Electricity distribution networks in Australia typically make capital works (infrastructure
investment) decisions based on ensuring the network can meet system peak demand in line with
security of supply standards demanded by local regulations or customs. For many networks, however,
significant financial challenges arise when the system maximum demand only occurs for short periods
of time. For example, in regional Queensland in 2011, approximately 10% of the network capacity was
used for less than 1.5% of the year [1]. Season, climate and time of day are some of the acknowledged
key variables that contribute to peak demand. Reducing peak demand through DSM programs is
therefore seen as a more economical option than network augmentation, flattening the load curve to
increase the utilisation rate (and hence investment return) of existing infrastructure. In Australia,
residential DSM strategies fall into three categories:
(i) network controlled tariffs (voluntary or mandatory requirement for particular appliances such
as electric water heaters to be controllable by the network at specific times);
(ii) tariff price reform (using price signals to drive changes to appliance usage times); and
(iii) direct rebates (e.g., financial assistance to customers to replace inefficient appliances with
more efficient and/or controllable appliances).
The principles which guide the development and implementation of DSM programs in distribution
networks are focused on managing business risk and maximising economic return. DSM programs
are required to increase the asset utilisation rate and deliver measurable and predictable reductions
in demand, whilst not compromising network service standards [1]. The energy network, from the
distribution company’s perspective, consists of the poles and wires that deliver the electricity from the
high transmission distribution network to the end use (the residential customer). Neither the houses nor
the appliances connected to the network are considered to be part of the energy system.