With electric utilities transitioning toward grid modernization, their business model has shifted from being confined to fulfilling energy requirement to playing a larger and more proactive role in the integration of distributed energy resources, managing energy demand, and optimizing electricity generation. The smart grid infrastructure comprises the deployment of Advanced Metering Infrastructure (AMI) for Automated Demand Response (ADR), which provides two-way communication in real time between the consumers and service providers.
AMI is an integrated system of hardware, software, and services, which form a network between the customers participating in the Demand Response (DR) program and the power utility by transferring consumption data of the user to the meter data management software at the utility. The system collects, measures, collates, and analyzes consumption data of many customers at a given point of time and sends DR signals to the smart meters or load control switches at the user’s end to adjust or shift their usage from peak to non-peak hours. Participation in the program requires a functional Home Area Network (HAN) and installation of smart meters, smart thermostats, and load control switches. The initial cost incurred for participating may pose a barrier to the widespread adoption of the technology.
U.S. Demand Response Management System Market, By Component, 2015 (%)
Customer participation is central to the success of Demand Response Management System (DRMS). The program is not forcible on electricity users but requires them to participate and reduce energy consumption. Utilities motivate participants for reducing their electricity consumption during pre-defined hours by providing incentive-based and price-based benefits. The program equally requires efforts from the service providers to manage peak load crisis and optimize the distribution system. ADR is different from conventional DR as it is based on an open standard system, can manage a large number of endpoints, provides two-way communication in real time, and is integrated into the Smart Grid network. ADR is anticipated to drive the market, accounting for a revenue share of around 40% by 2025.
There is lower applicability of DRMS in the residential sector as compared to the industrial and commercial sectors. Households may adopt OpenADR 2.0, which is the latest international standard of ADR and is recognized by the OpenADR Alliance. Primarily, aggregators are responsible for the application of DRMS in the residential sector. They contact the households individually through phone calls, messages, or e-mails. The OpenADR 2.0 uses AMI, which has access to data from a large number of endpoints at the same time. The DR interaction is based on a Common Information Model (CIM), which uses the standard IP communication. DR signals are sent to the customers’ control system to reduce consumption.
Recent market trends highlight the growing participation of companies in ADR. Companies such as EnerNOC and Comverge have an early market entry advantage and account for a considerable revenue share of the DRMS market. Owing to a strong market presence and customer relationship, large integrated companies such as Siemens AG and Honeywell International Inc. have been quick to catch up with their DR technology.
By 2025, the hardware component is anticipated to account for more than 50% of the revenue share of the DRMS market. The U.S. is expected to lead the market owing to the growing adoption of the smart grid technology. Pilot operations for ADR have been implemented in many countries where the technology has not been implemented yet. The global demand for DRMS is expected to rise over the forecast period.
In-depth report on global demand response management systems (DRMS) market by Grand View Research:
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