Please cite this article in press as: Yang, C.-J., Opportunities and barriers to demand response in China. Resour Conserv Recy (2015), http://dx.doi.org/10.1016/j.resconrec.2015.11.015 ARTICLE IN PRESS G Model RECYCL-3166; No. of Pages 5 Resources, Conservation and Recycling xxx (2015) xxx–xxx Contents lists available at ScienceDirect Resources, Conservation and Recycling jo ur nal home p age: www.elsevier.com/locate/resconrec Opportunities and barriers to demand response in China Chi-Jen Yang ∗ Duke University, Box 90658, Durham, NC 27708, USA a r t i c l e i n f o Article history: Received 17 September 2015 Received in revised form 26 October 2015 Accepted 24 November 2015 Available online xxx Keywords: Demand response Advanced metering infrastructure Electricity market Smart grid China a b s t r a c t China is quickly installing advanced metering infrastructure (AMI), which could provide tremendous opportunities in developing and utilizing demand response resources. Demand response may poten- tially create a profitable industry and contribute to efficiency improvement, cost reduction, and pollution mitigation of the entire electricity sector. However, China lags behind the developed world in utilizing demand response. Institutional barriers, including the lack of competitive electricity market and the resis- tance by the state grid corporations, are preventing the commercialization of demand response. In order to fully realize the potential of smart grid, China needs to push forward the reforms toward establishing an open access electricity market so the pollution-free demand response resources may compete with power generators on leveled field. © 2015 Elsevier B.V. All rights reserved. 1. Introduction: demand response and its benefits The operation of an electric power grid is a constant balancing act. Most of the power generators, such as coal-fired power plants and nuclear power plants, are most efficient when they are oper- ating at stable output. The consumption of electricity, however, fluctuates constantly. Because the storage of electricity is difficult and expensive, grid operators have to constantly ‘dispatch’, which is to bring power generators online or off-line, to meet the fluctuating demand. Traditional electricity tariffs are based on the average cost of electricity, so consumers have no incentive to adjust their demands according to the real-time cost of power generation. Conventional analog electricity meters can only record the total amount of usage without information on the time of use, and without real-time com- munication with the grid operator. Therefore, in the past, a grid operator had control only on power generators, but not on power consumers, so the dispatches were entirely on the supply side. The adoption of time-of-use (TOU) pricing motivates end-users to adjust demand in response to the variable price of electricity over time, and the introduction of smart meters enables the grid operator to remotely dispatch the interruptible demand loads. The installation of smart grid makes it possible and easier to manage or dispatch the demand. Peak-load generators are typically small, inefficient, expensive and more polluting than base-load ∗ Tel.: +1 919 9459075. E-mail address: cj.y@duke.edu ones. By utilizing demand-side resources to replace the use of peaking generators, a grid operator may reduce both the overall cost and pollution of the electric power system. Demand response (DR) is to adjust the demand of electricity by end-users in response to changes in the price of electricity over time, in order to reduce electricity use at times of high prices and to relieve the congestion of the power grid. The implementation of DR could be categorized into two types: non-dispatchable and dis- patchable (Balijepalli et al., 2011). Non-dispatchable DR refers to the electricity end-users’ changes in consumption in response to a TOU retail electricity pricing scheme. Dispatchable DR is the direct remote control of end-users’ interruptible electrical appliances, which the grid operator can dispatch to temporarily reduce demand and possibly shift the demand to a later time when the cost of gener- ation is lower. In addition to lowering the cost of peaking electricity, dispatchable DR also helps to maintain the reliability of the power grid. Therefore, dispatchable DR is equivalent to a virtual peaking power plant, which consumes no energy and emits no pollution. The practice of DR can improve the efficiency of resource uti- lization and reduce pollution by closer alignment of consumer’s electricity tariffs to the true costs of power generation (USDOE, 2006). The consumers who participate in DR programs may reduce their electricity bills by optimizing their time of use and earn incentive payments by selling their dispatchable demand loads to DR aggregators. By avoiding or reducing the use of costly peak- ing electricity, the system-wide costs of electricity is reduced. The standby DR resources can also be dispatched in emergency to avoid power outages, which often incur high economic costs, dam- ages and inconvenience to consumers. Overall, DR resources are http://dx.doi.org/10.1016/j.resconrec.2015.11.015 0921-3449/© 2015 Elsevier B.V. All rights reserved.