Demand Response in Shanghai


On 28 July 2015, the Natural Resources Defense Council (NRDC) held a conference announcing their latest research results in partnership with the University of Oxford, “The Potential and Benefits of Demand Response in Shanghai,” and shared their experiences establishing demand response markets in China and abroad.

In the summer of 2014, Shanghai hosted China’s first demand response pilot program. Early results pointed to the great hidden potential of demand response in the electricity system. In April 2015, the National Development and Reform Commission (NDRC) published policies promoting reform in China’s power sector, mandating the establishment of demand-side management pilot programs in Beijing, Tangshan, Suzhou, and Foshan. Using lessons learned from the Shanghai pilot and international experience, these cities will implement demand response programs and establish long-term market mechanisms.

In this context, NRDC and Oxford worked together to produce a special report to summarize years of experience in demand response project operations, examine the policies and regulatory frameworks necessary to promote demand response, and evaluate the market potential and value of demand response in Shanghai.

Because the power sectors in China, the United Kingdom, and the United States are different, this report offers recommendations and potential directions in future research. In their conference, the research team from NRDC and Oxford described NRDC’s work in demand-side management and energy efficiency and summarized the content of the report. They also discussed the future of demand response in China.

Shanghai’s demand response market potential

Their research predicted the market potential for demand side response up to 2030 via two programs. One program focuses on a direct air conditioning control program aimed at homeowners and commercial and industrial SMEs. The second program focuses on load reduction for commercial and industrial users. Figure 1 shows the market potential of demand response in 2020, 2025, and 2030.

The data show that 64-73% of demand response market potential lies in load reduction programs for Shanghai commercial and industrial users. Under different circumstances, it is predicted to contribute 43%-59% of total demand response market potential. Although the contribution from air conditioning direct load reduction for SMEs was limited, under certain conditions, AC direct load control programs for homeowners accounted for 23-33% of market potential for demand response.

Figure 1 – Estimated value of Shanghai demand response market potential

Value of avoided costs in Shanghai’s demand response programs

Avoided costs from demand response in Shanghai include avoided expenditures from gas power plants, such as capacity, energy, CO2 emissions, and T&D investment. This report supposed that market potential in demand response could rely on peak shaving, rather than peak shifting or backup generation, to achieve results. Figure 2 shows expected avoided costs in 2020, 2025, and 2030.

Figure 2 – Annual avoided costs between 2020 and 2030

Future research

The report also looked ahead at valuable research trends in the future:

  • Strengthening load curve research
  • Establishing a stronger evidence basis for participation rates and load reduction from demand response
  • Analyzing and evaluating the 2015 Shanghai demand response pilot program
  • Analyze the potential of different demand response strategies
  • Further defining demand response products
  • Strengthening long term peak use demand forecasting
  • Formulating a user communication and marketing strategy
  • Acquiring better system cost information to better evaluate system benefits
  • Assessing demand response project costs
  • Considering adding other environmental externalities