Should You Participate in a Demand Response Program?

One of the major challenges of the modern electric grid has been dealing with times of high demand. Each day, we use a predictable “minimum amount of power, called the baseload.”

However, at times, like the late afternoon when people come home from work or during times of extremely hot weather, electricity usage spikes, which can be costly and, in some cases, can threaten the stability of the grid.

To deal with these times of high demand, power companies have been introducing a range of programs that we’ll collectively call “demand response” here, though they’ll typically have names like “Peak Time Savings” or “Peak Reduction Program” from your power company.

Let’s look at a few areas you should look into if you’re considering enrolling in a demand response program:

 1. Is this a new electric rate or is it an occasional program?

Demand response can be somewhat of a wide range of program types, so you first want to check whether the prospective program is a new electric rate that will change how you pay for the electricity you use every day of the year or if it’s a program that will only affect a few extreme weather days per year.

Time-of-use (TOU) rates, for example, will increase the price per kilowatt-hour (kWh) that you pay during the peak period (for example, 3-8 p.m.) every day in exchange for a much lower price earlier in the day and overnight. Hourly pricing and critical peak pricing also work in this general manner.

However, other programs will only apply to “conservation events” or “peak events”, which are “specifically designated hours during which customers are asked, in advance, to be mindful of their energy consumption.” Knowing which program you’re looking into will help you determine your future commitment.

2. What do I have to gain by participating in this program?

You’ll also want to assess what you can gain by participating. First, you should know that by participating in a demand response program you’re playing your part in reducing stress on the power grid. This typically also delivers environmental benefits since the alternative to reducing demand is often to temporarily run older, inefficient power plants.

Beyond these societal benefits, these programs can have considerable financial benefits, but you should look closely at the potential benefits for any program as they can vary. And some programs could potentially end up costing you more. For example, since TOU rates have significantly higher prices per kWh during peak hours, if you can’t shift your energy use during this window, you may end up with higher bills.

For programs like peak time rebates, where the power company asks for reduced usage ahead of an extreme weather event, you can often get a decent bill credit for just one afternoon’s participation. Credits of $3-4 are typical, but it’s not unheard of for consumers to save more for one event. If your power company schedules a few events during a summer month, you could see a significant amount taken off your bill. 

3. Am I able to opt out before or during a conservation event?

Finally, it’s important to understand your ability to opt out of a program if it’s impacting the comfort of your home. If you’re enrolled in a peak time rebate program, your participation is usually entirely voluntary. Before the event, you can opt in or choose not to participate. And even if you decide you can’t save energy during an event, you won’t be penalized – you just won’t earn a credit.

However, there are some programs that allow the power company to control your thermostat during certain peak demand events, usually in exchange for much larger financial incentives. But, in some rare cases, you’re unable to override their adjustments. While this isn’t common and is only done during a legitimate grid emergency, you still should look into this, so you understand exactly what you’re signing up for.

Participating in a program where you adjust your home electricity usage away from peak demand can be an excellent way to save a bit of money while also playing your part in reducing stress on the grid and lowering emissions.

However, make sure you fully understand the program and how it will impact you before signing up. Your power company should be able to answer questions on how much you can potentially earn, whether you can opt out, if terms change during grid emergencies and more.

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