Demand Response in Decarbonizing Power Systems: Evidence from Chile, Colombia, and Vietnam

This paper examines the role of demand response (DR) as a strategic flexibility resource in the long-term development and operation of power systems. Using an iterative DR module implemented in the Switch capacity expansion model, the analysis is applied to the power systems of Chile, Colombia, and Vietnam, based on models developed within the MCET network. The study assesses the contribution of DR to long-term system expansion and its implications for investment decisions in generation, storage, and transmission infrastructure through 2050.

This time horizon is particularly relevant given the carbon neutrality commitments and climate targets adopted by the three countries. The results indicate that incorporating DR leads to system-wide cost reductions across all countries and scenarios, with total system costs decreasing by up to 35.7% in the Chilean case. In addition, DR consistently increases the share of renewable energy in the generation mix. By unlocking demand-side flexibility and lowering supply-side costs, DR also enables higher levels of electricity consumption, suggesting opportunities for deeper electrification and broader economic development. These findings highlight the potential of DR as a key instrument within decarbonization strategies and underscore the importance of explicitly integrating DR mechanisms into both generation and transmission planning processes.