Load growth is back, and it’s here to stay. Unlike the more predictable patterns of the past century, today's demand growth is lumpy, localized, and often bidirectional—driven by a complex mixture of customer investment, from electric vehicles, to heat pumps, data centers, and corporate electrification. In this new environment, utilities are rightly investing in traditional supply side resources, but due to both cost and practicality those solutions alone won’t suffice. We need a reimagined approach to demand-side management (DSM) that can complement supply resources and help utilities meet grid challenges effectively.
From Fragmented Programs to a Unified Demand Stack
For decades, utilities have successfully deployed energy efficiency (EE), demand response (DR), and time-varying rate (TVR) programs. Collectively, these initiatives deliver meaningful results: over 270 TWh in energy savings (6% of total consumption) and 35 GW of capacity (approximately 5% of U.S. system peak demand). Additionally, more than 18 million customers utilize TVR to drive beneficial load shifting and cost savings.
Despite these achievements, DSM programs are nowhere near realizing their full potential. Less than a quarter of customers adopt EE measures even when subsidized or free. Only 1% of eligible customers enroll in DR programs annually. And only 9% of eligible residential customers have enrolled in TVR programs.
This participation gap exists despite clear customer interest—over 80% of customers proactively invest in energy-efficient appliances, and more than 75% express concern about rising energy costs. The disconnect stems from a fragmented approach where EE, DR, and TVR programs operate in isolation, often with contradictory objectives, competing for the same limited customer attention.
The solution is a unified "Demand Stack" that intentionally integrates these programs to create a cohesive, powerful resource that complements the supply stack.
Introducing the Demand Stack
Just as a generation supply stack strategically combines resources with different cost profiles and operational characteristics, a demand stack leverages the unique attributes of each demand-side resource to maximize impact. In this framework:
- Energy efficiency functions as baseload power, persistently lowering the overall demand curve throughout the day. EE measures require upfront investment but deliver steady energy savings for the life of the measure at no marginal cost.
- Time-varying rates operate as mid-merit resources, modifying load shapes on a daily basis. TVRs permanently alter consumption patterns and can be designed to reflect the changing costs of producing and delivering electricity across time and place.
- Demand response serves as a peaking resource, providing targeted relief during critical periods. DR programs can ramp quickly and deliver precision grid services, though they incur higher short-run costs through customer incentives and potential fatigue.
Rather than viewing these programs as competitors that undermine each other's impacts, the demand stack considers their net effect as a unified outcome—similar to how the performance of individual generators matters less than the overall reliability of power supply.
Why Utilities Need a Demand Stack Now
The traditional utility playbook for accommodating increasing demand requires a refresh. Today's load growth isn't just challenging the bulk system's peak capacity—it's creating more frequent and irregular distribution network constraints on specific substations and feeders.
Meanwhile, utilities face a regulatory environment increasingly focused on decarbonization, electricity rates outpacing inflation, an expanding landscape of distributed energy resources, and more frequent extreme weather events threatening even hardened grid infrastructure.
While utilities will unquestionably need new grid resources in coming decades, they cannot simply follow last century's path. The pace of load growth exceeds the process of interconnecting new generation, and relying solely on utility-scale and utility-owned infrastructure while ignoring customer flexibility potential is prohibitively expensive and inefficient.
A unified demand stack offers a more cost-effective, flexible alternative to complement supply-side investments.
Three Steps to Operationalize the Demand Stack
Moving to an integrated Demand side approach carries significant implications for how regulators and utilities budget, plan, procure, and implement these programs. While a fully unified demand stack may take years to achieve, utilities can take three concrete steps today to begin building their demand stack.
1. Define the Need
The foundation of a successful demand stack is identifying and quantifying how demand-side resources contribute to reliability, affordability, and decarbonization objectives. A demand stack strategy should be clearly informed by capacity and energy needs at both system and local levels.
Compare load growth forecasts against the capabilities and limitations of existing infrastructure to defi ne specific opportunities for demand-side resources to provide the megawatts and megawatt-hours needed.
2. Take an Integrated Approach to Program Design, Budgeting, and Evaluation
DSM programs should be designed in connection with each other rather than in isolation. This integrated approach should encompass:
- Aligned eligibility requirements
- Coordinated incentive designs (e.g., the relative value of an EE rebate vs. a DR enrollment incentive)
- Streamlined end-user experiences that facilitate multi-program enrollments
- Consideration of how customer experiences in one program influence decisions in another
From an impact perspective, program design should include detailed modeling of interactions between EE, rates, and DR across customer segments. Baselining and performance evaluation methodologies should reflect the net impact on a customer's demand profile and incentivize desired outcomes.
3. Coordinate Program Procurement and Implementation
Nearly all customers are willing to do something to save energy and money—only 10-15% cite lack of interest as a participation barrier, while more than half cite lack of awareness.
Rather than overwhelming customers with multiple, sometimes contradictory offers, utilities should deliver a connected customer journey that guides individuals along the demand stack path as their needs and capabilities evolve.
This connected experience would resemble interactions with leading e-commerce companies: using a foundational technology platform, utilities can connect data from various channels to establish unified customer histories, preferences, and generate personalized insights and actions.
Conclusion
As utilities pivot from an era of stagnant demand to rapid load growth, energy efficiency, demand response, and time-varying rates are more relevant than ever. Under the current state of fragmented planning and implementation, these initiatives struggle to reach their full potential.
By strategically combining EE, DR, and TVR into a holistic demand stack, the whole becomes greater than the sum of its parts. This integrated approach enables utilities to:
- Maximize the impact of limited DSM budgets
- Create more coherent and compelling customer experiences
- Deliver targeted grid services when and where they're needed most
- Complement supply-side resources with flexible, cost-effective alternatives
While the full realization of this vision requires regulatory evolution, utilities can begin optimizing existing programs today to create a more integrated future. The demand stack offers a powerful framework for meeting tomorrow's grid challenges—turning the current wave of electrifi cation from a potential crisis into an opportunity for a more resilient, effi cient, and customer-centric grid.
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Originally published in AESP’s Energy Intel.