A review of demand side management business models in the electricity market

Demand side management (DSM) can be defined as modifications in the demand side energy consumption pattern to foster better efficiency and operations in electrical energy systems. DSM activities, which are classified into “energy efficiency (EE)” and “demand response (DR)” are becoming more popular due to technological advances in smart grids and electricity market deregulation. However, it can be argued that ensuring DSM sustainability requires creating suitable business models. Business models are influenced by different factors such as electricity market regulation, mechanisms, power system characteristics and infrastructure. The proliferation of smart grid infrastructure, distributed generation, intermittent renewable energy resources and energy storage devices has affected DSM business models considerably. Therefore, in this paper, possible business models for EE and DR providers in different electricity market segments are analyzed and reviewed. The analysis covers three types of characteristics: DSM transaction characteristics, renewable energy correlation and DSM load control characteristics. In DSM transaction characteristics, the value proposition of DSM such as added value offered to the DSM purchaser and transaction triggers are discussed. In renewable energy correlation, the effect of increased renewable energy penetration on the business model is evaluated. In DSM load control characteristics, load control and aggregation aspects such as response speed, duration, advance notice, location sensitivity and actual usage frequency are analyzed.