Demand response provides the ability for utilities to signal the need for power reductions from residential, commercial, industrial, and/or agricultural customers to create well timed power reductions that keep the grid operating smoothly. In the early days of demand response programs, industrial and large electricity customers provided manual demand response in response to pager or phone communications from their utility company. With the advent of automated demand response (AutoDR) communication protocols, large retail stores joined in to provide the bulk of Commercial and Industrial sector DR. Recent DR market expansions are into hotels, offices, and other commercial businesses. Industrial markets, including cold storage warehouses, and processing businesses that can accommodate short time delays in processes, use demand response to reduce their electrical energy costs. Demand response in the agricultural markets has focused largely on pumping applications. The residential market for demand response is now possible with smart meter deployments. With appropriate coordination through aggregation, a collection of relatively smaller responses can be made significant at the grid level.
Recent improvements in broadband communication allow the faster coordination of demand response resources, so that loads can be dispatched as needed to maintain grid reliability. Previously, demand response across all market sectors was coordinated at the retail (typically local utility) level. However, recent research suggests an even greater potential value for demand response at the wholesale (ISO/RTO) level, where very short reductions in demand can act in the same capacity as ancillary services generation.