Demand response

Written and checked by the Energy Merchants desk · Reviewed 3 October 2026

Demand response is the practice of changing when electricity is used, or exported, in answer to a signal. The signal might be a high wholesale price, a network emergency, a tariff window or a request from an aggregator. The result is less demand at the moment the grid is under most strain.

It can be manual, such as a customer delaying the dishwasher, or automatic. Automatic is where installers get involved: a hot water controller that heats at midday, an air-conditioner that eases back for 15 minutes, a battery that discharges on cue.

In practice

Demand response is the logic behind several programs relevant to certificates.

• NSW PDRS. The Peak Demand Reduction Scheme pays, via PRCs, for activities that lower peak demand, including connecting a battery to a VPP. See PDRS definition.
• Retail VPP products. A provider coordinates many batteries and earns market revenue, then shares some of it with the owner.
• Network programs. A distributor may pay customers for load reduction during an emergency event.

Hot water has its own twist. A resistive or heat pump unit with a controlled-load circuit or a timer is a simple demand response asset, and it is also relevant to hot water STCs.

Common confusion

Demand response is not the same as energy efficiency. Efficiency uses less energy overall, and in NSW that earns ESCs under the Energy Savings Scheme. Demand response may use the same energy but at a different time.

It is also not the same as a time of use tariff. A tariff is a price schedule that nudges behaviour. Demand response is the actual action, which may or may not be driven by a tariff.

For battery claims see battery STCs, and the glossary for related terms.