The rapid growth of AI data centers, widespread electrification across transportation and industry, and years of underinvestment in utility infrastructure are placing unprecedented pressure on the nation’s power grid. As a result, it seems like every news article and blog post points toward energy prices rising with no end in sight. Capacity constraints, volatile wholesale markets, and regulatory uncertainty are all contributing factors that create an increasingly challenging environment for energy buyers.
Today, we highlight a tool that can help organizations mitigate those rising costs while also creating a new source of revenue: demand response.
What Demand Response Really is, and Why It Matters Now
Demand response (DR) at its core is a mechanism by which Independent System Operators (ISOs) and electric utilities encourage large energy users to reduce consumption during periods of system stress and demand in exchange for financial incentives. These grid stress events, typically driven by peak summer demand, unexpected generation outages, or extreme weather can create dangerous reliability conditions. By temporarily reducing load, DR participants help stabilize the system and are compensated for the value of their flexibility.
For years, DR programs were seen as niche opportunities, often relevant only in markets like New York City where capacity prices are chronically high. In much of the country, the economics simply didn’t justify the operational disruption. But the grid is changing rapidly. The rise of AI-driven computing and electrified fleets are driving electricity demand at a pace not seen in decades. Meanwhile, new transmission is slow to build, and traditional fossil fueled generation is retiring faster than other resources can replace it.
This growing imbalance between supply and demand has led to:
A dramatically increased value for load flexibility across the country.
Federal environmental regulations on generators relaxing, allowing diesel generation assets, previously barred from participation, to take part in demand response programs
As a result, DR has evolved from a niche program into a nationwide opportunity, with many markets offering their highest incentives in years.
Growing Opportunity and Growing Complexity
While the financial upside of DR is clearer than ever, the programs administered by ISOs and utilities vary widely. Each market has its own rules, timelines, performance requirements, penalty structures, and payment mechanisms. For example:
Some programs pay based on the capacity that is nominated, while others pay for actual event performance.
Certain markets require strict test events; others rely on historical load data.
Some utilities allow for multiple curtailment strategies depending on operational constraints, while others require firm commitments.
Enrollment deadlines and participation requirements can vary drastically by region and program type.
This complexity often leads to confusion for clients who are already juggling procurement strategies, operational priorities, and budget pressures. Many organizations know DR could be valuable but aren’t sure how to participate, what they would be required to do, or even how payments are calculated. As a result, companies often leave significant value on the table or, worse, enroll in programs that don’t align with their operational realities.
How 5 Helps Organizations Navigate DR
At 5, we help clients make sense of this evolving landscape and determine whether participating in a DR program is the right strategic fit for a business.
Our approach includes:
1. Operational Assessment
5 begins by evaluating a facility’s operations to identify where load flexibility exists. This includes determining whether equipment can be cycled down, on-site generation is able to participate, and whether automated controls or battery systems can support curtailment. Every site operates differently, and understanding an organization’s true capabilities forms the foundation of a successful demand response strategy.
2. Market and Program Analysis
Once the operational profile is clear, 5 examines the DR programs offered by the local utility and ISO. This analysis includes reviewing potential revenue, event frequency, historical performance requirements, and the operational disruption associated with each program. The objective is to match each organization with the program that delivers maximum value while minimizing risk.
3. Financial Modeling and Alignment with Procurement
Demand response does not exist in a vacuum. Its value interacts closely with capacity costs, hedging strategies, and broader electricity or natural gas procurement plans. 5 ensures that DR participation aligns with an organization’s overarching risk-management goals, whether that involves offsetting capacity charges, improving budget certainty, or adding a new source of non-commodity revenue.
4. Enrollment, Contracting, and Ongoing Support
The administrative aspects of DR can be complex and time-consuming. 5 ensures you’re supported through the entire process, including enrollment, contract review, dispatch notifications, and annual performance reconciliation. During DR events, the team works to ensure strategies are executed smoothly so participants realize the full value of their commitments.
Demand Response Isn’t One-Size-Fits-All
Not every organization can, or should, participate in demand response. Some facilities are able to curtail load with minimal disruption, while others operate critical processes that simply cannot be interrupted. Different organizations also value different program structures: some prefer the certainty of guaranteed capacity payments, while others pursue the upside of performance-based compensation. Still others view demand response as a component of their broader sustainability or resilience strategy rather than solely a financial tool. In every case, the integrity of the client's core operations must take precedence; additional revenue should never come at the expense of operational reliability.
With the right expertise, however, demand response becomes a powerful financial and operational asset, helping organizations control costs, reduce exposure to volatile market conditions, and support overall grid reliability.
Turning Flexibility into Value
The energy landscape is becoming increasingly complex, yet also full of opportunity for those who understand how to navigate it. Rising demand and costs are undeniable realities, but so are the tools designed to help manage them.
Demand response remains one of the most effective and accessible ways to convert operational flexibility into meaningful economic value. And 5 stands ready to help organizations capture that value confidently and strategically.