Demand Response: What It Is and Why It Pays
Demand response (DR) is one of the few ways building managers can get paid to use less energy, and it's easier than you might think.
What Is Demand Response?
Demand response is when utilities or grid operators ask customers to temporarily reduce electricity use during peak demand periods. In summer-peaking regions, this might mean hot afternoons. In winter-peaking areas, it could be cold mornings or evenings.
Why? Because when the grid is maxed out, utilities have two options:
Fire up expensive, polluting peaker plants, or
Pay you to use less power.
Option 2 is cheaper and (usually) greener.
How It Works
The DR program (if any) in your area may vary, but they commonly work like this:
You enroll in the program with your utility or aggregator.
(In some cases) the utility or aggregator installs communication and control equipment in your building.
You get advance notice of DR “events” (limited to a certain number per year, lasting 1–4 hours).
You reduce usage during the event— usually through automation— by delaying or shedding non-critical loads, using energy storage or other tactics such as pre-cooling buildings.
You get paid for your performance.
Programs typically pay an incentive after the utility peak season, based on your actual load reduction measured using smart meter data.
What’s in It for You?
Cash Incentives – DR programs often pay thousands per year for large buildings.
Lower Peak Demand – Strategically reducing during DR events can also lower your building’s peak demand charges.
Grid-Friendly Reputation – Participating shows you're aligned with clean energy and reliability goals—great for ESG and public perception.
Is Your Building a Good Fit?
You don’t need battery storage or fancy tech. Good DR candidates typically:
Have HVAC, lighting, or equipment loads that can be adjusted or shifted.
Use automation or BAS to respond quickly.
Already track peak demand or load profiles.
Final Word
Demand response isn’t just about helping the grid—it’s about making your building more responsive, efficient, and valuable.
If you’re not getting paid to use less during peak times, you might be missing out on easy money. Because if you’re not managing your energy, who is?
2-Minute Payback is GRCL’s weekly blog of energy-saving tips and tools for busy building managers. This post was written by Chuck Faulkner.
