Viktoriya Ereshchenko and Elena Popic* his Brief is the second in a two-part series that provides an overview of the electricity sector'sdemand-side and supply-side environmental regulations. Specifically, this Brief focuses on measuresimplemented on the demand side that can help restructure energy demand and manage increased loadon the electricity grid in an energy-efficient way, while integrating renewable energy sources. The Briefpresents insights from new data on regulations and incentives for the environmentally sustainable use of electricityfrom the first Business Ready (B-READY) report covering 50 economies around the world. The findings show thateconomies that require businesses to adopt energy efficiency practices also tend to have supply-side regulatoryframeworks promoting the development of smart grids, indicating that the two go hand in hand. Finally, in thoseeconomies that have demand-side regulations to foster energy efficiency, firms tend to follow environmentallysustainable practices by monitoring their carbon dioxide emissions.TPublic Disclosure Authorized contexts where the lack of enforcement or political barriersprevent the correction of market failures through supply-sideinterventions (Caviglia-Harris, Kahn, and Green 2003). Low-income economies lag in the adoption ofdemand-side regulations for sustainable electricityuse Against this backdrop, the Utility Services topic of theBusiness Ready (B-READY) project evaluates demand-sidepoliciessuch as regulatory frameworks governing theenvironmentally sustainable use of electricity and incentives forbusinesses to adopt energy-saving practices. As energy demand continues to grow, the total power usageat a given time (the load demand) is increasing as well. Thisleads to a mismatch between supply and demand. Traditionally,the solution was to expand electricity capacity; this approach,however, is costly and environmentally unfriendly (Babu et al.2021). Demand-side management (DSM) can provide practicalsolutionsacross all sectors(box 1).These solutions arecommonlyintroduced along with traditional supply-sideregulations to promote energy-efficient technologies, renewableenergy, resource saving, and consumption during off-peakhours when overall demand is lower. DSM policies encompassabroad range of regulatory initiatives for the industrial,commercial, and/or residential sectors, including requirementsto switch to energy efficient appliances and mandatory energyefficiency labelling (AfDB 2021), financial incentives such as taxincentivesand grants,voluntary programs,informationcampaigns, and research and development programs (Warren2014). Enforcement mechanisms can help ensure adherenceand compliance with the standards (OECD 2009), whilefinancial and non-financial incentives can increase the adoptionof energy efficiency measures (Geller et al. 2006). Demand-sideregulations have been found to be particularly effective inPublic Disclosure AuthorizedPublic Disclosure Authorized Under the Utility Services topic, the regulatory frameworksgoverning demand-side energy efficiency measures are thusevaluated through the indicator “Sustainability of ElectricityUse”. The indicator measures two components: 1. Regulatory frameworks requiring businesses to switch toenergy-efficient practices. Requirements can apply to allbusinesses or specific categories by consumption level, size,and/oractivity type,as defined by national regulatoryframeworks.Examples include requirements to useenergy-efficientappliances,to adhere to energy savingstargets, or to use energy-efficiency labels. 2. Regulatory mechanisms to enforce environmental standardsforelectricity use,including fines,penalties,andvolume-differentiatedtariffstoensurebusinesses’compliancewith energy-saving standards(World Bank2024). Box 1Demand-side interventions Demand-side measures can incentivize the consumption of electricity, shifting it to off-peak hours, which can allow theinstalled capacity to be utilized more efficiently without the need to install expensive additional capacity (Chughtai, Khan, andAhmed2024;Warren 2013).While demand-side management comprises energy efficiency measures and long-termutility-driven changes in demand patterns,demand responseis focused on short-term changes in customer behavior and loadflexibility (Aghaei and Alizadeh 2013). Demand responses are generally classified as implicit or price-based programs where customers respond by reducing theirconsumption during peak-hours, and explicit or incentive-based programs where payments are offered to consumers to modifytheir power use at a given time. The price-based demand response programs, as one of the most important demand-sideregulatory measures, have the highest prevalence among response programs with industrial application. In particular, thetime-of-use subtype incorporates differentiated pricing that is based on predetermined time-intervals (such as peak, mid-peak,and off-peak), whereas under real-time pricing, the elec