First introduced in 2016, Demand Response is not something most people have heard of. But for businesses with large energy needs - like manufacturers, data centres and institutes of higher learning - it can be a powerful tool to manage costs and contribute to a more stable energy system.

The idea is simple: instead of generating more electricity to meet high demand, what if companies with flexible energy needs could adjust their consumption when prices are high or supply is tight?

That is exactly what Demand Response aims to achieve. During periods of high electricity demand or tight energy supply, participating companies voluntarily shift or reduce their electricity consumption. In exchange, they receive a share of the savings from the reduction in wholesale electricity prices due to lower demand.

“Electricity is generated and used in real time — and that means we constantly need to balance supply and demand,” Pearl Tan, Principal Analyst at the Energy Market Authority’s (EMA) Energy Capabilities Development Department explained. “If demand rises, wholesale electricity prices would increase. However, if consumers are willing to shift their energy consumption to off-peak periods, it helps to maintain the balance in the energy market and keeps electricity prices stable.”

Since the launch of the Demand Response regulatory sandbox in 2023, the number of participating facilities has tripled, with registered capacity rising to 166 MW. To put it in perspective, reducing 166 MW of electricity for an hour is equivalent to powering 438 four-room HDB flats a month.

But the benefits go beyond just the numbers.

By easing pressure on the power system, Demand Response also allows us to use existing power generation resources more efficiently. For participating companies, it opens up a way to leverage their operational flexibility to earn financial incentives and contribute to Singapore’s energy transition as part of their sustainability efforts.

Taking part in the Demand Response programme has proven to be rewarding. Over 2023 to 2024, participants earned an average of $2,400 to $2,700 for every megawatt-hour (MWh) of electricity they reduced. The programme has played a valuable role in the wholesale electricity market by easing wholesale electricity prices, resulting in approximately $740 million in savings for energy buyers across the market.

The types of participating companies are diverse. Pearl shared that majority of them are usually the commercial and industrial facilities. Companies with heavy energy requirements such as cold storage providers and data centres are also potential participants.

Recently, EMA has enhanced the programme to allow companies with battery energy storage systems (BESS) to participate. “With BESS, companies could store energy when wholesale electricity prices are low and switch to tapping on them during peak periods when prices tend to be high - making it even easier to participate in the programme,” Pearl said.

Even though energy prices have become relatively stable, the road ahead may change anytime. As Singapore accelerates its shift to cleaner but more variable energy sources such as solar, and brings in more low-carbon electricity, price fluctuations in the wholesale electricity market may become more common. Global energy developments could also add to this uncertainty.

This is where Demand Response will continue to play an important role in building up Singapore’s energy resiliency.

“It’s about being prepared,” Pearl said. “Demand Response gives us a flexible way to keep the power grid stable and prices more stable. And it gives businesses a way to contribute to a more resilient energy future, while benefiting from it too.”

If your business uses a significant amount of electricity and you are looking for smarter ways to manage energy consumption and costs, Demand Response is definitely worth considering.

Start by speaking to your electricity retailer or a Demand Response aggregator. They will help assess if your facility is suitable, and guide you through the process.

By participating, you can get to benefit from cost-savings while doing your part for energy sustainability.