with the load a system carries. The need of the hour is to generate new and
sophisticated dynamic frameworks which can be alleviated and as a result of that prices are
allowed to be varied incessantly that will be in the reaction to system operating conditions.
A new dynamic pricing scheme which is there to provide incentives for demand response, not
just that, it also looks after price certainty, for the benefit of the consumers who are actually
utilizing electricity at this moment.

Monotonic marginal pricing focuses on the marginal price upon which the electricity is provided.
It includes real-time pricing which heavily demands and asks for a response in the most peak
hours. When trailing the beginning and the last times of an individual user, it will make sure that
each one of theirs unit price is not increasing when the utilization level is static.
Most of the electric power systems face that almost every member, every consumer offers a fixed
price and cost for every unit of electricity, not concerned about the production price when it is
the time of consumption.
The prices for the consumers may be developed by the controlled authority like the government
or the regulating body and it specifically shows the medium cost per unit production for a stated
time period, it could be a year as well. Hence it means that consumption is not dependent over
the cost of production.
The utilization of consumer electricity in terms of finance is not elastic in short time references.
It is because consumer does not know and utilize the real price of production. The consumers
might increase or decrease their use of electricity as a response to cost-based price signals.
In almost every power station electricity is transmitted in a merit order, when produced by
generators. Those generators that have the least marginal cost are utilized first, and then the next
cheapest generator follows it in a succession. This eventually satisfies the immediate insist of
electricity. There are some power stations in which the extensive costs of electricity is somewhat
is same as the marginal cost of the most expensive generator, that is currently used to produce
energy. It varies and fluctuates as the demands of the consumer vary.

It is usual that the price may vary from a range of two to five because it all depends on the
demand at hand; the cycle is not stable for the whole day. When the graph shows a negative
price, it means that the electricity producers are being forced to give away the energy to the
network, and consumers might have refund for utilizing electricity for that time period.
It usually happens at night time when the generators are working in such a way to provide
minimum output level and quite a few of them are put to shut down. Thus the negative price is
sort of an incentive to bring about these black outs in a way that is minimal in costs.
In 2006, there had been two studies taken out that analyzed the worth of demand response for the
industry that creates electricity in overall terms along with exact appliance of real-time pricing
for the consumers. Later on this investigation discovered that even if the alteration is minimal in
peak demand, it would have a drastic effect on what the customers save and it would avoid prices
for another peak capacity. If the shift is as little as one percent in peak demand, it would
conclude in 3.9% billions of dollars savings on the big level. And if the reduction is up to 10 %,
the savings of the system would be like $8 up to $28 billion, approximately.
The consumers of energy require some great adventurous incentives to react towards the request
from Demand Response Provider. It can be formal as well as shown as informal. An example can
be that the government can create and announce an incentive that is based on tariff through
establishing an increase in price of electricity for a short period of time. They can also work their
agendas by forcing obligatory curtailing during the time of a heat wave; it would be only for only
a selective population who are great users of electricity and are remunerated for their
involvement.

Commercial and business electricity users may force load shedding, having no electricity at all,
without they being demanded by the service. Some very established and rich industries develop
their own power houses so as to ignore purchasing it from the authority. Some have industrial
tariff set-ups that initiate a consumers electricity prices per month; it solely depends on the
consumers highest or peak demand. As a result it motivates the consumers to put an end to their
demands for power, which needs to cut back the services, for some time.
In some governments, smart metering is being used to provide real time pricing to all types of
consumers but is opposed to put on a fix rate during the whole period of the demand session.
Through this incentive, the customers are given the full advantage to cut short their demand as
well as their prices. Most the times some consumers are unable to reduce peak costs. There is
also a system of automatic control which is no doubt efficient but is highly costly to be applied
for some uses.
United States of America demanded and made it compulsory on the Secretary of energy to
handover a full, detailed report that will tell about what the benefits are of demand response and
will thus give suggestions, accordingly. This sort of a report was submitted to be quantified in
2006.
The report stated all the facts and figures; in 2004 the demand response was equal to 20,500
megawatts that included an approximate of 3 percent of total United States peak demand. In
actual the peak demand that was sent out was noticed to be 9000 megawatts. It thus left a great
border for development. Moreover it is calculated that load management capacity has decreased
to 32% till 1996.

References
Palensky, P. (2011). Demand Side Management: Demand Response, Intelligent Energy Systems,
and Smart Loads. Retrieved from:
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Siano, P. (2014). Demand response and smart gridsA survey. Retrieved from:
http://www.sciencedirect.com/science/article/pii/S1364032113007211

Advanced Digital Sciences Center. Smart Grid: Demand-side Management. Retrieved from:
https://publish.illinois.edu/incentive-pricing/pricing/

Real-Time Pricing and Demand Response. (2011). Retrieved from:

https://www.smartgrid.gov/document/real_time_pricing_and_demand_response

The smart grid and the promise of demand-side management. Retrieved from:
file:///D:/sem%206/MoSG_DSM_VF.pdf-

Wang, Q. (2012). Dynamic Pricing of Power in Smart-Grid Networks. Retrieved from:

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