What Is Demand Response?
Demand response (DR) is the voluntary or contractual reduction of electricity consumption by energy users (buildings, industrial facilities) during periods of peak grid demand, in exchange for financial incentives from utilities or grid operators. By reducing demand during peak periods — typically hot summer afternoons when air conditioning loads peak — DR helps utilities avoid operating expensive "peaker plants" and prevents grid overloading.
For building owners, demand response can generate significant revenue from utility incentive payments and reduce peak demand charges on the electric bill, which in many commercial rate structures represent 30–50% of total electricity costs.
Types of Demand Response Programs
Emergency DR — utility calls for demand reduction during a grid emergency (extreme heat, equipment failure, unexpected generation shortfall). Shortest notice (sometimes under 30 minutes). Highest incentive payments but least predictable.
Economic DR — building owner monitors real-time or day-ahead electricity prices and voluntarily reduces load when prices are high. No utility coordination required; building owner decides when to participate.
Automated DR (Auto-DR) — utility sends a signal (OpenADR protocol) to the building's BMS, which automatically executes pre-programmed load shedding strategies without human intervention. This is the most valuable form for utilities because response is fast and reliable.
Building Load Shedding Strategies
HVAC setpoint adjustment — the single largest load in most commercial buildings. During a DR event, zone cooling setpoints are temporarily raised by 2–4°F, reducing compressor and fan energy. The building's thermal mass absorbs the reduced cooling for 1–2 hours with minimal comfort impact. Raising setpoints from 72°F to 75°F on a hot day can reduce HVAC load by 20–30%.
Chiller demand limiting — the BMS limits chiller electrical demand to a set percentage of full capacity. Combined with pre-cooling (chilling the building below setpoint before the DR event), this can substantially reduce chiller load during the event window.
Lighting reduction — non-critical lighting is dimmed by 20–30% during DR events. Many building occupants barely notice a 20% reduction; 30% is perceptible but tolerable.
Plug load management — smart power strips or controlled outlet panels shed non-critical plug loads (monitors in unoccupied spaces, non-refrigerated equipment).
Demand Charges and Why They Matter
Commercial electricity bills typically include a demand charge — a fee based on the highest 15-minute average power consumption during the billing month, multiplied by a $/kW rate. A building that typically averages 500 kW but spikes to 800 kW for one 15-minute window on one day in August pays the demand charge based on 800 kW for the entire month. Even one peak event can add thousands of dollars to the monthly bill.
Smart buildings manage demand peaks actively: the BMS monitors real-time building demand, predicts when it is approaching a new peak, and automatically sheds non-critical loads to keep demand below the target threshold. This "demand charge avoidance" strategy often has faster ROI than demand response program participation.