Unlocking Demand Response for Enterprise ESG Goals: A Guide for Facility Managers

Many companies have adopted energy management and associated building automation systems in support of their environmental, sustainability, and governance (ESG) goals. Such systems can have a meaningful impact on a company's carbon footprint and energy costs—but they are still narrowly focused on a single enterprise.

Demand response, however, is different. A demand response program asks participants to partner with utilities to prioritize the broader energy needs of the entire community. In brief, demand response (DR) is a strategic approach to energy flexibility designed to maintain grid resilience during peak demand periods. Unlike energy management strategies that focus on optimizing energy use based on cost or availability for a single building or facility, demand response directly addresses grid stress by adapting energy consumption in response to real-time grid load.

The principle is simple yet impactful: when the electricity grid approaches maximum capacity, demand response systems adjust energy usage among participants to prevent outages. These adjustments often target high-energy systems, such as HVAC and domestic hot water, which are particularly flexible in their energy demands. By leveraging automated building controls and smart grid communication, demand response ensures energy reliability while contributing to environmental and economic goals.

Energy management and demand response can both improve energy efficiency and reduce costs, but their applications differ:

Energy management focuses on optimizing energy usage throughout the day, often by scheduling high-energy tasks during off-peak hours when electricity is cheaper.
Demand response targets specific periods of grid stress, dynamically adjusting energy consumption to align with real-time grid needs.

For example, an energy management system (EMS) might pre-cool an office building during the early morning to leverage lower electricity rates, while a demand response system reduces HVAC load during an afternoon heatwave to alleviate grid strain. DR and EMS aren't mutually exclusive: they're complimentary practices for achieving ESG goals.

How Facility Managers Can Leverage Demand Response

Demand responses isn’t an available strategy in every instance: It requires integration across the energy delivery chain—from the power grid to the building’s energy systems. First, your utility must offer a demand response program. Such programs are widely varied, but the most sophisticated and effective programs allow utilities to send control signals directly to building systems to alleviate grid strain. In order to take full advantage of such programs, facility managers must ensure that their buildings are equipped with the following:

Building Automation Systems: EMS or BMS systems capable of receiving demand response signals and executing automated adjustments. The demand response scheme can only be effective if it can communicate with high-energy-use systems and devices across the facility.
Advanced HVAC Systems: HVAC systems are some of the largest systems impacted by a demand response scheme. If your building has more conventional non-inverter HVAC units, enrolling in a demand response program may cause the system to actually consume more energy overall. Such units have only two states—“on” and “off”—leading to wider temperature fluctuations and higher energy use during recovery periods. Inverter HVAC units, such as VRF units or heat pumps, offer more precise control by modulating energy use without turning off completely, ensuring greater efficiency and occupant comfort.
Integration Solutions: The mechanical systems that yield the greatest energy savings under a demand response scheme—e.g. HVAC units and water heaters—often lack native IoT capabilities. Integrating these systems into a demand response program may require add-on bridge or control devices that can integrate these systems into a BMS, EMS, or other control platform while preserving efficiency and functionality. This not only makes demand response integration possible—automation can lower HVAC energy consumption by over 30%.

While demand response focuses on major energy consumers like HVAC and water heating, it’s also essential to evaluate the flexibility of other building systems. Facility managers should prioritize non-essential and flexible systems for energy adjustments, coordinating with IT and AV departments to safeguard critical systems, such as servers and communication networks, from unintended disruptions. It's also a good idea to layer demand response and traditional energy management approaches to maximize overall efficiency and avoid wild swings in power consumption. For example, consider implementing strategies like automated lighting and shading to reduce HVAC loads.

You should also maintain reasonable expectations for how tenants will react to environmental changes caused by participation in a demand response program. Occupant comfort is a crucial factor in adoption and long-term success. Automated systems should maintain indoor environmental quality even during energy curtailments. For example, reducing HVAC output to 70% capacity during peak demand offers energy savings while preserving acceptable temperature levels.

Regional Considerations and Incentives

Demand response programs are more prevalent in regions with high energy demands, such as California, the Northeast, and the Sunbelt states. These areas often offer financial programs such as rebates and energy incentives to offset the cost of implementing demand response and energy-efficient technologies. They’re also more likely to institute regulatory policies that encourage grid modernization and smart grid deployment. Consult with your local utility provider to identify available programs and tailor strategies to regional grid characteristics.

Ultimately, demand response represents a singularly effective approach to corporate citizenship. It bolsters organizational commitment to reducing reliance on fossil fuels, especially when paired with renewable energy sources like solar or wind. It also enhances grid stability and promotes equitable energy distribution during crises. And most importantly, demand response demonstrates corporate responsibility by cooperating with the surrounding community to ensure everyone’s energy needs are met.

Demand response is a transformative tool for facility managers aiming to enhance building performance, reduce energy costs, and achieve ESG goals. By investing in advanced building controls, fostering utility partnerships, and prioritizing occupant comfort, facility managers can unlock the full potential of demand response to build a more sustainable and resilient energy future.