ADR – Demand Response: California’s Untapped Revenue Stream
If your facility is in California, demand response is no longer optional. The 2022 Title 24 energy code requires demand-responsive lighting controls for many nonresidential projects [1]. The 2025 code, effective January 1, 2026, extends these requirements. Title 24 also includes demand-responsive thermostat requirements on the mechanical side.
The compliance pathway is clear. Building controls must be able to receive a demand response signal and shed load.
What OpenADR is
The underlying protocol is OpenADR. Lawrence Berkeley National Laboratory developed it. Specifically, it came out of California’s rolling blackouts in 2000–2001.
OpenADR has evolved through versions 1.0, 2.0a, 2.0b, and 3.0. The OpenADR Alliance, formed in 2010, maintains the specification [2]. It also runs the certification program for VENs (the device side) and VTNs (the utility side).
OpenADR 2.0b and 3.0
OpenADR 2.0b, released in 2013, has been the workhorse in California’s IOU programs. It supports two-way communication, event scheduling, price signals, and detailed reporting.
OpenADR 3.0, released in 2023, simplifies the data model. It’s increasingly the version referenced in new code cycles. For example, California’s 2025 Title 24 references OpenADR 3.0-certified VENs [3].
How it works in a commercial building
The utility (or an aggregator) operates a VTN. Your building automation system, lighting system, or a gateway operates a VEN. When the utility issues a DR event, the VTN signals the VEN.
The VEN then translates the signal into specific control actions. For example: raise cooling setpoints by 2–4°F, dim general lighting to 80%, or defer non-essential loads. Whatever you’ve pre-programmed.
The economics
California’s IOUs have offered DR program incentives for years. Capacity payments cover guaranteed load shed during program hours. Energy payments cover kWh reduced during events.
In addition, you can participate in CAISO wholesale programs. Examples include the Demand Response Auction Mechanism (DRAM) and the Emergency Load Reduction Program (ELRP).
A well-instrumented commercial building of 100,000+ square feet can capture $5,000–$30,000 per year in DR revenue. The exact number depends on program, load shape, and willingness to commit. For a facility with a chiller plant and battery storage, the numbers can go much higher.
Where projects go wrong
The most common failure isn’t technical. Instead, it’s organizational.
For example, the energy manager enrolls in a DR program. The BAS is configured to receive signals. Six months later, the chiller plant operator manually overrides the DR event because “the building was uncomfortable.” As a result, the customer fails to deliver promised load shed, gets dropped from the program, and refunds part of the capacity payment.
DR works when three things line up. First, the control sequences maintain occupant comfort through the event. Second, the operations team is trained on what an event looks like. Third, there’s M&V infrastructure to prove participation.
Where this is going
Title 24 will continue to tighten demand-responsive requirements. CAISO’s grid increasingly depends on dispatchable demand-side resources. The shift from “DR as peak-shaving” to “DR as continuous grid-interactive participation” — the Grid-Interactive Efficient Buildings (GEB) vision — is underway. Buildings instrumented for this will accrue value. Buildings that aren’t will increasingly be on the wrong side of utility tariffs.
| Talk to Signet Controls. Planning a BAS install, retrofit, integration, or service contract in California? We work across Los Angeles, Orange County, the Inland Empire, the Central Coast, and Kern County. Reach our team at info@signetcontrols.com or call (877) 874-4638. |
References
[1] Electrical Contractor Magazine — Title 24 Sensors & Controls Changes — https://www.ecmag.com/magazine/articles/article-detail/title-24-requirements-for-sensors-controls-changes-in-california-s-updated-energy-code
[2] EPRI Journal — Opening the Door to Automated Demand Response — https://eprijournal.com/opening-the-door-to-automated-demand-response/
[3] California Energy Commission — Appendix D: Demand Responsive Controls — https://www.energy.ca.gov/filebrowser/download/8665?fid=8665
