Utilities across the country are increasingly developing “demand response” programs in order to gain flexibility in reducing peak load stress on the grid. Maybe you’ve heard of these programs, and maybe you haven’t, but it’s important to gain an accurate understanding of what they are, and their possible effects, to become informed enough to determine whether participating in your utility’s program is right for you.

What is Peak Demand?

Utilities are only able to produce so much power. As demand increases over the long-term, they build more power plants to keep up. In the short term, they simply fire up more power plants to keep up with the level of demand at a given time. When demand peaks, they fire up another power plant to keep up (case in point: mid-day on the hottest days of the summer, when everyone is cranking their air conditioning). The point at which demand for electricity is highest is called "peak demand" or "peak power load."

Most of the time, this all works pretty smoothly, but it doesn't always go according to plan. Heat waves, storms, and plant maintenance are often unforeseen events that challenge the ability of the existing generation and distribution systems to meet short-term demand.  Power outages and rolling blackouts across the service area are too-often the price everyone pays during these events.

This is a particularly visible concern in the summer months.  As heat waves across the country push consumers to crank up their air conditioners, electricity use is surging, placing increased pressure on the upper limitations of the electricity grid. It’s a classic tragedy of the commons - if we all crank our a/c, the grid may overload, and blackouts would prevent any of us from keeping cool. Demand Response programs have been increasingly proposed as a solution to this problem across the country. 

What is Demand Response?

Residential Demand Response programs are typically incentive-based, opt-in programs that allow the utility to ask you to reduce your electricity usage during an “extreme” or “critical” event, or to reduce your usage directly from a remote location.  While there's no singular form the programs take, in the residential sector, they tend to involve the installation of thermostats that can be controlled remotely by the utility in the event of an emergency, and/or by the customer with a mobile device.  There are many different software programs and countless apps for Android, iPhone and iPad.  Some utilities offer such thermostats for free, and others for a discounted price.

Unlike some of the demand response programs for larger commercial and industrial customers, programs for residential users tend to be voluntary, which means that eligible customers sign up to participate in the program. The incentives for doing so are typically two-fold in that utilities provide some sort of financial reward for cooperating, and it helps ensure the reliability of the grid, serving the common interest.


Pacific Gas & Electric pays $25 to customers willing to participate in their Smart AC program, in which households with central air conditioning systems allow the utility to install a device that would allow the utility to turn down your cooling system in the event of an “energy supply emergency” in the summer, between May 1 and October 31.  Customers may opt-out for particular days if PG&E is given notice, though they will override your request in the event of an emergency.  Customers may cancel membership in the program at any time.  

Similarly, ConEdison has a program by which households with central air systems can have a device installed that allows the utility to cycle the cooling system on and off, while a fan continues to move air in the home, during “system critical situations,” which the utility claims occur about twice a year.. The program is voluntary and participants are offered $50 for their participation. It is possible to override the system, and turn the a/c back on, though participants who don’t override the system receive an extra $50 at the end of the summer.  Free programmable thermostats are also installed, which can be controlled via internet or mobile device.

Where we are and where we're going

Overall, demand for energy is only increasing, and will continue to do so into the foreseeable future.  Until new power plants are brought online, grid operators are effectively required to do more with less, which means there will only be an increasing need for demand side management.  While the bulk of demand response is handled by the industrial and commercial sectors, individual households have an important role to play.

Experience from existing programs has taught that customers are more than happy to take a rebate or check from their utilities upon sign-up, but are furious when called upon to turn down their air conditioners on the hottest days of the summer.  While existing programs have focused on central air conditioning systems, there's no reason to believe that they'll be limited to HVAC systems in the future, since reducing electricity use by other means (turning off lights, unplugging the stereo, etc.) works just as well.

Trends in the development of demand response programs highlight the importance of managing energy use, from both near and far.  As a critical element in building a more dynamic, intelligent, and reliable electrical system for the 21st century, informing oneself and managing energy use is something we've long advocated.

As the specific technologies evolve, along with the national infrastructure and policy landscapes, the details of demand response programs are likely to change as well.  One major piece, hasn't yet become widespread, is time-of-use (TOU) pricing.  TOU is a dynamic pricing scheme that reflects changes in supply and demand with real-time price fluctuations.  It has the potential to radically transform consumption patterns, but will require a base of informed end-users with both the means and ability to manage their energy usage.

Whether it's through utility-controlled demand response programs, or personal energy management on your own initiative, signs point toward increasing incentives for using energy in a more intelligent way. Visit our Learn Library for information about how you can start using energy more intelligently in your own home. 

Image by Celticsolar.