A system impact analysis of government policies and regulations concerning demand response

Abstract

A vision of distributed energy generation, storage, electric vehicles and a "smart-grid" has been the driving force of a number of regulations and policies to promote a steady evolution of the existing & future infrastructure relating to the generation, transmission, distribution and retailing of electrical energy. Demand Response (DR) is often cited for smoothing this evolution as it has the ability to shave peaks and provide flexibility in load to dynamically adapt to an increasingly variable supply from renewable energy resources. In general, there are regulations and policies which are inadvertently increasing supply volatility (e.g., wind & solar). There are regulations and policies increasing technology adoption to decrease supply volatility (e.g., storage). There are regulations and policies which are inadvertently increasing demand volatility (e.g., electric vehicles). Finally, there are regulations and policies to increase technology adoption to decrease demand volatility (e.g., demand response). While the individual regulations are well-intentioned, from a holistic point-of-view, it is unclear how the combination of these government regulations will influence the electricity industry. The approach to answer this question is the creation of a System Dynamics Model of the Electricity industry highlighting demand response, energy efficiency initiatives, electric vehicles, storage, and variable energy resources and associated regulatory levers. The model was used to analyze the impact of regulations on the medium to long term dynamics of the industry. The result is a hypothesis that there will be a need for extra government incentives to increase the adoption of distributed generation, storage and demand response to align with the forecasted adoption rate of variable energy resources and electric vehicles in order to maintain grid reliability.