customers enrolled in DR programs are asked to throttle back their energy usage by shutting down or switching to onsite generation
. Removing or reducing a user’s load during peak demand (see peak shaving
) periods helps the utility avoid blackouts and brownouts. Energy curtailment has been a long standing method used by the utility to reduce strain on an aging infrastructure.
Demand response lowers system capacity, allowing load-serving entities like utilities and retail suppliers to purchase and build less new capacity. Savings are generally passed to retail energy users. ISOs offer compensation to users that remain on standby or that shut down when an “event” is called. An event is generally a surge in usage due to weather.
DR programs vary from state to state. Most retail energy suppliers can offer this type of program as part of a bundled energy supply contract. The company facilitating the demand response program will usually split the proceeds for an agreed upon percentage with the customer.