Transforming Risk into Revenue with Demand Response

Let’s start with a simple, albeit somewhat alarming, fact: the United States’ electrical grid is fragile and subject to ever-escalating demands.

According to a study conducted by global consulting firm ICF International, “U.S. electricity demand is expected to grow 25% by 2030 and 78% by 2050 from 2023 levels. Similarly, we expect U.S. peak electricity demand to grow 14% by 2030 and 54% through 2050.”

That increased energy consumption—particularly during periods of peak demand like heat waves—could lead to a growing number of catastrophic grid failures, such as blackouts and brownouts. In fact, the U.S. Department of Energy has warned that blackouts in the U.S. could potentially increase by a factor of 100X over the next five years.

The reasons behind that increased demand are varied, but they include electrification—in terms of vehicles, cooking equipment, etc.—as well as the growing prominence of AI and the attendant power demands of data centers.

In addition to the increased demand, the grid is also contending with a more variable supply. The growing prominence of wind and solar power is positive in terms of decarbonization, but they are undeniably less consistent than coal, gas, or nuclear power. If the sun is not shining or the wind isn’t blowing, you get less power.

Fortunately, there is a way for property owners to help ameliorate these issues, stabilize the grid, and get paid for their trouble. It’s called demand response, and it may be real estate’s most overlooked source of revenue. But as automation in HVAC and other electrical systems makes demand response participation easier, more buildings are discovering this path to reduce costs, earn revenue, and help avoid catastrophic grid events.

So, in today’s letter we’ll be looking at: