As China further deepens market economy reforms, increasing the introduction of market-driven demand response measures into the country’s system for countervailing pending power shortages could be far more economically efficient and probably more equitable than the existing administrative rationing system. This paper provides a brief overview of the development of demand response programs in developed countries, followed by details of four different types of programs. The paper also outlines potential demand response approaches that may be useful in China, and suggests ways that demand response programs could be sustainably funded. To begin to truly develop demand response in line with its great potential for efficiency gains in China, the authors suggest broad introduction of a modified power tariff that includes both (i) non-interruptible power service at somewhat higher prices, and (ii) a series of price discounts or other types of incentives for customers willing to participate in demand response. Such a modified power tariff could be designed to be revenue-neutral, if desired.
Demand Response: Managing Electric Power Peak Load Shortages with Market Mechanisms
March 4, 2015
- Regulatory Assistance Project