Demand Side Management (DSM)

A renewed tool for sustainable development

A survey of the concept, development and application

Hans NilssonChairman of the IEA DSM-Programme

DSM is universal and does not only apply to utilities, electricity or monopolies!!

“The planning and implementation of those (utility) activities designed to influence the customer use of electricity /energy in ways that will produce desired changes in the (utilitiy´s) load shape - i.e. changes in the pattern and magnitude of a (utility´s) load.”

The problem is not one but several!

• LOAD LEVEL (Too much supply for a wasteful demand)

• LOAD SHAPE (high peaks, little reserve capacity, bottlenecks in transmission and distribution)

• MARKET RESPONSIBILITIES (who is the owner of the problem?)

Cumulative Energy Investment 2003-2030

Sixteen (16) Trillions USD!!

Power sector absorbs 62% of global energy investment in the period 2003-2030

0 500 1 000 1 500 2 000 2 500 3 000 3 500

OECD North AmericaOECD EuropeOECD Pacific

Transition economiesChina

Other AsiaMiddle East

AfricaLatin America

billion $ (2000)

Coal Oil Gas Electricity

Source WEO 2004

Difference in Electricity Investment in the Alternative vs. Reference

Scenario 2003-2030

Additional investments on the demand side are more than offset by lower investment on the supply side

-2 000

-1 500

-1 000

- 500

0

500

1 000

billi

on d

olla

rs (2

000)

Difference

Additional demand-sideinvestment

Efficiencymeasures Avoided supply-side

investmentGeneration

Transmis-sion

Distribu-tion

Source WEO 2004

Energy-use in the IEA-11

Source: 30 years of energy use in IEA countries

Actual energy use20

40

60

80

100

120

140

160

1973

1980

1985

1990

1995

1998

Exaj

oule

s

49%49%

Hypothetical energyuse without savings

1975

AUSDEKFINFRAGERITAJAPNORSWEUKUS

20%

Additional energy use with1973 intensity = Energy saving

The rise in welfare depends more on energy efficiency improvements than

on growth in energy use!

Energy Efficiency has multiple dividends

• Employment• Industrial development• Poverty alleviation• Holds back prices in

supply• Reduces pressure on

supply reserves

• Cost• Environment/Climate

DSM is a tool to make large scale energy efficiency possible

LARGE-SCALE ENERGY EFFICIENCY

“Mandating” Market Acceptance

StandardsAgreedactions

Delegated

Actions Commitments

Price-responsivecustomers

“Commoditise”for Non Price-responsive

e.g. VoluntaryAgreements;TechnologyProcurements e.g. Muni-

cipalitiesplanning

e.g. Certificates

e.g. ESCO;Labels e.g. Taxes;

DR (elasticity)

e.g. MEPS;Top-runner

Energy Efficiency is the cheapest resource

Negative Costs!

DSM nowadays

• Is more complex and more comprehensive

• Involves more stakeholders

• Gives more opportunities with new technologies

The Mechanics of DSM

PEAK

SHIFT

VA

LL

EY

DSM can Change the LOAD SHAPE

Adapts the load to the capacity of the system

Winter Summer WinterDay Night Day

Before

After

DR and price volatilityP

rice

Load

Supply

InelasticDemand

Price without demandresponse

Demand withEnabling programmes

Price with enablingprogrammes

Load with enabling programs

Load Shape Technology

• Meters ……….BUT ALSO…• Communications ………..AND• Software for calculation, billing,

verification, settlement ………AND• Pricing structure…………AND• Institutional models……..AND• End use capacity to accommodate (e.g.

Storages)

New paradigms – Distributed Generation

Source: Distributed Generation In Liberalised Electricity Markets. OECD/IEA 2002

Bypass congestion

Reduce losses

Enables use

Stimulatescompetition

Strategicgrowth

From this StrategicSaving

To ThisTo This

Or toOr tothisthis

DSM can change the LOAD LEVEL

Adapts the system to the environmental requirements

Shift from “carbon-fat” to “carbon-lean”systems (e.g. fuel to electricity)

The value chain used to be vertical..

RetailerNetwork

Regulated monopolyGenerators

Transmission

DistributionSupply

End-use

kWh-

VALU

E

…but with liberalisation the value chain is fragmented

RetailerNetwork

Unbundled full competitionWholesale market

Indepen-dentRetailers

Broker

Generators

Transmission

DistributionSupply

End-use

Source: An EPRI Initiative to Advance the Efficient and Effective Use of Energy

New Technologies

Business interest in DSMActor Peak Load Load Level Remark

Generation company

No (prices are set on the margin)

No (loss of sales) Windfall profit may be regarded to be too high by authorities

Systems responsible (regulator)

Yes (to avoid systems break-down)

Possibly regional and in special situations (to avoid bottlenecks and to maintain systems to develop as planned)

Very different organisation between countries.

Transmission and Distribution

Yes (to maintain systems and avoid bottlenecks)

See above

Energy supplier

Yes (as a business opportunity to shift loads and operate in pools)

Yes ? (primarily as a marketing instrument)

Where “white certificates” and commitments are introduced they concern the load level operations from these actors.

IEA DSM-Programme tasks pertaining to utilities

Task II, VIII, XI, XIII, XV and XVII

Task I, VI, VII, XIV and XVI

-

Density in supply

Intensity inenergy use

Low -intensity•LED •Low -temp. heat

Medium•CFL•Heat Pump

High•Incand . lamp•El. heating

ConcentratedFossil, Nuclear

DecentralisedLocal e.g.Biofuel

Scatterred•PV, •Solar heating

OK

Hardly justified

OK OK

Very difficultMay work

OK

May work

OK

More

flexible

A sustainable system combines energy efficiency and renewable energy

Is sustainable growth possible…

..without DSMand without global co-operation?

The IEA DSM-Programme can assist you with, e.g.

1. ASSESSMENTS and EVALUATION of the DSM-situation (opportunities, organisation, potentials, technologies, training,incentive structures, etc.)

2. TRAINING of staff (for planning, programme-design, evaluation etc.)

3. TROUBLE-SHOOTING (and suggestion for programme development)

4. PROGRAMMES (target technologies, impact analysis)

5. PROJECTS (Technology Procurements, ESCO-development, DR-implementation)

www.ieadsm.org