Posted on 6/26/2013 8:43 AM by Frank Maricic

With demand response (DR) and curtailment programs, building owners and managers can keep tenants cool and comfortable while taking advantage of financial rewards and reducing their energy use. 

Benefits of Demand Response Programs
Many small and medium property managers tend to view their electric usage passively, yet energy is one of the few controllable expenses that property owners have. 

Load response programs, also known as demand response programs, incentivize consumers to cut electricity usage during peak demand times. By voluntarily lowering demand, FMs can receive financial rewards while helping to stabilize the grid. 

DR programs were previously only available to large commercial and industrial facilities (>1MW), but are now within reach of buildings down to 100kW and below using  low-cost electric metering and building automation technologies. DR strategies are customized according to each facility’s unique characteristics. Some curtailment strategies can be readily adopted without much cost or staff, while others require choosing the appropriate DR program.   

Common Curtailment Strategies

  • Dim or shut off non-essential lighting (corridors with windows, lobby, atrium)
  • E-mail occupants asking them to turn off non-essential plug loads such as coffee makers
  • When acceptable, minimize outside air intake
  • Reduce the number of running elevators
  • Sequence speed reductions of fans running on variable speed drive (VSDs)
  • Shut off electric reheat coils, raise cooling discharge temperatures
  • Allow summer room temperatures to briefly float a degree or two higher
  • Cycle electric dehumidifiers or allow humidity to briefly rise
  • Cycle or sequence electric hot water heaters/boilers
  • Shift process loads to off-peak (charging of electric carts, etc.)
  • If available, switch to a non-electric chiller
  • If allowed, run on-site generation

Promoting your buildings’ participation in a DR program has several advantages. For example, placing a sign in the lobby to tell your tenants of temporary reduction measures will signal that the building owner is proactive in helping to prevent blackouts. Properties using

DR can also receive points or credits under green building programs. Well-managed facilities command premium rents and can attract higher quality tenants, resulting in a competitive advantage.

Financial Benefits

Through demand response, electricity providers offer financial incentives to consumers that reduce energy use for a short period of time at a certain time of day, typically when the grid is stressed. Compensation is based on the amount of electricity reduced and how much advance notice is required. These factors determine available program options for the facility and the amount of potential revenues.

DR programs of various types can be found throughout the U.S. with more options in states where electricity is deregulated. In many major cities where electricity prices tend to be higher, DR opportunities are usually greater as well.

Many utilities and state agencies offer significant incentives to attract new participants. For example, in New York City, building owners are eligible for $200/kW to offset equipment costs; in Los Angeles, the amount is $250/kW.

A building’s economic potential for DR depends on several factors, including total energy spend, square footage, mechanical and HVAC systems, and the range of building controls.   


Single buildings less than 25,000 square feet would generally be considered too small. With their low electrical loads, it may be difficult to get an adequate return on investment for the upgrades. However, if owners have several buildings (even those that are small in size) in the same geographic location, they can combine their loads in certain DR programs.

DR Program Options

Pike Research predicts the number of commercial buildings with DR programs will grow from less than 600,000 in 2012 to over 1.4 million locations by 2018. There is a wide variety of rate and incentive programs to choose from:

  • Direct Load Control – Aimed at small commercial buildings where the program operator will cycle or shut down equipment such as pool pumps, HVAC systems, water heaters, A/C units, and thermostats.
  • Real Time Pricing – Designed for owners seeking to generate savings by paying attention to fluctuations in electricity pricing and adjust their usage accordingly.
  • Critical Peak Pricing – Dynamic rate program in which the utility charges a higher price for consumption during peak hours or critical days in exchange for a reduction in non-peak energy charges, demand charges, or both.  
  • Emergency Demand Response – Voluntary programs with financial incentives for electricity users to reduce consumption in response to emergency grid stresses throughout the year.
  • Capacity Demand Response – Program pays users for being on call to reduce usage when the grid is stressed, plus market energy prices or a higher predetermined rate. Typically this is the highest paying DR program.    
  • Ancillary Services Market Pays customers on call and able to make quick (varying from 4 seconds to 30 minutes) energy usage reductions in response to sudden, short-term grid instability.

Determining energy usage patterns can also increase the ability to manage DR strategies. Use low-cost wireless solutions with cloud-based software to automate DR participation and enable remote management, which allows you to maintain optimal tenant comfort with minimal staffing.  

Although there can be a bewildering range of choices and complexity when it comes to DR, the financial rewards available can help building owners realize opportunities that will spur growth. Knowing your options and taking a strategic approach to identifying the right program for your needs can create new value for the marketplace and its participants.  

Frank Maricic is director of sales & marketing for Joule Assets, Inc, a provider of energy market analysis, tools, and financing.