Demand Response: Everything You Need to Know

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Demand Response

What is Demand Response?

When the energy grid is experiencing an unusually high amount of demand utilities leverage demand response programs to reduce load. Demand response programs offer incentives for reducing energy consumption during peak periods. Some examples of these incentives include offering time-based rates such as time-of-use pricing, critical peak pricing, variable peak pricing, real-time pricing, and critical peak rebates. Additionally, direct load control programs allow utility companies the ability to switch air conditioners and water heaters on and off during periods of peak demand in exchange for a financial incentive and/or lower electric rates.

The Importance of Demand Response

Demand response is critical for utilities because it helps them quickly reduce the load from the grid when it reaches critical capacity. Well-managed demand response programs create a more stable energy grid for consumers and financial benefits for high usage businesses. 

Demand Response and the Smart Grid

Smart Grids allow real-time monitoring and the ability to quickly demand response measures once critical loads are reached. Smart grid operators and designers are incorporating more and more demand response measures. According to the Department of Energy, the smart grid of the future will include more technologies, data points, and infrastructure that will make demand response a key strategy in a more stable energy grid. 

Types of Demand Response Programs

 While the exact details of demand response programs change depending on your utility, energy usage, and location most programs are bucketed into two groups:

Behavioral demand response  

Most common for large commercial and industrial facilities with flexible energy load. These facilities enroll with their utility to accept demand response requests. Their own staff reduces their energy load in exchange for incentives. 

Automated demand response 

Designed for small and medium-sized businesses and even residential this form of demand response leverages aggregators to reduce the load by reducing usage. Members partner with the aggregator and allow the aggregator to take requests from the utility then reduce load. 

Misconceptions About Demand Response

Demand response programs are complex and hard to manage

Demand response programs are simple and better yet if you are using an aggregator there is no real effort required on your part. 

Demand response programs aren’t worth the time and effort

Utility incentives differ but by nature have to offer enough reward to spark interest. They are almost always well worth any sort of effort required on your behalf. 

Demand response requires businesses to turn off their electricity

No. Demand response programs are designed to reduce peak load. This means reducing the amount of energy being consumed by your business by temporarily (usually for a couple of hours) high energy-consuming equipment like heavy machinery, air conditioning, etc.

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