Demand side management, or DSM, is another term used for energy demand management. This refers to a set of actions taken in order to regulate the amount of energy used up by end users.
Aside from simply influencing quantity, this may also be utilized to manage patterns of energy consumption. This may be particularly useful during times when the supply of energy is limited. In such an event, it may be possible to bring down the peak demand. By doing so, authorities may avoid having to set up additional power plants. It may also be unnecessary to create additional energy networks. Despite these benefits, however, there is no guarantee that total energy consumption will be significantly reduced.
The market price for the usage of electricity is generally fixed. However, production costs are not necessarily included in this amount yet. The amount of electric usage may change quite sharply, but costing does not usually follow such changes.
This means that despite having a peak in usage, actual costing as experienced by end users does not directly take into account the higher costs of production that such usage entails. It would be very difficult to impose real-time pricing changes, especially if such peaks and falls in usage take place over a very short period of time.
As such, consumers often pay based on rates which have been based on an annual average or on other pricing schemes.
Since the main objective of demand side management is to optimize supply and demand, authorities may use a combination of regulation and taxation to influence demand.
Energy crises have made demand side management a necessity for many governments. In the present age, the use of DSM is not only limited to electricity, but may be used for water and fuel, as well.