What Demand Response Actually Is
Demand response (DR) is a program in which electricity customers agree to voluntarily reduce their consumption during periods of grid stress — in exchange for payment. From the grid operator's perspective, a customer reducing load by 500 kW is functionally equivalent to a power plant adding 500 kW of generation. The grid doesn't care which side of the meter the capacity comes from.
This equivalence is the foundation of demand response programs in organized markets like PJM and ISO-NE. These grid operators allow commercial and industrial loads to register as capacity resources, commit to curtailment obligations, and receive capacity payments — the same payments that generators receive for committing their output.
The result: your electricity load, which you've always thought of purely as a cost, can also be a revenue-generating asset.
PJM: Emergency Load Response Program (ELRP)
PJM's primary demand response program for C&I accounts is the Emergency Load Response Program (ELRP). Here's how it works:
Commitment structure
You commit a specific amount of interruptible load (typically measured in kW) for a defined delivery year — June 1 through May 31. Your commitment becomes a PJM capacity resource with the same standing as a generator.
Curtailment events
PJM may call an ELRP event during grid emergencies — typically during extreme heat or cold when system reliability is at risk. You will receive advance notice (typically 2 hours minimum) before a curtailment event begins. Events typically last 2–6 hours. Most delivery years see 0–3 events; some years see none at all.
Payments
You receive capacity payments at a rate tied to the BRA clearing price for your zone, whether or not any curtailment events are called. At the 2024/25 BRA clearing price of $269.92/MW-day, a 500 kW ELRP commitment generates approximately $49,300 in annual capacity payments — regardless of whether you are ever actually curtailed.
Non-performance penalties
If a curtailment event is called and your facility fails to reduce load to its committed level, you are subject to non-performance charges. These can be substantial — which is why accurate load assessment is critical before committing. A well-structured enrollment commits only load that is genuinely curtailable.
Key insight: The ELRP non-performance risk is manageable when the commitment is sized correctly. The mistake is over-committing — promising more load reduction than your operations can reliably deliver. We always size ELRP enrollments conservatively, below confirmed curtailable capacity.
ISO-NE: Forward Capacity Market (FCM)
In ISO-NE (covering Connecticut, Massachusetts, Rhode Island, Vermont, New Hampshire, and Maine), the equivalent program is the Forward Capacity Market (FCM). The mechanics are similar to PJM ELRP but with important differences:
Three-year forward commitment
ISO-NE's Forward Capacity Auctions (FCAs) are conducted three years in advance. This means a resource enrolled in the current auction cycle is committing capacity for a delivery year three years out. Unlike PJM, you cannot enroll for the current delivery year — planning ahead is required.
Capacity payments
ISO-NE capacity clearing prices are set in the FCA and paid monthly throughout the delivery year. Recent FCM prices have been in the range of $3–$6/kW-month, translating to $36–$72/kW-year. For a 500 kW resource, that's $18,000–$36,000 annually.
Passive versus active demand response
ISO-NE distinguishes between active demand response (resources that respond to real-time curtailment calls) and passive demand response (resources that receive capacity payments without a real-time curtailment obligation). The passive option is particularly attractive for facilities where operational disruption would be costly — hospitals, data centers, continuous process manufacturers.
Who Qualifies for Demand Response Enrollment
The minimum size thresholds and eligibility requirements for demand response enrollment are lower than most C&I accounts assume:
| Program | Minimum Commitment | Metering Requirement | Ideal Facility Types |
|---|---|---|---|
| PJM ELRP | 100 kW | AMI or interval meter | Industrial, commercial, office, retail |
| ISO-NE FCM (Active DR) | 100 kW | AMI or interval meter | Industrial, commercial, campus facilities |
| ISO-NE FCM (Passive DR) | 100 kW | AMI or interval meter | Hospitals, data centers, process manufacturing |
In practice, the most relevant qualification criteria aren't about size — they're about curtailability. The questions that determine eligibility are:
- Do you have load that can be reliably reduced on 2 hours' notice?
- Can that reduction be sustained for 2–6 hours without significant operational impact?
- Is the reducible load at least 100 kW?
For most commercial buildings with significant HVAC load, and for most industrial facilities with any non-critical equipment, the answer to all three is yes.
Which Facility Types Generate the Most DR Revenue
Office buildings and commercial real estate
HVAC systems in commercial buildings are the most common demand response resource. A 200,000 sq ft office building typically carries 800 kW–1.5 MW of HVAC load during peak hours. Pre-cooling combined with setpoint adjustment during a curtailment event can deliver 300–500 kW of reduction with minimal occupant impact. At current PJM prices, 400 kW of ELRP commitment generates approximately $39,400/year.
Industrial manufacturers
Industrial facilities often have the highest curtailable load and the cleanest load shapes for demand response analysis. Deferrable processes, non-critical equipment, and compressed air systems are common curtailment candidates. 5–10% of peak load is typically curtailable without touching production-critical systems.
Cold storage and food distribution
Refrigeration systems cycle on and off continuously. Coordinated "load shifting" — drawing refrigeration loads lower pre-event and allowing temperatures to drift slightly during a curtailment window — is well-established in the DR industry and presents minimal food safety risk with proper protocols.
Educational institutions and municipalities
Universities and K-12 school districts with significant campus square footage have some of the most attractive DR profiles — large HVAC loads, predictable occupancy schedules, and the academic calendar often aligns with summer peak season. Many university systems generate $30,000–$80,000 annually in FCM or ELRP payments.
Who typically doesn't qualify as active DR: Facilities where any reduction in electrical load during a 2–6 hour window would create safety risks or significant operational losses. Hospitals are typically enrolled as passive DR resources in ISO-NE for this reason — they receive capacity payments without curtailment obligations.
Why Most Brokers Don't Offer This
The honest answer: demand response enrollment doesn't generate a commission the way supply contracts do. A broker who places your supply contract earns a per-kWh margin for the duration of that contract. Demand response enrollment generates capacity payments that flow to you — not to the broker.
Independent energy advisors — who work on a fee basis rather than supplier commissions — have the financial incentive to identify every revenue opportunity for your account, including demand response. That alignment matters. If your current broker or supplier has never screened your facility for DR eligibility, ask why.
Getting Started: The Screening Process
Demand response screening for a C&I account follows a straightforward process:
- Interval data pull: We request 15-minute interval data from your utility for the past 12 months. This is the foundation of the analysis.
- Load profile analysis: We identify your peak demand, curtailment window loads, and the reliability of your load shape during likely DR event windows.
- Curtailment scenario modeling: We model different commitment levels and match them to your operational constraints.
- Revenue projection: We calculate projected annual payments at current program rates and structure a recommendation.
- Enrollment: If you choose to proceed, we handle the enrollment paperwork and metering confirmation with the applicable grid operator.
This process takes 48–72 hours. There is no cost to complete the screening and receive a written revenue projection. If your facility isn't a viable DR candidate, we'll tell you that directly — along with the reason.