Systems Thinking and Systems Dynamics Approach to Demand Side Management

Context: Demand Side Management (DSM) provides utilities with tools to modify end users’ consumption patterns, helping reduce peak demand, alleviate stress on the power grid, and even support with the integration of renewables. Nonetheless, DSM is an inherently complex and interdependent system stretching across numerous factors such as economic, behavioural, and technological with different feedback dynamics and competing incentives. To address this complexity a Systems Thinking and Systems Dynamics approach is applied. Objective: The aim of this paper is to develop a quantitative Systems Dynamics model in the Vensim simulation environment, capturing the dynamic transition between short run and long run price elasticities. Methods: The model defines variables such as baseline demand, electricity price, and both short-run and long-run elasticities. A stock variable, Effective Price Elasticity, is used to dynamically represent the shift from short-run to long-run responses. Simulation parameters were gathered from literature. Results: Simulations demonstrate that the model confirms expected behaviour, showing an initial less elastic response to the price changes followed by a more notable gradual adjustment over time as the effective elasticity converges to its long-run value. Conclusion: This model can provide a framework for simulating the dynamic interplay between electricity price and demand. Its ability to simulate short-run and long-run elasticity effects offers valuable insights for energy planners and policy makers.