Blog
08 12, 2025
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The electric grid is currently experiencing unprecedented challenges – from surging demand and aging infrastructure to extreme weather and the evolving energy mix. The question that arises is, what if energy demand could be more flexible and dynamic, rather than relying on steel-in-the-ground generation to meet demand at all times? And what if markets could incentivize this flexibility in the same way they do power plants?
Demand response has emerged as a proven solution that is helping the grid manage load growth by optimizing the use of existing infrastructure in a more efficient, cost-effective and dynamic way. As the need for flexible resources continues to grow, demand response is becoming increasingly essential to addressing the grid’s most pressing challenges – and the grid rewards companies that participate.
Challenges facing today’s grid, right now
Unprecedented challenges are facing the grid at this very moment, and these challenges are creating concerns around resource adequacy and grid reliability, as well as financial risk for utilities and energy consumers:
Surging demand: we are seeing record growth in demand across most energy markets in the United States and Canada. After years of efficiency across our load curve, the increased rollout of data centers, AI, electrification, EV charging, manufacturing and bitcoin mining is causing load forecasts to skyrocket.
Aging infrastructure: our electric grid is older than ever, it’s costly to maintain, and it’s not evolving fast enough to handle the diverse sets of energy resources in today’s energy mix. With 70% of the lines and transformers in the United States more than 25 years old, this outdated energy infrastructure is creating bottlenecks in power. We need to evolve outdated infrastructure to meet growing demand and accommodate a diverse energy portfolio. We need a smart grid.
Severe weather: long-duration and intense weather events – like heat waves and freezing temperatures – are becoming more frequent, putting increased pressure on the grid. These events can create significant supply and demand imbalances, leading to system constraints and even power outages. As reserve margins shrink, ensuring grid reliability becomes more challenging, especially during peak demand periods when having adequate supply is critical.
To meet today’s grid challenges, what actions can we take today? It's time to rethink strategies and utilize existing resources…flexibly.
Demand response – more flexible, more reliable and more cost-effective
Utilities are always looking for ways to stabilize the grid and better serve their customers with more flexible, reliable and cost-effective approaches to meet demand. And one of those ways is by offering customers the opportunity to participate in demand response programs.
The grid must constantly balance energy demand with available supply to avoid blackouts and brownouts. They have two options to make that happen:
- Increase supply to meet demand. This typically requires the grid to build new steel-in-the-ground generation assets or keep older fossil-fuel plants online longer than intended. And this has cost impacts – the cost associated with building new assets, and the cost to maintain older assets or infrequently used assets. There is also the environmental impact, as many of these resources, unless they are renewable plants, are fossil-fuel powered.
- Bring demand down to meet available supply. This is where solutions that leverage energy flexibility – like demand response – come into play. Demand response creates flexibility on the demand side of the energy equation. It’s not something that is fixed. It’s not something that needs to be always met. Large energy consumers have flexibility when and how they consume energy, and by offering demand response, the grid pays these consumers to reduce their energy usage.
Leveraging flexibility on the demand side of the energy equation reduces the need for new power plants. It is a cost-effective way to manage the system and it’s a very sustainable way to balance the system. When the grid is under stress, it’s important to leverage all flexible demand resources, capacity, market revenues, utility program revenues, energy revenues, and ancillary services to keep the grid in balance.
Here at Enel, we are advocating for increased demand response adoption in every market. Utilities and regulators should pay closer attention to demand response, as it is the reliability tool with the lowest barrier to entry and the speediest implementation today. Demand response provides tangible, near-term reliability benefits for utilities and grid operators as a complement to longer-term planning for transmission and generation. Unlike capital-intensive infrastructure upgrades or firing up expensive-to-maintain peaker plants, incentive programs for real-time load reduction require relatively little additional infrastructure at load sites.
There are signs we are headed in the right direction. Five trends are setting the stage for demand response’s growing role in the grid’s future. Let’s talk about them.
Trend #1: Rising load growth
The grid is grappling with unprecedented load growth, and this comes after years of limited demand growth given significant efficiency gains. There are a few factors driving this growth:
Data centers: Data centers are one of the key industries at the forefront of this explosive demand growth, especially in regions like PJM and ERCOT. Traditional data centers have predictable, flat loads that need round-the-clock power. However, the proliferation of AI could drastically alter the growth curve and is making it challenging for the grid to plan for adequate supply.
Bitcoin mining: Bitcoin mining is growing in popularity and, similar to traditional data centers, have a massive energy footprint. However, these facilities present a layer of complexity for the grid as their demand is unpredictable and price-sensitive, adding forecasting complexity for grid operators.
Electrification: EV home chargers and fleet electrification, while predictable, add significant load to the system.
Manufacturing: Growing demand for domestically produced goods adds predictable but significant load to the system.
Demand response is a key strategy that can help the grid accommodate surges in load growth. Instead of worrying about where to find new supply, grid operators and utilities incentivize more efficient and dynamic use of existing assets. For participants, creating a demand response strategy can ensure uninterrupted performance of essential services, while managing energy costs and earning payments for every MW they can reduce. Example strategies for a data center could include reducing non-urgent tasks during an event, rescheduling tasks for after the event and/or rerouting tasks to another facility in a zone not facing energy constraints.
