Five Trends Shaping the Future of Demand Response in 2025

The energy grid is confronting unprecedented challenges, including surging demand, aging infrastructure, and the increasing frequency of extreme weather events. A deep freeze across the East Coast recently generated an all-time winter high demand on the PJM grid, while Texas and Florida dealt with a rare snowstorm. Demand response has emerged as a proven and innovative solution to those pressures, offering a dynamic approach to maintaining grid stability and promoting sustainability. Instead of always needing enough steel-in-the-ground generation to meet demand at all times, what if energy demand were more dynamic—more flexible? What if it were incentivized by markets the same way power plants are? According to the Federal Energy Regulatory Commission (FERC), demand response participation in the seven U.S. wholesale markets increased slightly in 2023 to 33,055 MW, which represents about 6.5% of wholesale market peak demand.

COMMENTARY

With more participation, demand response can facilitate the integration of renewable energy sources by addressing one of the grid’s most pressing challenges: variability. Demand response bridges the gap when wind and solar generation fluctuate by enabling energy consumers to adjust usage in real-time, aligning demand with renewable energy availability. As the share of renewables in the energy mix grows, the ability to shift consumption patterns dynamically will be essential to create a truly “smart grid.” Demand response is on the verge of a breakthrough in 2025, with these trends setting the stage for its growing role in the grid's future.

Rising Load Growth

For years, energy efficiency was the trend. Now, the U.S. grid is grappling with unprecedented load growth after years of efficiency being the trend, with one estimate forecasting a 15.8% increase in electricity demand over the next five years. Among the factors driving this growth are data centers, crypto mining, and the electrification of transportation. Data centers, which often contribute predictable, flat loads, are expanding rapidly as tech companies build more facilities to meet demand for cloud computing and artificial intelligence (AI). These loads, while consistent, place significant pressure on local utilities to provide stable, round-the-clock power. In contrast, crypto mining introduces dynamic, price-sensitive demand, with operations ramping up during periods of low energy costs and scaling back when prices spike. This unpredictability adds a layer of complexity for grid operators trying to forecast and balance energy supply. Electric vehicle (EV) home chargers and fleet electrification offer a more predictable demand profile, but will continue to add significant load to the system. To manage these diverse and growing demands, demand response programs are incentivizing new strategies like battery storage, which enable data centers to shift their energy usage during peak periods, reducing pressure on the grid. Similarly, demand response solutions for crypto mining focus on aligning operations with price and even periods of excess supply, helping stabilize the grid during times of high demand or use more power when renewables are running. Smart charging technology for EVs offers a tailored approach to managing residential and fleet charging schedules, optimizing energy use based on grid capacity and minimizing strain during peak hours.

Data Access Hindering VPP Growth

Virtual power plants (VPPs) offer immense potential for aggregating energy resources, transforming individual sites and distributed energy resources (DERs) into a collective grid asset. However, progress remains stymied by inconsistent utility data standards and administrative barriers that limit participation, especially for small-scale resources like smart homes and EV chargers. The lack of a unified approach to accessing interval data means enrolling these resources in demand response programs is often prohibitively expensive and operationally cumbersome. Efforts to address these challenges are gaining momentum. Organizations like Mission:data are leading initiatives to establish standardized APIs, which would streamline the process of accessing and utilizing utility data. By modernizing data access, aggregators could tap into countless smaller energy sources, dramatically expanding the reach and impact of demand response programs. Improving data access would also reduce the time and cost required to integrate these resources, making participation more accessible for both providers and consumers.

Aging Infrastructure Creates Local Constraints

Much of the U.S. energy infrastructure dates to the 1970s and 1980s, creating bottlenecks in power delivery that are becoming increasingly evident as load growth accelerates. Aging infrastructure is struggling to keep up with today’s energy needs, especially in bustling cities and areas leaning heavily on power located hundreds of miles away. The mismatch between aging infrastructure and current energy needs highlights an urgent need for modernization and innovative approaches to grid management. Demand response and DERs are critical tools to address these challenges, providing immediate, localized solutions that reduce strain on the grid. In addition to addressing congestion, DERs and demand response contribute to a more resilient and flexible grid capable of handling fluctuating energy needs at the location and time it is needed. This adaptability is particularly valuable as modern operations often require precise and location-specific responses to maintain grid stability.

Severe Weather Creates Grid Strain, Power Outages

The frequency and intensity of extreme weather events continue to rise, placing additional stress on the grid. Localized demand response solutions step in to help keep the lights on during extreme weather, providing a lifeline for communities when the grid is under stress. For example, a heatwave in California in September 2022 created record-breaking electricity demand for the California Independent System Operator (CAISO). Demand response was critical to preventing rotating outages. Within five minutes of an alert asking Californians to conserve power, demand declined by more than 2,100 MW from CAISO’s hour-ahead forecast. We need to ensure, however, that the markets are designed to value demand flexibility appropriately going forward and not simply rely on voluntary curtailment from consumers. By providing targeted relief in areas affected by climate-driven disruptions, demand response enhances grid resilience and provides real value to the system. This capability will become increasingly critical as utilities and operators face unanticipated outages and fluctuating demand during extreme weather.

Capacity Accreditation Rules Must Evolve

As the energy mix evolves, so too must the regulatory frameworks that govern resource valuation. New capacity accreditation rules are fundamentally reshaping how resources like demand response are valued and integrated into the grid’s future. These policies create a system in which each resource’s value is tied to its projected availability during certain periods While this approach aims to standardize resource valuation, it undervalues demand response, which is uniquely adaptable and capable of providing rapid, scalable support without emissions. Policymakers must carefully design market rules that recognize the full scope of demand response’s contributions, including its ability to respond quickly, provide long-duration relief during grid emergencies, and support renewable energy integration. Demand response is poised to play a transformative role in addressing the energy grid’s most pressing challenges. By embracing flexible, data-driven, and localized solutions, utilities and operators have the opportunity to mitigate crises and fundamentally reshape how energy is consumed and managed. The steps taken today to scale demand response will shape the energy landscape for decades to come, offering a path toward a more reliable, adaptable, and sustainable future. Molly Jerrard is Head of Demand Response at Enel North America.