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How Demand Response Works for Ohio Businesses

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The short answer

Demand response (DR) pays a business to cut electricity use when the grid needs it. In Ohio, most business DR runs through PJM's wholesale markets, and you join through a curtailment service provider (CSP) that registers your load, sends dispatch notices, measures your reduction and shares the payments with you under a private contract. The main program is capacity-based: you commit to reduce load to an agreed level during grid emergencies and are paid whether or not an event is called. Before you sign, make sure you can actually shed the load on 30 minutes' notice, and understand how DR interacts with your capacity tag.

This page covers how the programs work and what participation requires. For what DR is worth at 2026–2029 capacity prices, see demand response earnings in Ohio. For lowering your own capacity tag without enrolling, see the PLC operations guide.

Who's involved

Party Role
PJM Interconnection Operates the regional grid and wholesale markets that include Ohio; dispatches DR events
Curtailment service provider Aggregates customers, registers them with PJM, bids them into markets, verifies reductions and collects payment
Your utility Supplies meter data used to measure performance; assigns your capacity tag
Your supplier Unaffected in most cases, but check your contract for any clause on DR participation
Your business Commits to a reduction plan and carries it out when dispatched

Payments flow from PJM to the CSP, and the CSP pays you a share set by your contract. The split, penalty allocation and contract term are negotiable.

The main PJM programs

Program What you commit to How you're paid Best fit
Capacity (pre-emergency and emergency load management) Reduce load when PJM dispatches during emergencies, with penalties for underperformance Monthly capacity payments on your accredited kW at the auction price; energy payments may apply during events Sites with a reliable, repeatable curtailment plan
Economic load response Voluntarily reduce when energy prices are high Energy-market prices for reductions that aren't part of normal operations Flexible processes that can shift on short notice
Ancillary services (synchronized reserve, regulation) Very fast, frequent adjustments Ancillary-service market prices Batteries and automated controls

Capacity-based DR is the usual starting point for commercial and industrial sites, because the payments are predictable.

What capacity DR requires

PJM's Capacity Performance rules set the terms. From PJM's load management reports:

  • Availability windows. Summer (June–October and the following May), 10 a.m.–10 p.m. Eastern; winter (November–April), 6 a.m.–9 p.m. Eastern.
  • Notice. The default requirement is to complete your reduction within 30 minutes of notification. Exceptions allowing 60 or 120 minutes are available for qualifying resources.
  • Events. No limit on the number of interruptions, and an event can last up to 12 hours.
  • Measurement. Almost all PJM load-management commitments (99.98% in 2022/23) use Firm Service Level (FSL): you agree to drop to a set kW level, measured against your capacity tag. The alternative, Guaranteed Load Drop, measures against an estimated baseline.
  • Testing. If PJM doesn't dispatch you during the delivery year, your CSP must run a test to show you can perform.
  • Metering. Performance is measured with interval data from your utility meter or approved metering.

Backup generators can be part of a curtailment plan, but engine air permits and federal rules often limit non-emergency operation. Check before you commit generator capacity — see backup power mistakes.

How much DR PJM buys, and how it's accredited

PJM doesn't pay DR on its full nameplate kW. Each resource class gets an accreditation rating, and DR's rating changed sharply between auctions:

Delivery year Capacity price ($/MW-day) DR accreditation rating DR cleared (MW, unforced)
2026/27 $329.17 69% 5,530.6
2027/28 $333.44 92% 7,298.6

The higher accreditation for 2027/28 is the main reason the amount of cleared DR rose. For you, it means the same kW commitment is worth more in 2027/28 than it was in 2026/27. Your actual payment still depends on the CSP's contract.

Demand response and your capacity tag

The two overlap, but they're not the same thing:

  • Your capacity tag is based on your load during PJM's five highest summer peaks (non-holiday weekday daily peaks, June 1–September 30), as your utility applies PJM's method, and it determines your capacity cost for the next June 1–May 31. Each kW of tag costs about $120 a year at 2026/27 prices.
  • PJM adds dispatched DR reductions back when it calculates peak load for capacity for the following delivery year. In other words, the load you shed because PJM dispatched you doesn't automatically lower your future tag. You're paid for it once, as DR.
  • Voluntary peak-hour reductions that aren't DR dispatches are what lower a tag.

Many businesses do both: they enroll in DR for the payments and also cut load on forecast peak days outside DR events. Ask your CSP and your utility exactly how the add-back will apply to your account before you count on a lower tag. For how tags are set, see capacity tags explained.

DR events also don't reliably coincide with your monthly demand peak, so don't budget demand-charge savings from DR alone. For monthly demand tactics, see how to lower peak demand charges.

Is your site a good fit?

A good DR candidate can answer yes to most of these:

  • Can you name specific equipment to curtail — chillers, process lines, pumps, compressors, lighting banks — and the kW each represents?
  • Can the reduction be made within 30 minutes and held for several hours without safety, product-quality or customer problems?
  • Is someone on call during the availability windows, or can building controls do it automatically?
  • Do you know what an event costs you in lost production or overtime, so you can compare it with the payment?
  • Can you live with penalties if you underperform during a real event?

Questions to ask a CSP: What share of capacity and energy payments do I keep? Who pays underperformance penalties? How long is the contract and can I exit? How are dispatch notices sent? Will you provide event-performance reports and my interval data?

FAQ

Can Ohio businesses participate in PJM demand response?

Yes. Ohio customers participate through a curtailment service provider, which registers their load with PJM and shares the payments under a private contract.

How much notice do you get for a demand response event?

The default PJM requirement is to complete your reduction within 30 minutes of notification; qualifying resources can get 60- or 120-minute exceptions.

Does demand response lower my capacity tag?

Not for dispatched events. PJM adds dispatched DR reductions back when it calculates peak load for capacity, so tag reductions come from voluntary cuts during peak hours.

What happens if I'm never called?

You still receive capacity payments, but your CSP must run a test to confirm you can deliver the committed reduction.

Sources

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