Interview: practitioners on energy efficiency & demand response

North American utilities enrolled 14.2 gigawatts of demand response capacity in 2024—a 23% increase from the prior year—yet practitioners report that only 38% of residential pilot programs achieved their customer acquisition targets within projected timelines. This gap between grid-level ambition and household-level adoption defines the current challenge facing energy efficiency and demand response professionals. In conversations with utility program managers, municipal energy directors, and technology providers across the United States and Canada, a consistent pattern emerges: the technology works, the economics pencil out, but the human infrastructure of enrollment, engagement, and sustained participation remains the binding constraint.

"We can shift megawatts," explains a demand response program director at a major Midwest utility. "What we struggle with is shifting behavior at scale without creating customer fatigue or backlash. The grid needs flexibility exactly when customers least want to provide it—during heat waves, cold snaps, and peak entertainment hours."

Why It Matters

The urgency driving energy efficiency and demand response investments has intensified dramatically in 2024-2025. The Federal Energy Regulatory Commission's Order 2222, fully implemented across regional transmission organizations by late 2024, requires grid operators to accommodate distributed energy resource aggregations in wholesale markets. This regulatory shift creates commercial opportunities worth an estimated $4.8 billion annually for demand response providers, according to the American Council for an Energy-Efficient Economy (ACEEE).

Simultaneously, electrification of transportation and buildings is reshaping load profiles. The Edison Electric Institute projects that electric vehicle charging will add 200 TWh of annual electricity demand by 2030—equivalent to the entire current consumption of California. Without sophisticated demand management, this load growth threatens grid reliability and requires costly infrastructure investments that ultimately burden ratepayers.

For utilities subject to state clean energy mandates—now covering 75% of U.S. electricity sales—demand response and efficiency programs represent the lowest-cost compliance pathways. The Lawrence Berkeley National Laboratory's 2024 analysis found that demand-side resources cost utilities $25-65 per MWh of avoided generation, compared to $85-150 per MWh for new renewable generation when transmission and integration costs are included.

The climate disclosure landscape adds another dimension. The SEC's climate disclosure rules and California's SB 253 require large enterprises to report Scope 2 emissions with increasing granularity. Companies cannot simply purchase renewable energy certificates and claim carbon neutrality; they must demonstrate grid-responsive consumption patterns that actually reduce marginal emissions. This creates enterprise demand for sophisticated demand response participation that delivers both cost savings and defensible emissions reductions.

Key Concepts

Energy Efficiency in the utility context refers to permanent reductions in electricity or natural gas consumption achieved through equipment upgrades, building envelope improvements, or behavioral changes. Unlike demand response, efficiency measures reduce consumption persistently rather than shifting it temporally. Practitioners measure efficiency program performance in lifecycle MWh savings per dollar invested, with top-quartile programs achieving ratios of 15-20 MWh per $1,000 of program expenditure.

Demand Response describes deliberate reductions or shifts in electricity consumption during specific periods in response to price signals, grid conditions, or direct utility control. Modern demand response encompasses a spectrum from simple thermostat setbacks during peak hours to sophisticated real-time load modulation coordinated with wholesale market prices. FERC classifies demand response into emergency (reliability-triggered) and economic (price-triggered) categories, with different verification and compensation frameworks for each.

CSRD (Corporate Sustainability Reporting Directive) represents the European Union's comprehensive sustainability disclosure framework that increasingly affects North American companies with EU operations or supply chain relationships. While CSRD is European regulation, its extraterritorial reach means that North American energy efficiency and demand response programs must generate the auditable data and verified impacts that multinational clients require for compliance. Practitioners report that CSRD-driven requirements are reshaping measurement and verification protocols across the sector.

Additionality is the principle that emissions reductions or efficiency gains claimed by a program must be genuinely incremental—they would not have occurred without the program intervention. Establishing additionality requires rigorous baseline methodologies, control groups, and statistical analysis. Practitioners emphasize that additionality standards have tightened considerably as regulators and corporate buyers grow more sophisticated about distinguishing real impact from paper claims.

Project Finance for energy efficiency describes specialized financing structures that enable building owners and utilities to fund efficiency investments using projected savings as the primary repayment source. Structures include on-bill financing (repaid through utility bills), Property Assessed Clean Energy (PACE), and energy savings performance contracts (ESPCs). The U.S. Department of Energy estimates that over $12 billion in project finance capital is currently deployed in North American efficiency programs, with demand substantially exceeding available deal flow.

