Post: Demand side response: a guide for 2025

Demand side response: a guide for 2025

Demand side response (DSR) is a cornerstone of global energy systems. It rewards businesses and consumers that adjust their electricity use in response to grid conditions driving cost savings, grid stability, and decarbonisation.

In this article we explore trends in the DSR space and practical insights for 2025 and beyond.

What is DSR?

When it comes to energy, value is determined by three key factors: price and quantity and time. When and how you use energy is just as important as the price you pay for it and how much you use. Ultimately, the ability to be flexible about when you use energy represents both a value and a cost and utility and grid demand response programs allow you to monetise that flexibility.

DSR (also known as demand response or demand side management) refers to mechanisms by which electricity users modify their consumption patterns, either manually or automatically, in response to:

• price signals: such as real-time wholesale price peaks or time-of-use tariffs
• grid needs: requests from electricity system operators during peak demand periods or times of network constraints
• environmental goals: incentives to shift usage to periods of high renewable generation

By participating in DSR your business could receive substantial financial payments for agreeing to reduce energy in response to grid signals that could help to offset cost increases seen over the last few years. The payments earned from these programs can then be reinvested into energy efficiency measures, renewables or battery storage technologies that provide further flexibility to your site, reduce your operating costs and support the transition to a greener future.

UK: new programmes, new participants

Driven by a combination of regulatory support, a liberalised energy market, and the urgent need to decarbonise, the UK has one of the most well-established flexibility markets in the world and continues to expand the suite of services available. Now, the spotlight is one main development BSC Modification P415, titled “Facilitating Access to Wholesale Electricity Markets for Flexibility Dispatched by Virtual Lead Partners (VLPs)”.

DSR in the UK has traditionally been centred around the Capacity Market, Balancing Mechanism, and frequency response services. The Capacity Market ensures long-term security of supply by paying providers (including flexible loads) to be available during system stress events. Participants bid their load reduction capacity into auctions and receive payments in return for being on standby. The Balancing Mechanism (BM) allows the National Energy System Operator (NESO) to procure real-time balancing services by instructing assets to increase or decrease demand or generation. While traditionally geared toward generators, the BM is becoming more accessible to flexible consumers through Virtual Lead Parties (VLPs)—aggregators that do not own generation or supply licenses but manage portfolios of flexible demand.

With the implementation of P415 a wider range of participants are now able to optimise flexibility across the entire value stack of services in both energy and ancillary markets. The implementation of P415 provides an opportunity for these consumers to access day ahead and intra-day wholesale market without the need for trades to go through the supplier, providing and incremental revenue stream and increases revenue opportunity. But optimising asset requirements for participation can be a challenge that requires the right technology and expertise.

Another change in recent years has been the Demand Flexibility Service (DFS), which is designed to engage domestic and small business consumers in national flexibility events. The DFS rewards participants for voluntarily reducing electricity usage during peak times, typically during winter evenings when the grid is under pressure. The reductions are forecasted and measured against a historical baseline, and successful delivery is rewarded through per-kWh payments. The programme has been widely regarded as a success, and in the 2023-24 winter alone, over 2M households and dozens of businesses participated. Now in 2025, the DFS is evolving into a year-round mechanism.

Moves in the UK have been about getting a wider variety of consumers involved and expanding availability of DSR programmes to new participants.

Australia: volatility and response

Electricity markets in Australia are driven by a combination of high electricity prices, abundant solar, and a strong policy push for decarbonisation. From rooftop solar to behind-the-meter batteries and demand response, Australian businesses have embraced innovation out of both necessity and opportunity.

DSR already plays a key role in terms of the Frequency Controlled Ancillary Services (FCAS) market. FCAS operates through a combination of market-based mechanisms and technical solutions. It involves a range of services aimed at both managing sudden imbalances in supply and demand (known as contingency events) and providing continuous adjustments to maintain frequency stability. In the past returns for participating businesses have been lucrative, but the Australian DSR landscape is undergoing a shift.

The rise of battery energy storage across the National Electricity Market (NEM), especially in states like South Australia, Victoria, and New South Wales, has led to increased competition and saturation in the FCAS market. Batteries can respond in milliseconds to frequency deviations, offering high-speed, precision support. As a result, the value of FCAS has declined significantly, particularly for slower-response assets such as industrial load curtailment. For energy users that once relied heavily on FCAS revenues, this presents a challenge and is making real-time energy price arbitrage and wholesale trading a strategic priority.

The volatility of Australia’s wholesale energy market, where prices can spike to thousands of dollars per megawatt-hour during peak periods, presents a compelling opportunity for businesses to reduce energy costs through intelligent load shifting.

Real-time price responsiveness is increasingly becoming a core feature within the Australian market.

USA: diverse markets, growing requirement

In the USA, while federal policy and public attention toward the green transition have experienced some deceleration DSR remains a cornerstone of energy cost management. The financial incentives tied to DSR, especially in regions with capacity markets and peak demand charges, remain significant and is increasing in some areas due to price volatility and infrastructure constraints.

One of the most consistent and lucrative applications is peak demand charge management, where by reducing usage during peak intervals businesses can reduce transmission charges by tens or even hundreds of thousands of dollars per year. In ERCOT, just four 15 minute interval periods of electricity demand can result in bill savings of up to $69,000/MW/yr, while in PJM Peak Load Contribution (PLC) related costs may account for up to 30% of your total electric bill through the Capacity Charge and the PJM Network Integration Transmission Service (also known as Network Transmission, or NITS) charge. For the upcoming Summer capacity prices across the MISO footprint rose to $666.50/MW-day—up from $30/MW-day last year, according to the results of its latest planning resource auction. This result equates to almost $80,000 per MW-year in potential revenue.

While some aspects of the USA clean energy transition have slowed, this makes DSR even more critical to avoid energy price peaks and related charges.

Conclusion

Across the globe, DSR continues to deliver value, resilience, and competitive positioning for businesses. Those that succeed will be businesses that combine technology, foresight, and operational flexibility to become not just energy consumers but active participants in the energy market and GridBeyond can help.

Our AI-driven platform leverages digital twins and advanced forecasting to unlock hidden flexibility while ensuring your operational and heat constraints are never compromised. By leveraging accurate forecasts, real-time data analysis, advanced machine learning algorithms, and seamless integration into existing plant infrastructure, Process Optimizer creates a live, dynamic model of your entire energy system.

This enables precise simulation of plant behaviour under different market and operational conditions. Process Optimizer then delivers market-aware optimisation and AI-powered process control that intelligently schedules energy assets to achieve best revenues and savings.

Intelligent demand side response- White Paper

In today’s fast-paced industrial landscape, optimising production schedules isn’t just about meeting deadlines; it’s also about navigating volatile energy prices. Fluctuations in energy costs can significantly impact operational expenses, making it imperative for businesses to devise strategies that mitigate against these costs.  

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