Demand-response initiatives have become an increasingly important component in electric utilities' efforts to manage grid reliability during periods of peak demand. Michael Flores, Direct Energy's Vice President of Demand Response Business for North America, likens demand-response initiatives to overbooking of an airline flight. "Just as airlines will pay passengers to give up seats on overbooked flights, the electricity market will pay users to disconnect from the grid during certain periods of very high demand," he explains.

Depending on the market they are in, end-users engaged in demand-response initiatives can reduce their draw on the grid either by shedding load (i.e., shutting down power-intensive equipment or facilities) or increasing on-site generation. "In essence, demand-response is one answer to the problem of raw generation and transmission capacity not keeping pace with growing electricity demand at critical peak times across North America," Flores says.

One goal of demand-response initiatives is to shift power usage from periods of highest demand to periods of lower demand. Studies by researchers at Carnegie Mellon have found that even small shifts in peak demand can have a large effect on savings to end-users and negate or at least delay the need for power suppliers to build new infrastructure. Since it is a costly, time-consuming and highly regulated process to build new energy infrastructure, Flores believes demand-response initiatives will play an even bigger role in energy management plans going forward.

"We see twofold benefits for end-users participating in these plans," he says. "First, the customer gains access to the financial incentives offered through these programs while assuming very little of the risk associated with them. Second, as today's pilot programs grow and become more robust, customers already participating will be first in line to benefit from future programs." Direct Energy is one company that offers such programs.