I apologize in advance if the following seems like nitpicking:

It sounds like you aren't really talking about "making requests from the power system", since by definition a request can be denied. Denying requests for power on a per-outlet basis requires power switching at the outlet, which was my initial problem with the concept.

The much less expensive system you are now suggesting has only per-circuit sensing, and only overload protection. It is incapable of physically "denying" a request by turning off the power to the requesting device. (Of course, it can trip on overload, shutting down the entire circuit, but thats not the goal here.)

What it can do, is deny a request by "telling" the requestor that the power is unavailable, and trusting the requestor to act accordingly. That works very well, for smart devices which probably already have power switching internally, and therefore have zero added cost for the power switch.

Not so well for dumb devices. If you plug a dumb toaster or hair dryer into the outlet, the system may be able to turn off smart devices after it sees the toaster load appear, but it can't keep the user from turning on the toaster in the first place.

Eventually, we could migrate toward more smart devices. But with toasters and such having average lifetimes of 5 years, 10 years, or even longer, "dumb" legacy devices will need to be supported somehow.

In addition, some devices like (like hair dryers or toasters) would have a consumer backlash if you said "sorry, you can't use this now". The system would have to prioritize loads so that non-critical ones could be turned off while more "cricital" ones run. (A toaster is hardly critical in the usual sense, but as a "foreground" application, it needs to take priority over "background" operations like the hot water heater or refrigerator compressor.)

This is really more of a peak shaving application. As such, you don't even really need to do it on a per-circuit basis, but on a total household demand basis.

Protecting the copper wires in a individual circuit from "starting surges" or other very short duration overloads is a non-issue - they can take it.

Protecting the wires from sustained overloads could have some benefit, but not much. Most people expect to be able to do several different things at once in their kitchens. Having the microwave turn off while they make toast, or the toaster refuse to run while the coffee is brewing, just isn't going to fly with the average consumer. The wires simply need to be sized to handle the kind of loads that the user is going to demand.

One of the reasons that electrical codes require multiple circuits in kitchens is exactly this consumer expectation. They know that people are going to run multiple loads at once, and they know that if nuisance trips happen, people are going to do unsafe things to avoid them. (The traditional penny in the fuse holder, or in more modern systems replacing a breaker with a higher rating without upgrading the wires, or running an extension cord thru the doorway from another room.)

Where this scheme can help is at the whole-house level. It is very reasonable to turn off the water heater, electric dryer, or air conditioning compressor while the toast is toasting. That is where I think your system has real merit. Unfortunately, except for people on backup, solar, or other off-grid power, there is very little incentive to do any form of peak shaving today. Before smarter power distribution inside the house happens on a large scale, we need smarter power measurement at the meter, and utility rate structures that provide a financial incentive for users to limit their peak load.