Benefits and costs of residential demand response

Always thought to be the more controversial side of demand response (DR) and energy management plans, the idea of utilities and energy companies employing residential demand response programs in the near future is gaining traction. Though there is a small segment of the energy industry that sees this as a futile attempt, more and more people understand the benefits of this tougher, but beneficial energy efficient resource.

The residential sector accounts for more annual retail electric sales than do commercial and industrial combined. There is a vast untapped section of the market for DR providers to explore. Air conditioning and heating account for nearly half of a home’s energy use. An action plan to cull prospects who would take an active role in a home DR program would shed light on its sustainability.


Energy providers have a huge incentive to accept the idea of residential demand response. They pay high prices to the utilities to get consumers the power that they need. Rather than paying more out of pocket, it’s easier to encourage reduction on the part of a homeowner. They can also return extra power that’s saved by DR to the market, thus making money themselves.

This article from Greentech Media states,

Every year, it seems as though we’re on the verge of residential demand response 2.0. In 2013, it actually started to materialize. Oklahoma Gas & Electric announced results of its commercial-scale residential demand response program, which will eventually involve more than 100,000 homes. It shaved about 2 kilowatts per home, far more than what the program was initially planning to achieve.

SDG&E is one of three utilities to announce a “bring your own thermostat” program to residential customers. These digital, two-way devices that homeowners have already bought allow them to take part in peak-time rebate programs. Controlling the temperature of your home while you’re at work, getting paid to do so, and saving on your bills at the same time is an easy decision.

Active participation in such a program can lead to a better relationship with your energy supplier, thus offering up the possibility of enrolling in other services such as energy management plans, energy procurement, and billing options. Taking control of your own costs and knowing how much energy your house uses is a way to break down resistance to programs such as these.

Initiating residential demand response in warmer states like Texas and California is ideal due to extreme summer heat, the perfect scenario for this program to work. Having residential customers reduce their consumption, coupled with DR programs already in use, avoids the need for dirty and expensive power plants to be built.


The current DR market mostly focuses on commercial and industrial properties as its main source of income and success. There is a general consensus that the average homeowner will simply not care enough, both from monetary and green angles, to participate in a local program. Getting a single person who works 12 hours days to join might not be a problem, but asking a mother who is home and taking care of an infant to turn down her A/C when it’s 90 degrees out probably won’t fly. Either the cost-savings from reduction won’t be enough, or her mindset cannot change to one of acceptance if it means disrupting their daily lives too much. Marketing these programs successfully could prove to be difficult.

Smart meters and smart thermostats (needed for successful residential demand response implementation), and privacy issues are always at the forefront when it comes to opening yourself up to residential participation. Residential customers would argue that too much information is handed over to the utilities in order for them to be fully active in a program. Google’s recent purchase of Nest has raised the suspicions of many people that nothing is sacred anymore and that virtually everything we do is or will be tracked sooner than later. That belief is hesitation enough for the average homeowner.

In addition, electric pricing variables could lead to confusion for residential customers as to why monetary savings are different on consecutive days even though the duration and load reductions were identical. The average home consumer may not be savvy enough to know that pricing is based on daily demand, what is used for generation, and so on.

Will it work?

While no utility or energy company can predict the future, the pros outweigh the cons in pursuing this opportunity. There is a huge chunk of the energy sector that isn’t currently involved in demand response and energy efficiency programs. Gathering information on these potential targets, formulating an action plan, and educating the consumers who would be using this service is vital to its success. One thing is for sure… making people understand that this will have long-term benefits won’t be easy. There needs to be constant and effective communication between utilities, suppliers, and residential customers. The knowledge that they’ll be saving or making money, and being green at the same time, will help ease that transition.

What are your thoughts? Would you be willing to help save the grid by reducing your power consumption during times of peak demand? Would the payments or savings make it worth your while? Let us know in the comments below.

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  • http://www.zefby2050.blogspot.com William

    I guess I’ve been one of the folks that saw Residential DR as a “futile attempt”. I’m still not 100% over the fence, however after reading your article I’ve come to the conclusion that there may be some gas in that tank. The large commercial and institutional entities are motivated by their bottom line and government regulations to reduce thier energy costs. The average homeowner is more interested in the comfort of the family members. Turning off the elderly grandmother’s A/C or the Kid’s TV’s, homework and game computers or devices or the dishwasher, the washing machine and dryer is not an option. The Residential DR is especially viable in light of emerging companies like Sungevity. This is a company whose business model is to build, install and lease to the homeowner a solar array which will provide a great reduction in the amount of grid power consumed by the homeowner. Until viable storage technology is developed, during peak hours, while the homes occupants are away at work, school or on vacation this “unused” power could be returned to the grid, and banked for the family’s night or overcast day usage. The family’s personal comfort doesn’t suffer and the utility avoids the cost of building to the greatest possible need.
    Thank you for you insight.

  • Wayne Kovach

    Hi, William. Thanks for commenting.

    I agree. It might require a few years for full and effective implementation, and will likely have several hiccups, but there is an opportunity here to help further the idea of energy reduction.

    That’s a good thing.