What's Working and What Isn't

What's Working

Bring-Your-Own-Thermostat Programs: Utilities that allow customers to enroll existing smart thermostats rather than requiring utility-provided devices consistently achieve higher enrollment rates and lower acquisition costs. "We spent years fighting about whether customers would accept our thermostat or use their own," notes a program manager at a California investor-owned utility. "Once we embraced BYOT, our cost per enrolled household dropped from $180 to $45, and our opt-out rates fell by half." The key success factor is seamless integration with popular consumer devices—Nest, Ecobee, and Honeywell platforms that customers already trust and understand.

Time-of-Use Rate Adoption with Behavioral Nudges: Simple time-of-use rates have existed for decades, but practitioners report breakthrough results when rate structures are combined with real-time feedback apps and gamification elements. Sacramento Municipal Utility District's SmartPricing Options pilot achieved 12% peak demand reduction among participants, with behavioral nudges contributing an additional 3-4 percentage points beyond the rate signal alone. The insight: price signals work, but most customers need visualization tools to act on them effectively.

Commercial and Industrial Automated Demand Response: The commercial sector leads in demand response sophistication because building automation systems can execute load curtailments automatically without human intervention. Enel X reports that their commercial automated demand response portfolio in North America achieves 94% event response rates compared to 67% for programs requiring manual customer action. Industrial facilities with process flexibility—cold storage, water treatment, data centers—provide particularly reliable curtailment because their operations can tolerate temporary load reductions without service degradation.

Income-Qualified Weatherization with Health Co-Benefits: Programs that frame energy efficiency as a health intervention rather than a cost-savings measure show stronger enrollment and completion rates in low-income communities. The Minnesota Department of Commerce's Conservation Improvement Program achieved 147% of targeted participation goals in 2024 by emphasizing indoor air quality improvements and asthma reduction alongside energy savings. Community health worker partnerships proved essential for building trust and navigating household logistics.

What Isn't Working

Opt-In Residential Programs Without Strong Incentives: Voluntary residential demand response programs that rely primarily on environmental messaging continue to underperform. "The uncomfortable truth is that most residential customers will not tolerate comfort trade-offs for $50 annual bill credits," explains a utility program evaluator. Programs achieving <15% eligible customer enrollment typically share common characteristics: inadequate incentives, complex enrollment processes, and unclear value propositions. Successful programs offer minimum $100 annual incentives, single-click enrollment, and transparent real-time feedback.

Siloed Efficiency and Demand Response Programs: Utilities that operate energy efficiency and demand response as separate organizational functions with distinct budgets, contractors, and customer interfaces consistently underperform integrated approaches. Customers experience multiple outreach campaigns, conflicting messaging, and redundant enrollment requirements. "We were literally competing with ourselves for the same customers," admits a program director at a New England utility that recently consolidated its demand-side management functions. Administrative overhead consumed 35% of program budgets before integration; post-consolidation overhead dropped to 22%.

Over-Reliance on Direct Load Control Without Customer Engagement: Legacy demand response programs that simply cycle air conditioners or water heaters without customer notification or control generate substantial opt-out and complaint rates over time. Practitioners report that programs lacking transparency about when and how loads are controlled experience 25-40% annual attrition. Modern programs provide advance notification, customer override options, and post-event summaries that maintain customer agency while achieving grid objectives.

Key Players

Established Leaders

Duke Energy operates the largest residential demand response program in the Southeast, with 1.2 million enrolled smart thermostats and water heaters across their six-state territory. Their PowerManager program achieved 2,100 MW of peak demand reduction during 2024 summer events.

Pacific Gas & Electric (PG&E) leads California utilities in commercial demand response enrollment, with over 2,400 MW of enrolled capacity participating in the California Independent System Operator's emergency and economic programs. Their Demand Response Auction Mechanism has set market-based pricing benchmarks adopted by other states.

Hydro-Québec operates North America's most aggressive time-of-use rate structure, with winter peak pricing exceeding 50 cents per kWh during critical periods. Their Hilo smart home platform has enrolled over 120,000 households in automated demand response since 2020.

National Grid has pioneered income-qualified efficiency delivery in the Northeast, partnering with community action agencies to deliver comprehensive weatherization services. Their ConnectedSolutions demand response program integrates battery storage, EV charging, and traditional load control into unified customer offerings.

Arizona Public Service (APS) leads in solar-plus-storage demand response integration, with over 8,000 residential battery systems enrolled in their Storage Rewards program that provides grid services while maintaining customer backup power capabilities.

