Manajemen Energi Listrik

Demand Side Management

Prof. Dr. Ir. Charles O. P. Marpaung, MS

Program Studi Teknik Elektro

Fakultas Teknik
Universitas Kristen Indonesia
Ganjil 2019/2020
 Demand Side Management (DSM): Overview
GENERAL

With growing industrialization and urbanization, electric utilities in most developing

countries are facing the problem of meeting the rapidly growing electricity demand.
Peak-load in 1999 is projected to be 2 to 3 times that in 1989 in many countries in Asia
and the Pacific region while the total installed capacity in 1999 is projected to be 1.5
to 2.6 times in most of these countries. A total of 455 billion US dollars is estimated to
be involved in power sector expansion during the 1990s in the 14 countries as listed in
Table 1. Of this expenditure, 35% will be financed through foreign capital sources. The
share of foreign capital in power development would be higher at 48.4 % if two large
countries China and India with high shares of domestic funding were excluded [Moore
and Smith (1988)]. Furthermore, most of the utilities in the developing world operate
as public enterprises and account for a heavy share in the total government outlay:
For example, 19 % of the overall public sector outlay in India during 1985-1990 was in
electricity sector [CBIP (1989)]. Table 1 gives the total capacity added during 1989 to
2001 in 14 countries as listed there.
 Demand Side Management (DSM): Overview
The foregoing discussion highlights the extent of capital investment involved in power
sector development in Asian countries, the inadequacy of domestic resource to
finance such development and resulting dependency on foreign capital. The need for
efficient utilization of the scarce capital resource in utility planning becomes therefore
fairly obvious.

Traditional electric utility planning is basically a supply-oriented planning where

utilities determine the best possible way of supplying electricity to meet the projected
demand. Utility planners here consider demand as something completely exogenous
in their planning exercise. The traditional approach could have been satisfactory when
utility production costs and demand growth were fairly stable. These are, however, no
longer the usual situations faced by utility planners in recent years: Utility production
costs are escalating for most utilities, and future electricity demand faces increasing
uncertainty due to rapidly changing end-use appliance technologies in terms of energy
efficiency.
 Demand Side Management (DSM): Overview

Modem utility planning approach is based on the view that utilities can better utilize
their resource by looking into not only the supply options but also the strategies than
can influence the timing and the level of demand. The strategy of providing reliable
electricity supply at the lowest overall cost with a mix of supply-side and demand-side
resources is known as least-cost utility planning (also known as "integrated resource
planning"). [For a more detailed account of least cost planning approach, see e.g.
Krause and Eto (1988), and Moskovitz (1989)]. The present paper will, in the following
sections, limit itself to the discussion of demand-side approaches.
Demand Side Management (DSM): Overview
Table 1. Peak-Load and Total Installed Capacity Additions in the 1990s in Asia Region, MW
Peak Load Total Capacity Total Capacity
Country 1989 1989+ 2001* Added in 1989-2001
Bangladesh 1,388 1,960 3,600 1,640
Burma 528 711 1,458 747
China 78,077 116,119 318,317 202,198
Fiji 48 147 199.2 52.2
India 47,013 59,149 111,777 52,628
Indonesia 4,975 8,687 20,821.5 12,134.5
Korea (South) 13,485 21,295 52,085 30,790
Lao-PDR 159 169 425 256
Malaysia 3,347 5,226 13,758 8,532
Nepal 177 260 388 128
Papua-N.G 127 221 554 333
Philippines 3,719 5,788 13,242 7,454
Sri Lanka 625 1,216 1,606.5 390.5
Thailand 6,098 7,269 20,791 13,522
Total 159,766 228,217 559,022.2 330,805.2
+ Source: Moore and Smith (1990)
*Source: www.eia.doc.gov
Demand Side Management (DSM): Overview
Table 2 Total installed and peak load capacity in ASEAN region, 2000
Country Total installed capacity (MW) Peak load capacity (MW)
Cambodia 145 155
Brunei Darussalam 706 398
Indonesia 20,762 14944*
Laos 642 **
Malaysia - Peninsular 7,500 9,712
Malaysia - Sarawak 816 526
Malaysia- Sabah 785 391
Myanmar 1007 750#
Philippines 7000 **
Singapore 6600 4695
Thailand 22,269 14,918
Vietnam 6,253 4,800*
Source: www.aseanenergy.org
* Data are taken from graph
** Not Available
# Data for 1998-1999
 DSM Programs

