Demand response treats flexible consumption as a resource. When demand threatens to exceed supply, the grid operator or a utility sends a signal and participating sites reduce load, for example by raising the air conditioning setpoint, pausing an industrial process or delaying electric vehicle charging. Participants are paid for the capacity they can offer or the energy they avoid.
IoT makes participation automatic. Thermostats, water heaters, chargers and building automation systems can receive the signal and act without anyone on site, and smart meters verify the reduction. The trade-off for the consumer is loss of some control and comfort during events; for the operator it is the uncertainty of how much load will actually respond. Demand response is a core function of the smart grid, covered in IoT in energy.
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