Emerging Startups

OhmConnect pioneered the residential behavioral demand response model, paying customers directly for energy reductions during grid stress events. Their acquisition by Shell's New Energies division in 2023 provided capital for expansion beyond California into Texas and the Midwest.

Leap operates a distributed energy resource aggregation platform that enables commercial and industrial facilities to participate in wholesale demand response markets without utility intermediation. They manage over 750 MW of flexible capacity across CAISO, ERCOT, and PJM markets.

Arcadia provides a software platform connecting consumers to clean energy and demand response programs regardless of their utility. Their platform has enrolled 1.5 million customers in community solar, renewable energy, and demand response offerings.

Uplight (formed from the merger of Tendril and Simple Energy) delivers white-label customer engagement platforms to utilities, with their behavioral programs reaching 100+ million utility customers across North America.

Recurve specializes in meter-based savings verification, enabling utilities to measure efficiency and demand response impacts directly from AMI data rather than relying on engineering estimates. Their methods have been adopted by California and Colorado as regulatory standards.

Key Investors & Funders

Breakthrough Energy Ventures has invested over $500 million in demand-side energy technologies including OhmConnect, Gradient (heat pump manufacturer), and Dandelion Energy (geothermal heat pumps).

The U.S. Department of Energy allocated $3.5 billion through the Home Energy Rebate Programs established by the Inflation Reduction Act, with states beginning implementation in 2024-2025. These funds support both efficiency upgrades and electrification.

Energy Impact Partners operates a $3.5 billion platform with investments across the demand-side management sector, including stakes in Bidgely, AutoGrid, and CLEAResult.

Generate Capital has deployed over $8 billion in project finance for distributed energy resources, including energy efficiency retrofits, solar-plus-storage, and fleet electrification projects.

The New York Green Bank has catalyzed $2.1 billion in clean energy investments through credit enhancements and co-investment structures, with substantial focus on building efficiency and demand flexibility projects.

Examples

Baltimore Gas & Electric's Peak Rewards Program: BGE's thermostat-based demand response program represents one of the longest-running and most-studied utility pilots in North America. Launched in 2008 and continuously refined, the program now enrolls 420,000 thermostats across Maryland. During the August 2024 heat wave, the program delivered 547 MW of peak demand reduction—equivalent to a mid-sized power plant. Program evaluations by the Brattle Group found that participating households reduced peak consumption by 1.3 kW on average during events, with customer satisfaction scores remaining above 85% despite cycling events. The key innovation was transparent customer communication: BGE sends text alerts before events, provides real-time opt-out options, and limits annual event hours to maintain customer goodwill. BGE estimates the program has deferred $340 million in peaking capacity investments since inception.

Toronto Hydro's Peak Demand Program for Commercial Buildings: Toronto Hydro partnered with Enbala (now Generac Grid Services) to deploy automated demand response across 200+ commercial buildings in downtown Toronto. The program achieved 35 MW of verified demand reduction during 2024 winter peak events—critical for a winter-peaking system facing growing electrification loads. Participating buildings reduced demand by an average of 8% during events through automated HVAC setbacks, lighting reductions, and elevator load management. Building operators retain override capability, and the program achieved 91% event compliance rates. Post-event analysis showed minimal occupant complaints, attributed to careful pre-commissioning that identified curtailable loads with low comfort impact. Toronto Hydro compensates participants at $60/kW-year, with top performers earning over $200,000 annually.

Sacramento Municipal Utility District's Neighborhood Electrification Pilot: SMUD's ambitious pilot in the Oak Park neighborhood combines efficiency upgrades, heat pump installation, panel upgrades, and demand response enrollment into a comprehensive neighborhood-scale intervention. The pilot enrolled 250 households in 2023-2024, with the utility covering upgrade costs through a combination of federal rebates, utility incentives, and low-interest financing. Early results show 45% average reduction in household energy costs and 62% reduction in carbon intensity, with 89% of participants enrolled in demand response programs. The integrated approach—addressing efficiency, electrification, and flexibility simultaneously—achieved acquisition costs 40% lower than implementing programs separately. SMUD is expanding the model to three additional neighborhoods based on pilot success, with a goal of 5,000 households by 2027.

Action Checklist

• Audit current customer enrollment processes to identify friction points—each additional step reduces completion rates by 12-18% according to behavioral research.

• Integrate efficiency and demand response customer databases to enable cross-program enrollment and eliminate duplicate outreach that frustrates customers.

• Establish bring-your-own-device pathways for major smart thermostat platforms, enabling customers to participate without hardware replacement.

• Develop tiered incentive structures that reward consistent participation over time rather than one-time enrollment bonuses that drive quick churn.

