Many reasons contribute towards the astounding CAGR of 21.6% for the global smart demand response market between 2014 and 2025. The market’s earlier value of US$5.041 billion in 2013 is expected to skyrocket to US$51.479 billion in 2025. These figures represent the efforts that are being taken to introduce a system that works on the demand side of the power systems in the world.

The entire premise of demand response is based on the fact that it is practically difficult to store power in such large scales for long durations. Which is why the supply has to be the same as the demand in order to maintain an uninterrupted power supply. Demand response was portrayed to be the last line of defense against an impending power grid collapse. In theory, the concept of a demand response system is simple: at the time of peak power consumption, instead of asking the supply to increase, it asks for the demand to decrease. Users of demand response are offered incentives depending on the overall power that they save at times of a demand response call.

The Global Smart Demand Response Market Today

Current demand response schemes are categorized into two: incentive-based schemes, which are mandated through contract, and price-based schemes, which are completely voluntary.

A price-based demand response encourages end users to shift or change their power demands in accordance with changing price signals. This lets them consume less power when it is costlier and more when it is cheaper. The various types of price-based demand response systems used are time-of-use (TOU) rates, real-time pricing (RTP), and critical-peak pricing (CTP).

On the other hand, an incentive-based demand response system relies on the actions of members present on the supply side of the chain: the load-serving entities, utilities, and even grid operators. In an incentive-based demand response system, end users are paid when they reduce their power consumption during peak usage periods. The basic segments within an incentive-based demand response program are interruptible services, direct load control, demand bidding programs, emergency demand response programs, capacity market programs, and ancillary service market programs.

How the World is Reacting to Demand Response Programs

The huge growth rate of the demand response market mentioned earlier exists due to one key factor: the global shortfall of power generation in the face of a seemingly endlessly growing demand. One aspect of the power-saving endeavors employed by the world today is the implementation of smart grids, and with smart grids come smart demand response systems. As more and more locations around the world employ smart grids, they will bring with them a huge scope for growth of the region’s smart demand response market.

Industries are upping their demand for power that is supplemented by the imposition of capacity constraints, which is expected to propel the global smart demand response market in the near future. There are also multiple policies – some in the pipeline and some already in effect – that enhance the appeal of demand response programs for more end users to take them up.

On the other side of the coin is the single most challenging adversary of demand response: awareness. Or rather, the lack of it. There stands a small percentage of end users around the world that are actually aware of the global smart demand response market and its advantages. Then there are also a few end users who remain unconvinced regarding the benefits of adopting demand response programs. In time, the negative connotations will reduce and a great population of the world is expected to run demand response programs.

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