Demand Side Management (DSM) is usually considered as a process of shifting of energy consumption from pick peak hours to off-peak times. DSM doesn’t always reduce total energy consumption, but it helps to meet energy demand and supply. For example, it balances changeable variable generation from renewables (such as solar and wind) when energy demand differs from renewable generation .
One of limitation of electricity power is that generally, electrical energy cannot be stored because of a large number of economic or physical feasibility limits. Thus, it must be produced in the quantity needed. It is exactly the main objective of DSM – to equilibrate production and consumption of energy.
DSM was originated after oil crisis in the 1970s. Before Then, energy demand was met relying on forecasts, which were often made with a ruler and double-log paper. In other words, demand side was largely disconnected from the market. Consumers were mostly simple users of energy sources. They received electricity from energy grid and paid for it. Gradually, situation is changing. After petrol shock in 1973, Demand Side Optimization has become more important. Most countries tried to develop programs to reduce dependence on oil and to promote energy efficiency and alternative energy sources. Nowadays, energy consumers are more proactive. They want to optimize electricity consumption that allows so as to reduce their expenses.
The process of DSM activities usually follows the integrated approach. DSM sends signals to end-use systems to shed load depending on system conditions. This allows for very precise tuning of demand to ensure that it matches supply at every period, reduces capital expenditures for the utility. Critical system conditions could be peak times, or in areas with levels of variable renewable energy, during times when demand must be adjusted upward to avoid over generation or downward to help with high needs. Consequently, the analysis and optimization on the demand side focuses on the involvement of the customer and fits to the vision of a customer centric energy grid.
According to literature , DSM can be divided into 3 categories:
Energy efficiency means usage of less power due to more efficient load-intensive appliances such as water heaters, refrigerators, or washing machines.
Strategic Load Growth refers to a general increase in energy consumption. Load growth may involve increased market share of loads which can be served by fuel switching from fuels to electricity such as heat pumps, induction cooker and microwave oven.
Demand Response (DR) identifies the short-term relationship between price and quantity when the actions and interactions of substitutes and complements are considered. Currently, the term DR is used in a broad sense, in relation to electricity end-use, and is attributed to a wide range of control signals such as prices, resources availability and network security .
Fig. 1 sums up DSM categories (based upon ).
Demand Side Management and Demand Response
We define DR as part of DSM similar to  and , as the “voluntary changes by end-consumers or producers or at storages of their usual electricity/gas flow patterns - in response to market signals such as time-variable prices, incentive payments” or beforehand given agreements between customers and third parties. Such pattern changes are possible due to flexibility on the demand side. Such flexibility might be provided for example through electrical or thermal storages where demand is decoupled from generation, but also from other flexible loads, such as EVs.
In electricity markets, traditional DSM programs are slowly getting replaced with DR programs. Good A good example of demand response implication and reducing electricity peak demand is the introduction of “Time of Use Tariffs” in France. Its aim was to apply a fixed rate with different time units depending on hours and seasons. “Time of Use Tariffs” in France included 3 parts: