Is PJM’s Demand Response Program Right for Your Business? What to Know Before You Enroll
Here’s what to consider when determining if enrollment in a demand response program is right for your business.
Start with your operational flexibility
As capacity market prices have increased, demand response (DR) has gained attention, and the value of participation in a DR program has grown. While it can create meaningful revenue opportunities, participation also introduces operational responsibilities and risk. Before enrolling, organizations should evaluate whether their facility is a good fit.
Demand response works best for facilities that have flexibility in how they operate. When a DR event is called, participating organizations are expected to reduce grid-supplied power consumption by a committed amount. That reduction can come from several sources, including:
- Running backup generators
- Using battery storage systems
- Temporarily reducing HVAC, lighting, or other building loads
- Shifting production schedules
- Powering down non-essential equipment
Organizations that perform well typically have a defined curtailment plan and can execute it quickly. Facilities where most loads are critical to operations may find participation more challenging.
Considerations before demand response participation
A common question asked is, "How often will I be called, and how long do I have to perform?" Event frequency varies based on weather, electricity demand, and grid reliability conditions, making exact predictions difficult. Some years may have relatively few events, while others may see more frequent dispatches and longer durations.
Events occur during periods when electricity demand is placing significant stress on the grid; they can occur with limited notice, and an event can last up to 12-15 hours. Program requirements have also evolved over time, with increasing emphasis on participant performance during events. For many organizations, the most important consideration is whether they can reliably respond without creating operational disruptions.
Before enrolling, it can be helpful to ask a few practical questions:
- Can we consistently reduce load when needed?
- Can we maintain that reduction for several hours (or longer if necessary)?
- How would curtailment affect production, staff, customers, students, patients, or occupants?
- Who is responsible for notifying the team when an event is called?
- What happens if key personnel are unavailable?
- The answers often provide a clearer picture than a revenue estimate alone.
Non-performance can reduce earnings and may create penalties depending on program requirements. For that reason, organizations are often better served by committing only to reductions they can deliver rather than pursuing aggressive curtailment targets.
A manufacturing facility that can shift production, run backup generation, or reduce non-essential processes may be well positioned for demand response. Facilities with highly sensitive operations often face greater challenges. Ultimately, participation depends on each organization's operational flexibility.
Other ways to reduce energy costs and peak demand
Demand response is one of several ways organizations can manage energy costs and peak demand. Depending on your facility and objectives, other options may be a better fit, including:
- Peak shaving programs to reduce demand during anticipated peak-demand periods
- Smart building and automation improvements
- Energy efficiency upgrades that lower peak demand
- Battery energy storage systems
- Operational scheduling and load-shifting strategies
Peak shaving involves customers voluntarily reducing demand during anticipated peak periods to lower future capacity-related utility charges. Demand response requires participants to reduce load when called upon by the grid operator in exchange for incentive payments. Because both strategies often rely on the same load reduction capabilities, organizations should evaluate how the approaches interact to determine which path forward best aligns with their operational goals and financial objectives.
The bottom line on demand response
Demand response can create meaningful value for facilities that can reliably reduce load when called upon. Before enrolling, evaluate both the economic opportunity and the operational requirements to determine whether participation aligns with your goals. If you're considering demand response, talk with your IGS Energy representative. We can help assess your facility, estimate value, and compare DR with alternatives such as peak shaving, energy efficiency, building automation, and battery storage.
Note: This article is intended to provide a general overview of demand response participation in PJM. Program rules, event requirements, and compensation structures vary by market and grid operator.