Business participation in demand response: a review of potential barriers

Catarina Araya Cardoso, Westminster Business School

Demand side response (DSR) is widely seen as the main intervention tool to address issues of peaks and troughs in electricity demand. Businesses can provide DSR through a variety of measures, such as using on-site generators or reducing their electricity consumption in response to external signals. To date, energy intensive firms have been the main providers of demand side response. However, the realization of the technical potential of DSR requires that other electricity end-users also alter their consumption patterns in response to system needs and there is little research on what influences their capacity and willingness to do so. This paper contributes to filling this gap by examining DSR participation of large energy consumers in the commercial and public-sector. In this sector, energy costs typically represent a smaller proportion of overall costs than in energy-intensive industries and partly because of this, energy initiatives tend be perceived as marginal to the core business. These differences suggest that the drivers that have encouraged energy intensive industries to participate in DSR may be insufficient to unlock the technical flexibility of the commercial and public sector. Using concepts from neo-classical and behavioural economics and insights from organizational theory and social practice theory, we explore impediments to the uptake of DSR by large commercial firms and public-sector organizations. We argue that to encourage their participation it would be important to investigate what electricity loads are used for in different firms, how energy initiatives are approached within these organizations, and what role barriers such as hidden costs and status-quo-bias may have in inhibiting engagement in demand side response.