Monetizing Microgrids: A Q&A on How Businesses Can Benefit from Demand Response Programs and Energy Market Participation

We sat down with PowerSecure’s Energy Markets Manager, Evan Fitzgerald, to better understand how energy market programs can help businesses lower their energy costs.

To get started, what are demand response programs and how do they impact the energy market?

Demand response describes a variety of different programs that help maintain grid stability while offering financial benefits to those who participate.

These programs include emergency responses during grid stress, economic responses to high market prices, ancillary services for grid stability, behavioral programs encouraging voluntary load reduction, and automated programs using technology for precise adjustments. Each type has its own requirements, verification processes, and uses advanced technologies, all shaped by regulatory frameworks.

How can businesses leverage these programs to reduce their energy costs overall?

Businesses can participate in available demand response programs if they have the proper technology in place to reduce their load. This often involves controlling “process loads” at the commercial and industrial level—adjusting HVAC systems, dimming non-essential lighting, or pausing certain manufacturing lines.

Advanced microgrid options include using standby generators or battery energy storage systems, which allow businesses to maintain operations while reducing demand from the grid. By shifting power use to these sources during peak times, businesses can lower their utility costs and potentially earn incentives.

What are the different types of demand response programs available?

In the commercial and industrial space, several types of programs exist:

• Interruptible Programs: Utilities cut power in exchange for bill credits or reduced demand charges. Businesses typically use generators or batteries to maintain operations during interruptions.
  
• Curtailment Programs: Rather than cutting power completely, businesses throttle down specific loads like HVAC or lighting. These programs still allow participation through generators and batteries and are common in utility programs funded by state demand-side management filings.
  
• Market-Based Programs: In regions like the Midwest, Mid-Atlantic, Northeast, Texas, or California, businesses can participate in wholesale energy markets. These programs offer compensation for reducing load during grid instability or high pricing periods but often require choosing between similar utility or market programs.
  

Do businesses experience an interruption to facilities during a demand response event?

There will be no interruption to service. Since advance notice is provided prior to the event, the generator or energy storage system will be online prior to the event and will seamlessly transfer load from the grid to your local energy system. Once the event is over, the load will seamlessly transfer back to the grid.

How can businesses measure the effectiveness of their demand response strategies?

Effectiveness should be evaluated holistically. Businesses need to consider their baseline energy usage and compare it to usage and costs after implementing demand response. They should account for fuel costs (for generators), electricity costs (for energy storage), revenue-sharing fees (for market-based participation), and any operational costs.

In addition to the resiliency benefit that generators and energy storage provides, enrolling these assets into demand response programs can minimize the impact of rising energy costs.

For example, a customer could leverage a microgrid to earn revenue from market-based programs while maintaining operational efficiency and reducing reliance on expensive grid power during peak times.

What information should businesses have to determine if these programs are viable for them?

To assess viability, businesses should prepare:

• 12 months of utility and supply bills to analyze rate structures, usage patterns, and potential exposure.
  
• Interval or hourly load data (often referred to as 8760 data) to provide deeper insight into energy patterns.
  
• Information about future operational changes or expansions that may affect energy usage.
  

This data allows solution providers to tailor recommendations and predict value potential accurately.

What are best practices for businesses to optimize their energy consumption through demand response?

Businesses should:

• Understand their utility rate structure and where costs may escalate.
  
• Use demand response participation strategically, many programs only require 20–50 hours of load reduction per year to deliver measurable financial benefits.
  
• View demand response as part of a broader energy strategy that includes bill credits, market revenue, and asset performance.
  
• Consider their utility type (e.g., municipality vs. cooperative) as that can influence available options and strategies.
• Utilize tools, like PowerSecure’s PowerControl®, that can seamlessly optimize participation for you. 
  

What unique challenges or nuances should businesses keep in mind?

Every customer's situation is different. Some may value long-term stability, preferring utility programs with fixed terms (3–10 years), while others might pursue wholesale markets with higher, but more volatile, returns.

It’s essential to understand what matters most to the customer—certainty, revenue, operational flexibility—and match the solution accordingly. Understanding the nuances of their utility type, size, and program availability is crucial for building the right solution.

What are some common concerns you hear from those considering participating in these programs?

We have found that customers vary in their understanding: Customers new to demand response often ask if they’re "selling power back" or how exactly they’re getting paid. It's important to note that they’re compensated for coming off the grid, not selling generated power back.  Customers with more experience in demand response may already be in programs and want to optimize or expand their participation. With these customers, the conversation can quickly move into advanced options and tailoring solutions based on existing assets.

Other questions we see a lot include:

• Will a third party have control of my facility?

In some instances, a utility or market operator will have direct control of your curtailment processes, generator, or energy storage systems. However, advance notice will be provided if an event occurs. These parties will only have control during an event. PowerSecure can make this process easier via our 24/7 monitoring and dispatch services to ensure events run smoothly.

• For a generator, am I allowed to use my generator for anything other than a grid outage?

This answer depends on the type of power generation in your microgrid. Most programs require reciprocal generators to meet Federal, State and local air permitting requirements. Our in-house environmental specialists can make sure your assets are in compliance.

• Do I have to report use of my generator in demand response programs?

In some instances, there will be required reporting. PowerSecure environmental specialists can manage these reporting requirements on behalf of your facility.

Ultimately, many customers turn to microgrids for resiliency. The financial benefits are often seen as a bonus, but they can meaningfully reduce the total cost of ownership over the asset's life.

With over 25 years working with utilities, we have become experts at maximizing the benefits of these types of programs. PowerSecure works with your facility to make sure the solution will meet the needs of the programs. Further, we offer 24/7 monitoring and dispatch services to make sure your facility responds when an event occurs.