DEMAND SIDE MANAGEMENT PROGRAMS

Demand-side management (DSM) activities "are those which involve actions on the demand-or
customer-side of the electric meter, either directly caused or indirectly stimulated by the
utility",[Gellings and Chamberlin (1988, P.2)]. Popular among the DSM activities include direct
load control, thermal storage electrification, strategic conservation, and innovative rates. Of
these five programmes, the first four are mainly technological in nature while innovative rates are
related to pricing. The technological options will be described in the remainder of this section
while the innovative rate structure will be discussed in the next section.
 DSM Programs
Direct Control of Customer Load

It is related to the alteration of a customer's end-use appliance in order to change the level of
maximum demand and thus the system load. Utilities may control customer's load either through
remote controlled signals or locally at the point of use. Major types of devices used for the
purpose include time switch, thermostat, current limiter. The loads that are generally considered
for direct control are air conditioners, water-heaters, space-heaters and irrigation pumps.
Customer load control could also be achieved in response to the price signals given by the utility.
In either case (whether load is directly controlled by the utility or by the customer) it is assumed
that there exists an agreement between the utility and the customers for the load control
arrangement.
 DSM Programs
Thermal Storage

This technique is useful to achieve strategic load growth through valley filling in load
profile and for load shifting. This option involves the use of an equipment that can vary
energy input while maintaining the energy delivery schedule. Water heating and space
conditioning services are the popular targets for the use of thermal storage option. In
water heating application, heat is stored during the off-peak period and is used during
the peak period. In air cooling applications, coolness storage systems are used to
reduce the peak time load caused by air conditioning units.

Electrification

Expanding electrification to rural areas, electrification of transport system, or use of

electricity to substitute fossil fuels in industrial appliances could increase the system
load. Such an option is obviously relevant for strategic growth of demand in the case of
a utility that faces underutilization of its capacity.
 DSM Programs
Strategic Conservation
This option involves improvement in the efficiency of energy use. It covers every major end-use
and the associated appliances. Major strategic conservation programs include:
(a) Building envelope programs
(b) Improved air conditioner efficiency
(b) Solar programs
(d) Improved water heating efficiency
(e) Energy-efficient appliances and uses
(f) Energy efficient motor systems

(a) Building Envelope Programs: These are related to thermal performance of building. These
programs aim at reduction in energy consumption through (i) installation of natural or synthetic
insulation in buildings and (ii) reduction of air infiltration e.g. by sealing structural cracks and
joints.
 DSM Programs
(b) Improved Air Conditioner (AC) Efficiency: Use of more efficient AC units can contribute to
reduction of customer peak demand and the utility's peak load. Considerable fuel-economy has
been reported in new generations of ACs. In the US, new models of Central AC units in the 1990s
are expected to require 16 to 33 % less energy per annum while the corresponding reductions for
room ACs would be 20 to 40% as can be seen in Table 3. [Geller (1988)].

Table 3: Energy Consumption and Conservation Potential of Major Residential

Equipments in the U.S.
product Best Model of 1986 Advanced Technology for
(kWh/yr) 1990’s (kWh/yr)
Refrigerator 750 300-500
Freezer 430 200-300
Central AC 1800 1200-1500
Room AC 500 300-400
Electric water heating 1600 1000-1500
Electric range 700 400-500
Electric clothes dryer 800 250-500
Lighting 650 350-500
 DSM Programs
Table 4. DSM potential by efficient technology in the Republic of Korea
Options Amount of Benefit Cost Net benefit Net benefit
reduction (bil. Won*) (bil. won) (bil. won) per TOE
(M toe) (1000 won)
Refrigerators 107 54.2 17.8 36.3 339.3
Electric bulbs 1,137 436.4 144 292.4 257.2
Washing machines 30 9.6 3.1 6.4 213.3
Fluorescent lamps 1,097 347.3 114.6 232.7 212.1
Air conditioners 132 40.1 13.2 26.9 203.8
Source: United Nations, 2002
*1USD = 1,260 Won
 DSM Programs
(c) Solar Systems: There are three types of solar systems: active solar system, passive
solar system, and photovoltaic systems. Passive solar system utilize architectural design of
building to circulate solar energy through natural convection. A popular example of active solar
system is solar water heating.
Residential solar water heating can offer significant reductions in a customer's electricity bill. An
electric-augmented solar water heating system could offer stability of service while reducing the
customer load. While the viability of solar systems in general in developing countries is still not
very clear, domestic solar water heating devices have become increasingly popular in Kathmandu
(Nepal) even without any special incentive from the utility for their promotion.

