By Matheus “Matt” Lima, CEM, Senior Director of Energy Programs at Vanguard Building Solutions
As the electric grid becomes increasingly stressed due to high demand and energy costs rise in NJ, business owners are looking for ways to reduce energy expenditure. One of the most powerful tools available today is Demand Response (DR).
What Is Demand Response?
At its core, Demand Response is about flexibility. It allows businesses to reduce or shift their electricity use during times of high demand on the grid. In exchange, participants receive financial incentives, lower demand charges, and save on energy costs.
Instead of firing up costly, carbon-intensive “peaker plants” (these are traditionally the dirtier and most expensive plants to operate, think coal, diesel, and other fossil fuel plants) to handle demand spikes, utilities and grid operators turn to customers who can temporarily reduce load. By doing so, participants become a virtual power plant and unlock a new revenue stream.
Common Demand Response Applications
Commercial and industrial facilities are well-positioned to participate because they have diverse loads that can be adjusted without compromising comfort, safety, or productivity. Some common strategies include:
- HVAC Systems: Leverage smart thermostats or building management systems (BMS) to pre-cool buildings before peak hours, adjusting temperature setpoints, or staging equipment operation.
- Lighting: Control strategies can enable dimming or cycling non-essential lights, especially in large offices, warehouses, and retail spaces.
- Process & Equipment Loads: Rescheduling non-critical operations or sequencing equipment use.
Incentive Opportunities
Participating in Demand Response programs often provides multiple layers of financial benefit:
- Utility Programs: Utility companies pay monthly incentives simply for being available to reduce demand when called upon.
- Wholesale Market Programs Participants can receive payments for verified load reductions.
- Bill Savings: Strategically reducing usage during peak events can dramatically lower transmission charges for the following year.
Together, these mechanisms make DR a compelling strategy for companies seeking to reduce operating costs and generate new revenue streams.
Challenges and Considerations
While the benefits are clear, implementing a successful DR strategy requires careful planning. Common challenges include:
- Measurement & Verification: Proving measurable load reductions is essential for earning incentives.
- Operational Impacts: Adjustments must be made without disrupting core business processes or compromising comfort.
- Technology Gaps: Older buildings without modern controls may need upgrades to participate effectively.
How to Implement DR Successfully
The good news is that Demand Response is achievable with the right roadmap. Here’s a step-by-step guide for commercial and industrial facilities:
- Identify Flexible Loads: Perform an Energy Audit of your facility to find equipment and processes that can be temporarily reduced or shifted.
- Evaluate Program Options: Consult your utility to learn which DR programs are available and what incentives apply.
- Upgrade Controls: Consider investing in DR-ready systems, such as building automation systems that support DR standards.
- Run Test Events: Simulate a demand response event to confirm that systems, controls, and staff are ready.
- Engage Staff: Make sure facility operators and key personnel understand their roles in the event of a DR call.
These steps can be made easy by partnering with a trusted Energy Service Company (ESCO), which can assist with all steps of the process.
Why Demand Response Matters
Beyond cost savings, Demand Response delivers broader benefits. By reducing the need for fossil-fuel peaker plants, participants help cut carbon emissions and accelerate the transition to a more reliable grid. At the same time, businesses gain resilience, protect against rising demand charges, and demonstrate leadership in sustainability.
In short, Demand Response is not just an energy strategy; it’s a competitive advantage.
Ready to unlock Demand Response for your facilities? Let’s start the conversation and identify the opportunities available in your region.