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Utility Demand-Response Programs: How They Work And How They Save You Money

Enrolling in your utility company's demand-response plan is a great way to save money and energy. With simple lifestyle adjustments, you will quickly be able to see savings.

When most homeowners think about ways to start saving energy, they tend to first focus on upgrading their home, appliances and HVAC systems. This makes sense: cumulatively, these improvements can drastically cut down on your high utility bills. Yet, many homeowners are unaware of another highly effective way to conserve energy and save money: demand-response programs. Nationwide, many utility companies are now offering incentives to homeowners who help them reduce energy usage during times of peak demand.

In this article, we’ll review how you can establish a baseline measurement of your homes’ energy use, why you should enroll in a demand-response program, and where to go from there.

Start By Knowing What You're Using

The first step to conserving energy is knowing when and how much your home is using. The good news is that today’s homeowners have more tools available to them than ever before. Curb’s home energy monitoring system, for example, helps you take direct control of your home's energy use. Curb plugs directly into your breaker panel and gives you real-time data on your energy consumption and production.

Homeowners are able to recognize unusual patterns of your energy use and discover probable issues with appliances. In addition, its mobile app allows you to receive personalized notifications and alerts regarding your energy usage right on your phone, even when you’re not home.

One you’ve used Curb to discover your baseline energy usage, it’s time to start saving. You’ll want to check with your utility company to see if they offer a demand-response program.

What Is Demand?

Utility companies typically experience the highest demand for electricity between 3-7pm on weekdays, which corresponds with the time that most homeowners return home from work, cook dinner, and run their air conditioner or heater. These peak hours put stress on the entire system and make generating electricity more expensive - a cost that gets passed through to consumers in the form of higher rates. In a perfect world, if demand was more evenly distributed throughout the day, utilities would be able to lower costs and reduce the risk of outages.

How Do These Programs Work?

To flatten this demand curve, many utility companies have embraced real-time demand-response programs. These initiatives go by many names - “peak-hour pricing”, “rush hour rewards”, “time-of-use plans” etc. - but all operate on the same principle: incentivizing homeowners to use more of their electricity during off-peak hours instead of during on-peak hours.

Once enrolled, the homeowner’s off-peak rate is lower than the average cost of electricity, while their on-peak rate is higher. Assuming energy use is reduced during peak hours (even if the total consumption stays the same), electricity bills will fall.

Use Smart Thermostats To Save Further

In general, time-of-use savings programs are not new. However, in recent years, smart thermostats have opened up a whole new world of possibilities for demand-response savings. Many utility companies partner with thermostat manufacturers and offer automated savings programs to households above and beyond differentiated on/off peak rate structures.

Of all the electricity used in the average American home, nearly half of it is used on cooling and heating. For utility companies, air conditioners, heat pumps, and furnaces drive peak hours energy consumption in the summer and winter. During “energy-saving events” when demand is expected to be at its highest — such as on a particularly hot summer day — the utility company takes direct control of your home’s thermostat. In the hours preceding the “event” before peak hits, the utility sets the thermostat to start cooling your home. Then, when the event starts, your home should be cool enough to “coast” through the late afternoon without needing to run at length, reducing demand during peak hours.

Not only does this process directly save homeowners money, but utility companies heavily incentivize such programs by offering partial or full rebates on the cost of smart thermostats. They may also provide further incentives in the form of lower energy rates or cash-back offers.

You’re Just Getting Started!

Whether enrolling in your utility’s demand-response program is your first step toward energy savings or just your latest, there’s so much more that you can do to make your home more efficient and affordable. Want to know your current home energy score? Check out our free Home Energy Score today.

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