Demand Response Program Toward Sustainable Power Supply: Current Status, Challenges, and Prospects in Malaysia

Rising carbon (CO2) emissions, driven by increasing energy demand across residential, commercial, and industrial sectors, present a critical environmental challenge, exacerbating climate change. While numerous studies explore the potential of Demand Response (DR) strategies to regulate energy consumption and mitigate environmental impact, significant gaps remain in their global standardization and inclusivity across diverse electricity markets. This paper addresses these gaps by providing a comprehensive review of existing DR frameworks within renewable-driven distribution systems, with a focus on identifying barriers to universal DR adoption. Unlike prior studies, this review introduces a novel framework that systematically evaluates demand-side flexibility using coordinated and uncoordinated DR initiatives, highlighting their comparative impacts on grid stability and renewable energy integration. Special emphasis is placed on the critical role of DR in maintaining voltage stability through innovative optimization techniques and dynamic pricing mechanisms tailored to market-specific conditions. A case study of Peninsular Malaysia is presented to illustrate actionable reforms and strategies, including Incentive-Based Regulation (IBR) and regionally optimized dynamic pricing schemes, that can enhance DR adoption. By addressing geographical and market-specific variations, this study bridges the gap between existing DR models and their scalability, advocating for inclusive, robust, and adaptive DR strategies. This work proposes an incentive-based DR framework specifically designed for the Malaysian electricity market, aimed at encouraging customer participation through tax incentives and flexible demand-side initiatives. The proposed framework for Malaysian Electricity consumers achieves a 6.3–9.2% reduction in peak load and a 5–10% reduction in electricity costs. The findings position DR as a cornerstone of sustainable power systems, harmonizing renewable energy integration with enhanced system reliability and inclusivity. This paper’s novelty lies in proposing a tailored DR program for the Malaysian market that aligns technical optimization with policy reforms, offering a clear pathway toward a resilient and environmentally sustainable energy future.