Demand Response Programs: How to Get Paid by Your Utility to Use Less Power

The Basic Deal: Reduce Power, Get Paid

Demand response is a straightforward exchange: your utility agrees to pay you (or credit your bill) in exchange for your agreement to reduce or shift electricity use during specific periods when the grid is under stress. Those periods are typically hot summer afternoons when air conditioning demand spikes, or cold winter mornings when heating loads surge.

The economics make sense for utilities because the alternative is expensive. Peaker plants — gas turbines used only 50–200 hours per year during demand peaks — cost $800–$2,000 per kilowatt to build, require fuel, and emit carbon dioxide every time they run. Paying customers to reduce demand during those same peak hours is often cheaper than running another gas turbine for three hours on a July afternoon.

For residential customers, the pay is modest but real: $50–$200 per year is typical. Industrial customers with large loads can receive thousands of dollars annually for curtailing operations during grid emergencies.

How Texas Used Demand Response to Avoid a 2023 Blackout

The clearest recent demonstration of demand response value happened in Texas during summer 2023. ERCOT faced multiple days of record-breaking heat that pushed electricity demand to historic highs. The grid operator issued conservation appeals and activated demand response programs. Industrial customers curtailed heavy loads. Smart thermostat owners allowed their setpoints to be adjusted. Voluntary conservation requests went out to the general public.

The result: ERCOT managed through the heat waves without the kind of forced rotating blackouts that occurred in 2021. Demand response wasn't the only factor — additional generation capacity had been added since 2021 — but it provided measurable relief during the hours when the grid had the least margin.

ERCOT's emergency response programs, which include industrial demand response, are estimated to provide 4,000–6,000 MW of demand reduction capability during extreme events. That's comparable to four to six medium-sized power plants available at short notice, without building anything new.

Types of Demand Response Programs

Automated Thermostat Control

The most common residential demand response program. You install a smart thermostat (or use one you already have), connect it to your utility's program, and agree that the utility can adjust your setpoint by 2–4 degrees Fahrenheit during demand response events. Events typically last one to four hours. You can usually override in an emergency.

Programs typically let your house cool below the adjusted setpoint before the event starts — called pre-cooling — so the actual temperature change during the event is minimal. Most participants report that the events are barely noticeable in a well-insulated home.

Major programs include: SCE Summer Advantage Incentive (Southern California Edison), PG&E SmartAC (Pacific Gas & Electric), Eversource Connected Solutions (New England), and many others under utility-specific names across the country. Most require a qualifying smart thermostat and enrollment through the utility website.

EV Charger Demand Response

Electric vehicle charging is a significant and growing source of grid load. Most EV chargers draw 7–11 kW (Level 2) and in aggregate can strain local distribution circuits during peak hours. Utilities in California, Texas, and New England offer incentives for EV owners who agree to pause or reduce charging during peak demand windows — typically 4pm–9pm on weekdays.

The EV owner's vehicle still charges fully; the charger just doesn't start until after the peak window, or charges at reduced power during it. With overnight charging schedules, this often has no practical impact on the driver. Programs like SCE's TOU-EV-9 and PG&E's EV2-A provide rate discounts that effectively pay EV owners to charge overnight rather than in the evening.

Battery Storage Demand Response

Homeowners with battery systems can participate in more sophisticated demand response programs that go beyond simple thermostat adjustments. During a demand response event, a home battery can supply household loads entirely from stored energy, reducing grid draw to zero. If the interconnection agreement permits, the battery can also export power back to the grid — a more valuable service that typically commands higher compensation.

This is the domain of virtual power plant programs (covered separately in the VPP guide). Battery-based demand response is more technically complex but can generate $200–$500 per year or more for enrolled homeowners.

Manual / Voluntary Conservation Events

Some utilities issue conservation appeals without direct control of customer equipment — essentially asking people to reduce use voluntarily. These programs pay less or nothing for residential customers, but they work at scale when grid conditions are severe. During winter storms and extreme heat events, public appeals to raise thermostats and avoid major appliance use can meaningfully reduce grid load when millions of customers respond.

Industrial and Commercial Demand Response

Large industrial customers — manufacturing plants, data centers, aluminum smelters, cold storage warehouses — operate under interruptible service contracts that allow utilities to curtail their power supply with short notice during grid emergencies. In exchange, these customers pay lower base electricity rates or receive direct payments. A large industrial customer can shed 5–50 MW on demand, providing more grid relief than thousands of residential thermostats.

How to Find and Enroll in Programs Near You

Program availability depends entirely on your utility and state. The following steps work for most customers:

1. Visit your utility's website and search for "demand response," "smart thermostat rebate," or "energy rewards program"
2. Check if your existing thermostat (Nest, ecobee, Honeywell) is compatible — most major utility programs support these brands
3. Verify whether your home battery system qualifies for separate compensation beyond basic demand response
4. Review the event terms: maximum events per year, maximum event duration, override policy, and how compensation is paid

If your utility doesn't offer a program, third-party aggregators like OhmConnect, Enel X, and EnerNOC operate in many markets and can enroll customers independently of utility programs. OhmConnect in particular has a track record in California, Texas, and New York of paying residential customers to reduce usage during grid stress events.

What You Actually Give Up

Demand response programs ask for limited, defined inconvenience in exchange for payment. The honest accounting:

During an automated thermostat event, indoor temperature may rise 2–4 degrees above your normal setpoint for one to four hours. In a well-insulated home, this is barely perceptible. In an older, poorly insulated home in extreme heat, it can be uncomfortable. Most programs allow you to opt out of individual events; read the terms carefully if you have household members with heat-related health concerns.

EV charging curtailment typically means your car charges overnight instead of in the evening — no practical impact if you don't drive until morning. Battery export events may leave your battery at a lower charge level than normal at the end of an event, which matters if you rely on it for backup.

The combination of demand response with time-of-use electricity rates can significantly reduce annual electricity bills — the demand response payment stacks on top of the savings from shifting loads to cheaper rate periods. For homeowners with solar, batteries, and an EV, the combination can generate $400–$800 per year in combined incentives and savings in high-rate states.