(d) Improved Water Heating Efficiency: Water heating is one of the major users of
electricity in residential and commercial buildings in some countries. Significant efficiency
improvements are taking place in the technology of electric water heating, it is estimated that
advanced technologies for 1990's could require 6 to 38% less energy than the best model
produced in 1986 (Table 3].
 DSM Programs
Lighting is the most common and, in the case of some poor countries, perhaps the most
important component of household load contributing to the system peak. Wide variety of high
efficiency lamps are now available. Promotion of high efficiency lamps would offer the potential
for substantial reduction in customer load as well as in the system peak load. For example, even if
moderately more efficient lamps that require 10% less power than the traditional fluorescent
lamps were used by households, generation capacity avoided in 1987 would be in the range of 0.
8 to 2.5% of the total capacity in ten countries of Asia as shown in Table 6.

Table 5 shows the level of electricity generation that could be technically avoided from the use of
efficient appliances in 1997 and 2011. It can be seen from the table that the total power
generation that could be technically avoided across the selected countries ranges from 8% in
Thailand to 19% in Sri Lanka in 2011.
 DSM Programs
(e) Energy Efficient Appliances: These mainly include refrigerators, rice-cookers, freezer and
lighting in the context of a developing country utility. The ownership of other appliances e.g.
electric range, micro-wave ovens cloth-washers while sizable in industrialized countries is mostly
insignificant in developing countries.
There have been significant improvement in refrigerator and lighting technologies in terms of
their energy efficiencies. For example, refrigerator units available in Thailand in 1990 were
reported to have unit energy consumption of 350-1080 kWh per year MEC (1990)] as compared
to 750 kWh per year for the best model produced in the U.S. in 1986 (Geller, 1988).

The ownership of electrical appliances is growing rapidly in many developing countries, the
growth being particularly high in the urban areas. The option of promoting the use of efficient
appliances in developing countries becomes even more attractive (than in industrialized
countries) if one considers the fact that the relatively more expensive appliances e.g. refrigerators
have slower rates of retirement in these countries.
 DSM Programs

Table 6: Generation avoided by different efficient end-use options in selected countries, GWh.

Perspective India Nepal Pakistan Sri Lanka Thailand

1997 2011 199 2011 1997 2011 199 2011 1996 2011
7 7
Efficient Lighting 29,269 73,514 186 674 6,721 16,225 638 1,593 198 253
Efficient Refrigerator 3,049 11,375 - - 1,289 4,130 - - 1,837 4,685
Efficient ACs - - - - 338 1271 179 647 5891 16023
EEMs* 9,555 23,250 21 97 723 3,060 166 542 692 1,799
Total 41,873 108,139 207 771 9,071 24,686 983 2,782 8,618 22,760

* Energy Efficient Motors

Source: AIT, 1999
 DSM Programs

(f) Energy Efficient Motor Systems (EEMs): Over 40% of electricity consumption in
developing countries is estimated to be used by electric motors [USAID (1988)]. Thus, the EEMs
which are designed to optimize energy efficiency rather than material costs of motor production -
can offer significant potential for reductions in electrical load in developing countries. According
to de Almeida et al (1990), efficiency improvement with EEMs varies from 6 % for 5 hp motors to
3% for 150 hp motors. The price of EEMs is reported to be normally 15-25 % (i.e. US$ 8-12/hp)
higher than that of standard motors, the paybacks in the U.S context are normally under two
years in the case of a new application with a large number of operating hours.
Similarly, the availability of electronic adjustable speed drives (ASD) in recent years have made
the continuous variation of AC motors feasible offering a large potential for reductions in drive
power consumption. In the U.S., for example, the use of variable speed drive is estimated to save
the drive power by 20% while the combined use of ASDs with other efficient motor technologies
could increase the savings to 30% [Almeida et al. (1990)].
 DSM Programs
Table 6: Percentages of Avoided Generation and Capacity Saved in 1987 with
the Use of Lamps Requiring 10% Less Power in Household Sector
Country Electricity Generation Avoided Generation Capacity Avoided

Bangladesh 0.20 0.48

Chinaa 0.90 2.91
India 0.28 0.57
Pakistana 0.31 0.89
Sri Lanka 0.31 0.54
Indonesia 1.53 2.55
Korea, Rep. ofb 0.48 1.02
Malaysia 0.63 1.08
Philippines 4.46 1.62
Thailand 0.90 1.98
a1985 figures, b 1984 figures.

