Evaluation of demand side management mechanisms and opportunities for their development in the Brazilian power industry

Abstract

Demand Side Management (DSM) can be defined as the process that aims to modify the behavior of the consumer through price signals, financial incentives and awareness actions, among other mechanisms, in order to improve the economic efficiency of the market, the security and adequacy of supply. This term is very broad and can refer to both the long-term actions such as the Energy Efficiency (EE) programs, as well as to short-term actions of Demand Response (DR), such as the ability to respond to market or system conditions. This work focuses on Demand Response mechanisms. In any market, the participation of consumer response to price is essential to promote market efficiency. The more demand actively participates in the electricity market, the more competitive and robust is the market. Additionally, Demand Response (DR) has proven to be an operational tool in maintaining reliability, both in real-time security and long-term resource adequacy. Even though the technologies required for its implementation are already available, a larger deployment of DR mechanisms in the global context is taking place slowly, mostly through industrial and commercial sectors. In general, the main obstacles found in the markets are still of regulatory nature. Many questions have been raised to identify how the current regulatory structure can evolve to better encompass new DR solutions involving greater voluntary participation. In this sense regulatory and business models need to evolve to better handle these solutions. The scarce use of DR mechanisms in Brazil presents an opportunity to achieve efficiency gains. The aim of this work is to evaluate the main opportunities and barriers for DR in Brazil and worldwide. We focus on the importance of these mechanisms to achieve efficiency in electricity markets both in wholesale and retail markets. Additionally, the main drivers for the evolution of DR mechanisms for the Brazilian Electric Sector in the current context are identified and discussed.