In general, demand response refers to the ability of consumers to respond to a supply shortage by curtailing demand, thereby improving economic efficiency. Since the California energy crisis, demand response has been widely used in electricity markets throughout the United States and Canada.1 Recent developments in the natural gas sector suggest that the time may have come to also introduce demand response in that sector.
Weighing green energy’s costs and benefits.
Policies aimed at promoting one good thing can diminish a better thing, for a net loss to the overall public welfare. Raising prices to promote renewables, for example, makes electricity less affordable and hurts the economy. But artificially low prices can themselves create social ills — by preserving an unsustainable status quo.