In the hot days of summer, everybody turn on their air conditioner consuming massive amount of energy at the same time. This kind of usage puts the entire grid under the possibility of power outage. The reason behind black outs is that the demand of electricity exceeds the supply.
This graph illustrates the demand of electricity. When it is a really hot summer day, the utility won’t be able to meat the demand. They have three choices; operate extra power plants, buy electricity from another region, or demand response programs.
The first option, operating extra power plants, is not a great choice for many reasons; it is expensive, emits more CO2, and the technology at these power plants are outdated.
Purchasing electricity from another region increases the rates. It also creates tons of waste.
The third option, demand response programs, are the best solution to this problem. Participants in this program get a call from the electric supplier asking them lower their usage of electricity during peak demand events. After peak demand events, participants are allowed to turn back to their normal usage of electricity. For example, if the utility supplier expects a hot day tomorrow, it contacts some of its participants asking them to cool their rooms today prior to an expected peak demand event.
This method saves a lot of money and energy, and provide more stable electricity.
Sources:
http://www.youtube.com/watch?v=weNGPtx1StA
http://en.wikipedia.org/wiki/Demand_response
http://www.mpoweruk.com/electricity_demand.htm