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What is demand response?

Demand response (DR) is the voluntary reduction or shift of electricity use by customers, which can help to keep a power grid stable by balancing its supply and demand of electricity. It can help to make electricity systems flexible and reliable, which is beneficial if they contain increasing shares of variable renewable energy.

DR is also a quick and cost-effective way to reduce the demand for electricity during peak periods, providing an alternative to increasing the amount of electricity being generated or building new power plants.

DR is commonly used in the USA, Japan, New Zealand and the UK. In some American states it is used to meet over ten per cent of peak demand for electricity. New Zealand began using DR in 2007 and now meets over 16 per cent of peak demand through DR programs.

How does demand response work?

DR typically involves paying some energy consumers to voluntarily cut or shift their use of power to better match supply.

It can lower the amount of electricity required from the grid during peak periods, reducing the likelihood of a blackout, or to shift demand to off-peak periods, or when renewable energy output is high, to use excess electricity more efficiently. It can even help to bring down wholesale electricity prices, which increase when demand is high.

Demand response in Australia

In Australia, demand response is used by grid operators to reduce or shift the demand for electricity or to help keep the grid stable.

How is ARENA supporting demand response projects?

Our purpose is to improve the competitiveness of renewable energy technologies and increase the supply of renewable energy through innovation that benefits Australian consumers and businesses. By connecting investment, knowledge and people to deliver energy innovation, we are helping to build the foundation of a renewable energy ecosystem in Australia.

We joined forces with the Australian Energy Market Operator (AEMO) in late 2017 to run a demand response trial to demonstrate how DR could play a role in managing electricity supply during extreme peaks such as summer heatwaves. Ten DR projects were funded in Victoria, New South Wales and South Australia over a three year period (2017-2020), with the NSW Government providing additional funding for projects located in that state. The projects aim to deliver 200 megawatts (MW) of capacity by 2020, covering both residential, commercial and industrial energy users, and using a range of technologies and innovative behavioural change ideas to help deliver this capacity.

Results from DR RERT Trial were considered successful. Proponents were able to recruit and mobilise their programs in a short time with positive outcomes, and though performance varied between individual proponents, overall, the portfolio exceeded the combined contracted capacity. This varied performance has provided important insights and lessons that have been taken into consideration for year two.

Knowledge Sharing

Annual report iconWe share knowledge, insights and data from our funded projects to help the renewable energy industry and other projects learn from each other’s experiences. Our projects capture high-quality quantitative and qualitative data and information, linked with the needs of the market, while respecting our recipients’ commercial and contractual rights.

Read demand response project reports in the Knowledge Bank

Explore our demand response projects

Learn how we work with renewable energy technologies

Last updated 08 September 2020
Last updated
08 September 2020


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