What are Demand Response Programs and How Do They Work?

With continued record-breaking temperatures, extreme heat days are becoming more common. During such events of high energy demand, communities put a strain on the electric grid when everyone runs air conditioning and other appliances at the same time. In order to avoid blackouts or needing to tap into additional energy sources—often dirtier options like fossil fuel-powered plants—to meet demand, utilities and some third-party services encourage customers to do what they can to save energy through demand response programs.

What Is a Demand Response Program?

Demand response programs—also referred to as peak rewards programs or rush hour rewards—provide incentives for you to lower your energy use at periods of peak demand. This is the time of day when customers are using the most electricity. It is most common between June and September between 2-7 p.m. when people rely on air conditioning to stay cool. Peak demand can also occur during cold days when customers run their heating systems.

High demand for electricity requires more supply, which leads to higher energy costs for all users. By reducing the demand for electricity during certain times, demand response programs help cut prices and save energy.

While these types of programs used to only be for large businesses trying to save energy, they are now available for consumers to participate in at home as well.

Why Are They So Important?

Demand response programs provide many benefits to consumers, utilities, and the community as a whole. According to Lea Lupkin, Solutions Lead, Energy Services here at Sense, “These programs help reduce the need for ramping up dirty 'peaker plants' to meet extremely high demand. This benefits everyone and helps keep energy costs more affordable for all.” Environmental Defense Fund calls these programs “a triple win: savings for customers, lower costs for electric utilities, and cleaner air for all.”

By reducing energy in your home through demand response programs, you can minimize your carbon footprint while also reaping financial rewards. It also means that electric utilities can use clean, cost-effective energy instead of ramping up more expensive, often fossil fuel sources of energy. Finally, demand response programs play a role in making the electricity grid more stable and affordable by shifting demand to meet supply.

Demand response programs also result in consumers being more mindful of their energy consumption. According to research out of the UCLA Luskin Center for Innovation, demand response programs result in overall reduction in energy use—not just a shift in consumption during peak hours. This is good news considering the critical need to address climate change.

How Do They Work?

When energy demand increases, your utility or a third party managing the demand response program may notify you, while other programs are completely automatic. Many of these programs use apps now, so you will receive an alert or update on your phone or other device.

You may be asked to reduce your energy usage for a brief period of time (usually 1-4 hours) by taking some or all of the following actions:

  • Adjust your air conditioning or heating. Reduce your thermostat to a temperature that you are still comfortable at. One trick is to pre-cool your home in the morning by lowering the thermostat 2-3 degrees than normal. Then later in the day (the exact time depends on where you live and what the demand response program suggests), set your thermostat 3-5 degrees higher than normal.
  • Turn off lights. Manually turn off lights and/or use timers to switch them off.
  • Postpone chores. Do the dishes and laundry before or after peak times, such as after 8 p.m. or on the weekend.
  • Reduce plug load. Unplug devices that are not being used, since many devices draw power even when they are off.
  • Use smart plugs. Plug electronic devices into smart plugs to prevent them from consuming more energy, even when they are off or in standby mode. Schedule your smart plugs to turn off devices during peak demand hours.
  • Charge your electric vehicle (EV) strategically. Adjust your car’s charging time to off-peak periods or install a smart charger to automatically switch off the charger when peak hours begin. Some EVs even have an "intelligent charging" feature.

These programs are usually easy to do and will hardly impact your daily activities. “Some are completely automated, and some only may have a few peak events over the course of a year during the most critical peak times,“ explained Lupkin. Indeed, some of the programs connect pre-approved smart home technologies, such as programmable thermostats, electric car chargers, swimming pool pumps, and water heaters, that are set to automatically turn off or turn down to conserve energy for a few hours or less.

In most cases, you will receive financial rewards for your energy conservation efforts. This can look like a rebate on your electricity bill, points that you can trade in for cash, or other types of prizes.

What Types of Programs are Available?

There are many demand response programs available to homeowners. Some programs allow you to choose how to save energy in your home, while others focus on only one device at a time like smart thermostats, EV chargers, water heaters, or air conditioners.

According to EnergySage, the most common type of program for homeowners is air conditioning cycling. During a demand response event, your air conditioning unit will run for only 20 minutes each hour. And you get paid for participating in this program. Thermostat programs are also popular, with many utilities offering thermostat demand response programs, at a minimum. Many utilities allow you to enroll in the program when you purchase a smart thermostat, even offering rebates for additional savings.

There are also different seasonal programs. Rush Hour Rewards, for example, used to only offer their program in the summer, but expanded to include natural gas during the winter. To participate in Summer Rush Hour Rewards, you need to have central air conditioning controlled by a Nest Learning Thermostat and for Winter Rush Hour Rewards, you need an electric heating system controlled by a Nest Learning Thermostat.

With smart home technology gaining traction, expect to see more demand response programs being offered. Lupkin predicted, “As more people get electric vehicles and smart devices, these programs will become more mainstream.” She also explained how Sense can help enable these changes as well. “With Sense, users can see what is running in their homes in real-time, so when they get alerts they can act on them more easily.”

How Do I Participate?

Demand response programs are offered by either utilities or third-party providers, also called aggregators. If you are interested in participating, start by asking your local utility. If they don’t have a program, they may direct you to providers in your area. If you have trouble locating one, then contact the public utility commission in your state and ask them to pave the way for demand response programs.

Here are some notable programs currently available:

  • OhmConnect: As a Sense partner, OhmConnect pays people to reduce their energy use one hour at a time. They currently offer programs in New York, California, and Texas.
  • GridRewards: An award-winning, free app that tells customers when and how to reduce energy use and helps them earn cash payments for doing so. Available in New York, California, and Texas.
  • Ecobee: The smart thermostat programs offer features to help customers save energy while enhancing comfort. Personalized energy recommendations are delivered by considering local weather, home occupancy, and variable electricity rates to shift energy usage accordingly.

Be sure to take advantage of demand response programs in your area so you can save money, save energy, and help benefit your entire community.