Source: Shrestha (1990)

The most convenient targets for the promotion of EEMs and electronic ASDs are the industrial,
and commercial customers. The utilities could actively develop awareness among such customers
(both existing, and potential) on the benefits of these technologies.
 Innovative Rates
3 INNOVATIVE RATES

Electricity demand is subject to wide variation over time. The fact that electricity cannot be
economically stored (at least in a large scale) requires utilities to have a sufficient capacity to
meet the peak demand in the system. Growth of peak demand in excess of the existing capacity
would require construction of a new power plant by the utility.
Economic efficiency requires that price of electricity at any period of the day reflect the cost of
supplying the marginal unit of electricity at that period. In other words, value (i.e. price) of
electricity should be equated with marginal cost of supply. In practice, tariffs in most developing
countries are flat in that they do not reflect the varying costs of production over different time of
a day and as such, they do not promote efficiency in the use of electricity.
Several innovative rate structures are being adopted by utilities in industrialized countries with a
view to promote efficient use and to reduce the level of peak demand. They can also be
considered by developing country utilities. Popular among the innovative rates include the
following:
•Time-of-use rates
•Interruptible rates
•Special purpose rates
 Time of Use Rates
Time-of-Use (TOU) Rates

A key objective in designing TOU rates is to provide "correct" signals to the customers on the
temporal variations in electricity supply costs. Both the demand charge, and energy charge can
vary during a year. The rates could offer seasonal variations i.e. separate rate schedules for peak-,
and off-peak seasons. Even within a season or a month, rates could vary by time-of-day to reflect
the hourly variations in costs.

For designing a TOU rate that is consistent with both revenue requirement objective and the
efficient pricing objective it is important to have a good understanding of the likely price
elasticities of demand by TOU periods and/or substitution elasticities across TOU periods. Such
information, however, can be available only after the rates are implemented. Utilities could
benefit in this respect by initiating experimental TOU rates.
 Time of Use Rates

The elasticities can vary widely between a customer that has a large discretionary load and one
that has very little or no such load [See e.g. Shrestha and Wan (1990)]. Only a few utilities in Asia
have implemented the TOU rates so far for at least a class of customers: These include the
utilities in South Korea, Taiwan, Thailand, Sri Lanka, and Bangladesh. However, not much is known
about the effect of TOU rates in load management for these countries. In the case of Korean
Electric Power Company (KEPCO), an estimate suggests that the TOU pricing reduced the system
load in July 1982 by 986 MW which was over 10% of the peak demand (ADB, 1989).

The effectiveness of TOU rates in modifying the load pattern depends on several factors. Of
particular importance are the level of discretionary load in the use of electricity by a customer,
the constraints in shifting an activity from the peak-period of a day to off- peak periods and the
level of price incentives (or disincentive) implied by the TOU rates.
In the case of an end-use that, for some reason, cannot be shifted form peak- to other periods, it
could be necessary to set a sufficiently high demand charge during the peak period in order to
make the replacement of the existing appliance (related to the particular end use) with a more
efficient one feasible.
 Interruptible Rates
Interruptible Rates

Such rates are designed to provide capacity savings to utilities. Participating customers are
offered a reduced demand charge if they allow their service to be interrupted by the utility for a
specific period of time. Participants may also be given the option to choose the frequency of
interruption, maximum duration, and the magnitude of the interruptible load.
Often, utilities also offer incentive payments to customers allowing demand interruptions. Such
incentives are designed on the basis of net cost that would be avoided by the utility from
interrupting the customer load.
Similarly incentive payments could be designed to reduce the utility's energy costs. The maximum
level of incentive per kWh of interruptible energy would be based on the marginal energy cost
avoided by the utility net of energy cost to the customers and the metering costs.
 Special Purpose Rates

Special Purpose Rates

Utilities can also design special rates for customers who meet specific DSM requirements. In such
rates, the qualifying customers will be offered lower charges. For example, customers who install
thermal insulation in buildings in accordance with the prescribed thermal standard could be
offered a special rate incentive. Similarly, customers who install solar appliances with the
potential to reduce customer load during peak period could also be the targets for special rates.
 Load Shape Objective and DSM Options
4. Load Shape Objective and DSM Options

Each DSM program can influence the load shape of the customers and hence that of the utility
system in particular ways. The expected changes in load shapes are the key basis to evaluate the
potential benefits of any DSM program. On the other hand, the choice of DSM programs could
itself depend upon the load shape objectives of the utility. There are many (in fact infinite)
combinations of load shape change possibilities. The following basic load. shape possibilities are
discussed here for illustration (see Figure 1):

a. Peak Clipping: This is a classic form of load management. It is most commonly practiced
through direct load control of customer's appliances.

