The economic impact of demand response on distribution network planning

Smart meters deployment and developments in telecommunication technologies allow easier response of consumers to price signals. In this context, real time pricing together with network price signals may incentivize consumers to consider their impact on distribution networks costs, both from the short-term and long-term perspectives. In this paper, the effect of demand response on network costs would consider the avoided or deferrable investment costs in networks. For this purpose, a large-scale distribution network planning tool, Reference Network Model, is used to estimate the reinforcements needed to meet the demand growth in a ten-year horizon. The results show that different factors affect the impact of demand response on networks: such as the grid topology, consumers’ location, price signals and consumer’s flexibility. One of the main findings is that a demand charge significantly reduces network costs already even at low demand flexibility levels to energy prices.