Trend #2: Data access hindering virtual power plant (VPP) growth
A VPP is basically a collection of energy resources – like demand response, batteries, solar PV, generators, EVs, and even items like lighting, thermostats and HVAC. It is a way to harness load growth, electrification, and new technologies and build them into flexible aggregated resources. Once implemented, VPPs orchestrate these assets to balance supply and demand. They offer immense potential for aggregating individual energy resources into a collective grid asset.
These resources unlock various benefits for the grid, consumer, and the environment:
For the grid – critical peaking capacity, frequency control, balancing of renewables, price response
For consumers – revenue generation, cost reduction, energy optimization
For the environment – carbon reduction, energy efficiency
So why aren’t there more VPPs? It basically comes down to the fact that we need standardized data processes. Utilities have inconsistent data standards across the board, and demand response providers, like Enel, need to comply with varying regulatory processes in each market. In some cases, a lot of manual work needs to be done, like uploading data via a spreadsheet.
We need to be able to leverage VPPs to meet today’s grid challenges now. Standardized APIs are being developed to streamline the process of accessing and utilizing utility data, but the industry needs to move faster so that data can catch up to the sophistication of the loads on the grid now.
Trend #3: Aging infrastructure creates local constraints
Aging grid infrastructure is struggling to keep up with today’s energy needs, raising concerns and risks across generation and distribution. In fact, the U.S. energy sector’s 2025 Instructure Report Card grade dropped from a C- to a D+. The mismatch between aging infrastructure and rising energy demand highlights an urgent need for modernization and innovative approaches to grid management.
70% of lines and transformers on the U.S. grid are 25+ years old. This outdated energy infrastructure is creating bottlenecks in power delivery, as it was not built for the load growth and diverse energy resources we are witnessing today. In addition, aging infrastructure raises concerns and risks across generation, transmission, and distribution. A wide range of issues can arise, from unplanned outages, mechanical issues, increased maintenance costs, reduction in load-carrying capacity, line losses, and more.
Demand response is a critical tool to address these challenges. It is quick to market and cost effective to deploy. It provides immediate, localized solutions to reduce congestion and strain, making the grid more capable of handling fluctuating energy needs – this is especially important as more renewables interconnect with the grid.
In addition, a major shift in the energy landscape is happening with the retirement of coal fired power plants. Demand response can help fill capacity gaps resulting from these assets retiring by offering a reliable, cost-effective and fast to market alternative to traditional generation sources.
Trend #4: Severe weather creates grid strain and power outages
When the grid is under stress during extreme climate events, demand response becomes an important tool to balance the grid and prevent blackouts and brownouts. During extreme weather, we have been increasingly seeing regional grids hit all-time peak demand records, testing the resiliency of aging infrastructure. These demand surges occur as AC units crank up during prolonged heat waves and heaters run during extreme cold, creating a high imbalance on the grid.
Flexible resources, like demand response, are playing a critical role in maintaining grid stability and preventing blackouts during extreme weather events. To highlight some specific occasions, demand response helped the grid remain stable during the June 2025 heatwave across the eastern U.S., Winter Storm Elliott in December 2023, and blackouts in California in August 2020.
Trend #5: Capacity accreditation rules must evolve
New capacity accreditation rules are reshaping how resources are valued and integrated into the grid, and they are a barrier to the growth of VPPs and flexibility resources.
For example, during the 2025/2026 Base Residual Auction, PJM Interconnection changed how it modeled resources for reliability, and it implemented new resource-specific accreditation ratings that reflect how often these resources are available and can be deployed. Unfortunately, these new rules have undervalued the services that demand response provides to the grid.
Policymakers must carefully design market rules that recognize the full scope of demand response contributions. Demand response is cost efficient, it doesn’t require steel-in-the-ground infrastructure, it doesn’t require long interconnection queues, it’s fast to come online, it’s a zero-carbon resource, and it can provide long-duration relief during grid emergencies.
Enel is continuing to advocate for flexibility resources to receive appropriate treatment in the markets against other technologies. As a result of our advocacy in PJM in particular, the value of demand response is set to increase – from a preliminary value of 69% in 2026/2027 to an estimated 92% for 2027/2028.
Next steps for continued growth of demand response
How can we continue to increase adoption of demand response?
Actions for businesses: Let’s find out what flexibility you have in your operations so you can monetize it in energy markets. Or if you are already participating in demand response, maybe it’s time to reevaluate your energy reduction plan and up your game. Our team of experts is happy to chat with you to help maximize your participation – reach out to us.
Actions for utilities: Don’t have a demand response program available for your customers yet? Or already have demand response but what to offer more? Discover how we help utilities build and deploy demand response programs – or reach out to our team directly to get a discussion started.
Actions for policymakers: With your help, we can accelerate the growth of demand response in every market in North America. Appropriately accredit demand response resources in the energy markets. Work with demand response providers and other stakeholders, listen to their concerns, and look at the value that demand response provides the grid.
As the global leader in demand response, Enel identifies and initiates new demand response opportunities that enable participants to fully capitalize on available revenue streams with accurate and transparent representation of earnings potential. We develop and deploy successful demand response programs in partnership with total lifecycle management of portfolios to achieve reliable resource performance that's cost effective.
Because the cheapest megawatt is one that's never produced and never used.
