China is quickly installing advanced metering infrastructure (AMI), which could provide tremendous opportunities in developing and utilizing demand response resources. Demand response may potentially create a profitable industry and contribute to efficiency improvement, cost reduction, and pollution mitigation of the entire electricity sector. However, China lags behind the developed world in utilizing demand response. Institutional barriers, including the lack of competitive electricity market and the resistance by the state grid corporations, are preventing the commercialization of demand response. In order to fully realize the potential of smart grid, China needs to push forward the reforms toward establishing an open access electricity market so the pollution-free demand response resources may compete with power generators on leveled field. (C) 2015 Elsevier B.V. All rights reserved.