Demand response: A carbon-neutral resource?

• Demand response reduces electricity system expenditures.
• Demand response accelerates retirement of operationally expensive power plants.
• Demand response found to have little impact upon CO2 emissions.
• Coupled with renewables, demand response reduces regional CO2 emissions.

Recent literature on demand response raises questions about the long-term capacity and carbon emissions impacts of expanding its deployment. To provide economy-wide insights into how demand response, capacity planning, and carbon emissions might interact in the future, we perform economic forecasts using a computational general equilibrium model based on the Energy Information Administration's National Energy Modeling System. We develop multiple scenarios of assumptions about the load-shifting and load reduction potential of demand response based on prior literature. The results of these scenarios suggest that demand response can defer large amounts of peak capacity construction. Contrary to expectations of increased carbon intensity, the results of our scenarios also suggest that demand response will have little impact on overall carbon emissions from electric power generation. This suggests that demand response can serve as a long-term, low-cost alternative for peak-hour load balancing without increasing carbon emissions.