• Partner with community organizations in income-qualified programs to build trust and navigate household barriers that pure utility outreach cannot address.

• Implement real-time feedback mechanisms that show customers their demand response contributions and savings in accessible formats.

• Create commercial building automation standards that enable automated demand response without requiring custom integration for each building management system.

• Establish rigorous measurement and verification protocols that satisfy both regulatory requirements and corporate buyer additionality standards.

• Design programs with explicit customer override capabilities and event limits that maintain trust through transparency.

• Build internal capacity for meter-based impact verification that reduces reliance on engineering estimates and strengthens program credibility.

FAQ

Q: What customer incentive levels are necessary to achieve meaningful demand response enrollment in residential programs? A: Practitioner experience consistently indicates that annual incentives below $75 generate minimal enrollment, while incentives of $100-150 achieve enrollment rates of 15-25% among eligible customers. Programs offering $200+ annual incentives can achieve 30-40% enrollment when combined with streamlined onboarding. However, incentive levels must be weighed against program cost-effectiveness: the optimal structure typically combines modest base incentives with performance bonuses that reward actual peak reduction rather than mere enrollment.

Q: How do practitioners measure the additionality of energy efficiency programs when baseline consumption is inherently counterfactual? A: The gold standard is randomized controlled trial design, where eligible customers are randomly assigned to treatment and control groups. Control group consumption provides an observable baseline for treatment effect estimation. When RCT design is impractical, practitioners use comparison group methods that match participants with similar non-participants based on pre-program consumption patterns, weather response, and demographic characteristics. California's CalTRACK protocols and the Uniform Methods Project provide standardized methodologies that regulators increasingly require for program evaluation.

Q: What role does project finance play in scaling energy efficiency programs beyond utility rate funding? A: Project finance enables efficiency investments that exceed utility program caps or fall outside program eligibility. Commercial Property Assessed Clean Energy (C-PACE) has financed over $4 billion in building efficiency upgrades across 38 states plus DC by attaching repayment obligations to property tax bills. Energy savings performance contracts (ESPCs) enable federal, state, and municipal facilities to implement comprehensive retrofits with payments guaranteed by measured savings. On-bill financing, offered by 35+ utilities, allows residential and small commercial customers to repay efficiency investments through utility bills at lower interest rates than unsecured consumer credit. These structures are essential for reaching building owners who lack upfront capital for efficiency investments.

Q: How are utilities adapting demand response programs for electrified heating loads as heat pump adoption accelerates? A: Winter-peaking utilities like Hydro-Québec and New England utilities are developing cold-weather demand response strategies that differ substantially from summer cooling approaches. Heat pump modulation during cold snaps risks customer discomfort and potential freeze damage, so programs focus on pre-heating strategies that build thermal mass before peak periods rather than real-time curtailment. Thermal storage water heaters, increasingly deployed alongside heat pumps, provide flexible load that can absorb excess renewable generation and reduce demand during peaks without affecting space conditioning. Smart panel technologies that prioritize critical loads during grid stress events represent an emerging approach that maintains safety while providing grid services.

Q: What distinguishes demand response programs that achieve sustained participation from those experiencing high attrition rates? A: Successful programs share several characteristics: transparent communication about when and how loads are controlled, genuine customer override capabilities that are not penalized, post-event feedback that reinforces customer contribution, and incentive structures that reward ongoing participation rather than front-loading value at enrollment. Programs experiencing 20%+ annual attrition typically over-control without customer visibility, impose penalties for override usage, or fail to provide meaningful feedback about customer impact. The practitioner consensus is that treating demand response as a partnership rather than a resource extraction relationship is essential for long-term program viability.

Sources

• American Council for an Energy-Efficient Economy (ACEEE), "State Energy Efficiency Scorecard 2024," November 2024
• Lawrence Berkeley National Laboratory, "The Cost of Saved Energy for Utility Customer-Funded Energy Efficiency Programs," 2024
• Federal Energy Regulatory Commission, "Assessment of Demand Response and Advanced Metering," December 2024
• Edison Electric Institute, "Electric Transportation Projections: 2024-2040," 2024
• The Brattle Group, "The National Potential for Load Flexibility: Value and Market Potential Through 2030," 2024
• U.S. Department of Energy, "Home Energy Rebate Programs Implementation Guidance," 2024
• California Public Utilities Commission, "Demand Response Monthly Reports," 2024-2025
• Natural Resources Canada, "Energy Efficiency Trends in Canada: 2024 Update," 2024