Key Takeaways

• Demand response programs pay businesses to reduce electricity usage during peak grid demand periods.
• HVAC systems, lighting controls, building automation systems, and energy storage are among the most effective demand reduction strategies.
• Demand response incentives can create a new revenue stream while lowering utility costs.
• Businesses may be able to combine participation in demand response with the Section 179D Energy Efficient Commercial Buildings Deduction.
• Automated building technologies are making demand response participation easier and more profitable than ever.

Why Demand Response Matters

As utilities face rising electricity demand from data centers, electrification initiatives, and extreme weather events, demand response programs are becoming increasingly important for grid reliability. These programs pay commercial buildings to temporarily reduce electricity use during peak-demand periods, creating an opportunity to lower demand charges while generating incentive revenue.

Businesses can reduce peak demand through HVAC optimization, advanced lighting controls, building automation systems (BAS), battery energy storage, and load shifting strategies. Facilities with automated controls are often best positioned to maximize savings while minimizing operational disruption.

How Businesses Can Lower Energy Demand

The most successful demand response participants focus on reducing peak electrical loads without disrupting building operations.

Optimize HVAC Systems

HVAC equipment is often the largest contributor to peak demand. Pre-cooling spaces, adjusting temperature setpoints, and implementing occupancy-based controls can significantly reduce electrical demand during demand response events.

Implement Advanced Lighting Controls

LED lighting systems equipped with occupancy sensors, daylight harvesting controls, and networked lighting controls (NLCs) can quickly reduce energy consumption when a demand response signal is received.

Leverage Building Automation Systems

Building Automation Systems (BAS) allow facilities to automate demand-reduction strategies by coordinating HVAC, lighting, and other building systems from a centralized platform.

Utilize Energy Storage

Battery energy storage systems can discharge stored power during peak periods, reducing utility demand without affecting occupant comfort or productivity.

Shift Non-Essential Loads

Many facilities can shift energy-intensive activities such as EV charging, refrigeration cycles, water pumping, or manufacturing processes outside peak-demand windows.

Common Demand Response Programs

• Most utility demand response offerings fall into four categories:
• Capacity Programs: Businesses receive payments for committing a specific amount of load reduction.
• Peak Time Rebate Programs: Participants earn incentives for reducing energy use during designated peak events.
• Emergency Demand Response Programs: Utilities offer compensation for demand reductions during periods of grid stress.
• Automated Demand Response (Auto-DR): Building systems automatically respond to utility signals, reducing demand without manual intervention.

SRP Business Demand Response Program

The SRP Business Demand Response Program helps Arizona businesses earn incentive payments by reducing electricity usage during periods of peak grid demand. Administered through a partnership between Salt River Project (SRP) and Enel X, the program is available to commercial, industrial, educational, municipal, and institutional facilities that can temporarily curtail electrical load when called upon.

Participants choose either a Complete Summer Program or a Limited Summer Program and may be called to reduce energy usage during the summer season (May 1 through October 31). Events typically occur between noon and 9 p.m., require at least 90 minutes’ notice, and generally last one to three hours. Depending on the selected participation option, customers may be called for up to 5 or 10 events per season.

Organizations with peak electrical demand of approximately 100 kW or greater, along with controllable HVAC, lighting, or building automation systems, are often the strongest candidates for participation. Businesses can earn payments for helping support grid reliability while reducing operating costs.

Demand Response and the Section 179D Tax Deduction

The Section 179D Energy Efficient Commercial Buildings Deduction provides a federal tax incentive for qualifying energy-efficient upgrades to commercial buildings, including lighting, HVAC, and building controls. The same technologies that help facilities participate in demand response programs—such as networked lighting controls, Energy Management Systems (EMS), and Building Automation Systems (BAS)—can also help buildings exceed ASHRAE energy standards and qualify for a deduction of up to $5.00+ per square foot. By combining demand response incentives with 179D, businesses can improve project ROI while reducing both energy costs and peak demand.

Frequently Asked Questions

What is commercial demand response and how does it work?

Commercial demand response pays businesses to temporarily reduce electricity usage during periods of peak grid demand temporarily. Utilities measure the reduction and provide financial incentives based on performance.

How do businesses earn cash payments from demand response?

Businesses receive payments by reducing electricity consumption below an established baseline during demand response events. Compensation may include capacity payments, performance incentives, or event-based rebates.

What are the best strategies to lower a building’s demand during peak events?

HVAC optimization, advanced lighting controls, building automation systems, energy storage, and load shifting are among the most effective demand reduction strategies.

What is the difference between active demand response and standard energy efficiency?

Demand response reduces electricity demand during specific peak periods, while energy efficiency permanently lowers a building’s overall energy consumption.

How are my business’s demand response payouts calculated?

Utilities typically calculate payments using a facility’s historical baseline usage, verified demand reductions during events, and the program’s incentive structure.

What physical equipment does my building need to qualify for these programs?

Most facilities use advanced utility meters, building automation systems, energy management platforms, smart thermostats, lighting controls, or energy storage systems to participate effectively.

Conclusion

As utilities continue expanding demand response initiatives, commercial buildings have more opportunities than ever to turn energy flexibility into financial value. Facilities that invest in building automation, advanced lighting controls, HVAC optimization, and energy-efficient upgrades can reduce peak demand, generate incentive revenue, and potentially qualify for additional benefits such as the Section 179D Energy Efficient Commercial Buildings Deduction. The result is a smarter energy strategy that improves both operational efficiency and long-term cost savings.

Click here to read the full article originally published April 22, 2026, by 75f.