Designing a Demand Response Program One Step at a Time

By Sean Morash and Doug Houseman

Demand Response (DR) is a growing concern for the industry. Few people have actually done demand response program design from the beginning. The article covers questions that are key to designing a good demand response program that will pass regulatory review. The article is a summary of the 4 session “Designing Demand Response” Webinar that IEEE PES ran in November and December 2016.

Demand response has been around the industry for a very long time. Industrial demand response programs started in the 1920s and one-way air conditioning interrupter programs started in the 1970s. But only a handful of program types have been developed and only a few utilities really use demand response as a day-to-day tool in grid and energy management. Probably the premiere demand response user is Florida Power and Light, which has dozens of programs available to fit any customer’s needs.

Demand response traditionally has been used the industry to shave peak, or to recover from the loss of a generation facility. In the near future, demand response is going to be the key to balancing distributed generation. At times demand response will be needed to increase demand (too much distributed generation) and at others decrease demand. DR will have to respond, for some needs in less than a second in other situations there will be hours or days of warning. Some types of programs will have to be fully automated and some types will allow for negotiation between the customer and the others for compensation, just like the wholesale market works for generators.

Program design for demand response tends to be adaptation of another company’s similar program. There is no real manual for DR program design, so the balance of the article is devoted to key questions in designing a DR program.

Demand response quickly escalates in complexity as factors of eligibility, communication, and requirements on response time and performance are discussed. Program administrators quickly become overwhelmed by the pursuit of a silver bullet DR program, delaying more simple solutions. DR program design doesn’t need to be that way; simply running through the requirements of a potential DR program will help bring the program design into focus.

Program administrators should not set out to create any single DR program. Instead, the first question should be: What is the problem that will be addressed by DR? Several others immediately arise:

  • What is the goal of the program? What is the root problem that this program is trying to fix? Any program design should be tested against this issue for effectiveness. Any costs of the program should be less than the cost of the issue trying to be fixed.
  • Which stakeholders are affected? What incentive do they have to participate?
  • Do the potential benefits to some stakeholders outweigh the negative impact on others? For instance reducing peak demand lowers market clearing prices, costing generators income, but lowering the cost of customer bills.
  • How often will the program operate?

That first set of questions helps to define the program before getting into the more complex technical specifications or administrative infrastructure. A firm understanding of these basic questions provides the foundation for a successful program and begins to establish its identity.

After the introspective self-definition comes a more detailed chisel that helps to define the technology decisions, operations processes and more.

  • How long should each session last to effectively address the problem?
  • How much warning (reaction time) is there in the worst case?
  • Regarding customer enrollment: Is the program an opt-in, opt-out, mandatory, voluntary, or some combination therein? If it is a combination, how do we communicate various urgencies to customers?
  • Who has override authority?

The answers to these questions should flow from defining the overall goals and problem statement. There are a variety of established successful DR programs that provide examples of how to address problems.

DR is large step on the way to a distributed energy resources future. Is the program designed to evolve as distribution operations evolve? Successful programs need not have infinite lifetimes.

Along those same lines, what is the program life cycle? How might the program life cycle be influenced by the start and ramp up processes?

Are there major regulatory and statutory steps associated with creating a program?

An understanding of each of these will help to address the potential of DR to address the defined problem statement.

From there, we still have a few important questions that help to guide program design. Chiefly, what would constitute “success”? Is there a critical mass, number of customers, or kilowatt participation necessary to make the program worthwhile? These are very important questions. DR programs are often suggested because they are new and full of potential, but there is little thought put into the overall effects of the program.

Finally, we get into the operations processes that might facilitate the wonderful program that has been defined thus far. Is there a communication mechanism in place within the back office to signal the program start? Is there a way to measure the performance of the program? How does the DR signal reach customers?

The acceptable timeframe and plausibility of these answers will be defined by the problem to be addressed. DR is a tool to be used as needed, not just when it is wanted. The idea of a demand side resource to reduce demand-supply strain is the result of impressive technical achievements. It is not the answer to every problem and should still be used only as appropriate. There are certainly DR applications that are ideal, but the tiered questions outlined above are intended to tease out the efficacy of DR.

Different demographics and firmographics have diverse needs and will respond in kind. Eight to 15 programs may be needed to get broad acceptance of DR with the correct demographic spread and proper consideration of social justice to meet regulatory scrutiny as well as balancing the costs and benefits across the spectrum of customers.

Programs that are well suited to solve issues, and are well liked by customers, tend to have long life cycles and very positive returns on the investment to set them up. One of the oldest DR programs still in daily operation is On-Call in Florida run by Florida Power and Light, is now over 30 years old and still going strong. The program is one of the first to use two-way communication with a diverse set of customer owned devices.

Before becoming overwhelmed by the immersive possibilities of DR, take program design one step at a time. Clearly defined requirements help to keep the DR program focused and define what will ultimately be successful from the beginning. There are a wide range of reasons for pursuing DR, each valid and most with technological pioneers from whom to learn. New programs don’t need to do it all; keep it simple.

For a downloadable copy of  the January 2017 eNewsletterwhich includes this article, please visit the IEEE Smart Grid Resource Center




Sean Morash rejoined the EnerNex Smart Grid Engineering team in August 2015, having completed an internship at the EnerNex Smart Grid Labs in 2012. Sean produces solutions through research based on a working knowledge of Smart Grid related applications, including communication technologies and protocols, advanced sensing and control, renewable energy, electrical, mechanical and information systems integration, enterprise information architecture, cyber security, information modeling, and related disciplines and methodologies.



Doug Houseman, VP of Technical Innovation at Enernex and chairman of the IEEE PES Intelligent Grid Coordinating Committee. Doug has a broad background in Utilities and Energy. He worked for Capgemini in the Energy Practice for more than 15 years. During that time he rose to the position of CTO of the 12,000 person practice. During that same time Capgemini grew from less than $10 million dollars in Energy related revenue to more than $2.4 billion. Doug was part of the Global leadership team and worked all over the world in a thought leadership and delivery role. During that time Doug founded the Smart Energy Alliance, lead the Distribution Roadmap 2025, and developed the smart metering and smart grid practices. Doug and his sons are makers and tinkers who have built everything from a 3D printer to a greenhouse. Doug started using photovoltaics in the 1970s and geothermal in the 1980s.

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