Energy demand response refers to management of electric consumption of customers in response to the supply conditions in order to optimize supply without affecting the demand for it. It may actually involve cutting power used, starting on-site generation and other methods to keep a balance between actually supply and consumption of people. Though it may sound similar, energy demand response is completely different concept energy efficiency, which is using less power to perform the same tasks to save on energy. Large to small commercial areas, as well as residential communities are now using different energy demand response schemes using dedicated control systems. Services such as lights, machines and air-conditioning are minimized according to a set load scheme during different times. Aside from being able to maximize use of available energy, this schematic can also significantly reduce the peak price of electricity and affect electricity price volatility.

There are two types of energy demand response: emergency and economic. The first one, emergency energy demand response is used primarily to avoid outages of service. Economic energy demand response, on the other hand, is used to manage daily system peaks.