b. Valley Filling: This is the second type of traditional load management. It involves building of
off-peak loads. One of the most popular ways to achieve this is the promotion of new water
heating and/or space heating loads.
 Load Shape Objective and DSM Options
c. Load Shifting: It is the third classic type of load management and involves shifting load from
peak to off-peak periods. Typical applications here include the use of storage water heating,
storage space heating, and coolness storage.

d. Strategic Conservation: It involves load shape changes through utility-stimulated

conservation programs. Popular programs here include appliance efficiency improvement
and weatherization.

e. Strategic Load Growth: It involves a general increase in load and not limited only to load
growth during off-peak periods. Expansion of rural electrification program is one popular
example here.

f. Flexible Load Shape: Considering system reliability as a variable in utility planning, changes in
reliability and load shapes could be affected through different DSM programs. Variations in
interruptible load is one of the options here.
Load Shape Objective and DSM Options
Peak Strategic
Clipping Conservation

Strategic Load
Valley Growth
Filling

Load Flexible Load

Shifting Shape

Figure 1. Load-shape Objectives

Source: Gellings and Chamberlin (1988)
 Issues on Demand Side Management Incentives

It should be noted that for an effective implementation of DSM programs, the utilities need to
devise appropriate incentive schemes which could include a favorable rate structure and/or other
kinds of incentives.
Formulation of incentives schemes for a DSM Program requires d thorough analysis of potential
benefits and costs related to the program. Incentive payments require careful estimation since
payments in excess of program savings could eventually result in an increased cost to
nonparticipant customers of the utility.

There are also equity issues to be considered in defining who should qualify for the incentives.
For example if an incentive program is to be applicable only to those customers who participate
in the program after the program has been launched, then customers who have, for some reason,
met the requirements since an earlier date would appear to have been unfairly discriminated.
 Issues on Demand Side Management Incentives

Implementation of some incentive programs can also face the problem of enforcing the
requirements associated with the programs. It is necessary that costs of enforcement be taken
into account while assessing the desirability of a particular program. In general, other things
remaining the same, a program with higher cost of enforcement and monitoring should be less
preferable to one that is easier and less expensive to enforce.

Even if a DSM program is found to be attractive, a developing country may face the problem of
financing it if the program involves a substantial level of utility investment e.g. if the option
involves a huge amount of utility subsidy in the replacement of inefficient electrical appliances. To
a large extent, the policy of international financing sources on investment in DSM project
 Evaluation of DSM Programs

After a DSM program is identified, the evaluation of the program basically involves the following
three steps:

i. Market share analysis (It analyzes the potential participation level in the program).
ii. Load-shape impact analysis (It involves statistical analysis of customer load shape
changes which will be the basis for the derivation of the system wide load shape
changes).
iii. Net benefit of the program (For a program to be cost effective, the program's cost
should be less than or equal to avoided costs. Economic analysis of a program are
conducted from different perspectives e.g. Participant's perspective, nonparticipant's
perspective, utility's perspective, and societal perspective [For details, see e.g. Krause
and Ito (1988)]).

Selection of DSM programs for implementation should compare among other things, the relative
benefits (or the economic savings) of the various alternatives, the relative ease of
implementation (e.g. enforcement and monitoring of conditions attached to incentive programs).
 Final Remarks
Electric utilities are mostly in public sector domain in developing countries. Many of these utilities
depend heavily on either the allocation of government funds or on foreign capital for their
capacity expansions. Since utilities compete with the rest of public sectors in the economy for
government budget allocation and for capital investment from abroad, it is to the interest of the
utilities and the economy on the whole that the utilities optimize their resource use considering
both the supply-side and the demand-side options. Utilities need to be innovative to exploit the
potential benefits of demand side management options. They need to conduct serious studies to
identify the set of economically viable DSM programs. Some DSM programs may require changes
in government policies. When this becomes necessary, the utilities should actively seek
appropriate changes in government policies in order to develop a more efficient system of
electricity supply and use in the economy.

In order to be able to benefit from demand-side management, it is essential that utilities select
the optimum set of DSM programs. Such a selection requires sound understanding of customer
load characteristics of major end-uses, ownerships of major appliances and their energy
efficiency on the part of utility planners. At present, such data-base does not exist with most
developing country utilities. Serious efforts are warranted in this direction for the utilities to be
able to exploit the potential benefits of demand-side management.
 Exercises
1. Discuss the various possible load shape objectives of an electric utility. Give some examples
of the corresponding demand-side management programs.

2. Define the rebound effect associated with end-use energy efficiency improvement programs.
What are its implications for electricity planning? State what information you would need in
order to determine the rebound effect. Explain how would you take the rebound effect into
account in a generation expansion planning exercise.