The U.S. demand response management market is growing at nearly 15% annually and is projected to more than double by 2030. Commercial buildings account for more than 25% of that market, and HVAC is, by quite a wide margin, the biggest controllable load inside those buildings. It accounts for 40–60% of total electricity consumption.

Today, however, most HVAC OEMs are barely participating. The ones that have done anything at all are typically stopping at the most basic level: reacting to dynamic electricity tariffs. That’s a feature, not a business. The real money, the kind that creates recurring revenue and shifts your competitive position, requires going a step further.

Three levels of grid participation

Level 1: Tariff response. Your system reads price signals and shifts operation to cheap hours. Pre-cool before peak. Run the heat pump when rates are low. This is now table stakes; consumers expect it, and SG Ready relays have commoditized it in Europe. The grid operator has no visibility into what your equipment is doing, no ability to coordinate it, and no reason to pay you for it. Revenue to OEM: zero.

Level 2: Aggregator-mediated DR. An aggregator (Enel X, CPower, AutoGrid, etc.) signs up your customers, pools their HVAC into a virtual power plant, and bids flexibility into wholesale or ancillary markets. The problem: the OEM is invisible. The aggregator owns the customer relationship and captures the margin. Each aggregator wants a different API. You become a dumb pipe. Revenue to OEM: minimal.

Level 3: Direct grid participation via OpenADR. Your cloud platform or BMS speaks OpenADR natively as a Virtual End Node (VEN). It receives dispatch signals directly from utilities, ISOs, or aggregators using one open standard. No custom integrations per partner. Any certified party can dispatch your fleet. You own the platform, the data, and the customer relationship.

This is where the economics change. You can offer “grid-services enabled” as a premium product tier. You can license your platform to installers and energy service companies. You can participate in utility DR programs, capacity markets, and ancillary services, directly or through aggregators, on your terms. Revenue to OEM: significant and recurring.

The U.S. market is ready for this

A few things are converging that make this the right moment for HVAC OEMs to move:

California’s SB 49 directs the CEC to establish standards for “flexible demand appliances”, appliances whose operation can be scheduled, shifted, or curtailed to support the grid. HVAC is specifically in scope. AHRI Standard 1380 already establishes requirements for demand-responsive variable capacity HVAC systems using OpenADR and CTA-2045. This is the direction of regulation in the largest state energy market in the country.

FERC is pushing automated demand response hard. Updated policies proposed in 2024 require large commercial buildings to implement automated load-shifting, backed by $500 million in deployment funding. The utilities executing these programs need certified, interoperable endpoints, not proprietary integrations with every equipment vendor.

The economics already work. Utility DR programs in California (PG&E, SCE) pay for verified load shed. Aggregators bidding into PJM, ERCOT, and NYISO capacity and ancillary markets are actively looking for controllable HVAC load. A fleet of commercial VRF systems or heat pumps with certified OpenADR capability is a highly attractive asset for any flexibility provider.

OpenADR 3.0 makes this practical

If you looked at OpenADR 2.0b and decided it was too heavy for your engineering team, that’s fair. It was built on SOAP/XML, required mutual TLS with certificate management, and the spec ran to hundreds of pages. OpenADR 3.0 is a different animal:

It’s a REST API with JSON payloads, the same stack your developers already use for cloud connectivity and IoT. Authentication is OAuth 2.0 instead of mutual TLS. The core data model fits on three pages. It supports webhooks for push notifications and message queues for in-building devices. And the “convention over specification” philosophy means you implement defaults and only customize what you need.

The practical result: a VEN implementation that used to take a specialized team 3–6 months can now be done in weeks. The largest utility in California is already rolling out OpenADR 3.0 for price distribution, and it’s gaining traction in Europe as well.

What this looks like for an HVAC OEM

The architecture is straightforward. Your cloud platform or BMS acts as the VEN, receiving signals from utility/ISO VTNs. It translates those signals into equipment-level commands through your existing control hierarchy, adjusting setpoints, cycling compressors, modulating fan speeds, whatever makes sense for the specific system and comfort parameters.

The relevant signal types for HVAC map cleanly to real programs: ELECTRICITY_PRICE for dynamic pricing optimization, LOAD_CONTROL for percentage-based capacity limits during grid events, SIMPLE for emergency shed levels, and LOAD_DISPATCH for direct kW-level dispatch into ancillary markets.

The building’s thermal mass is your secret weapon here. Unlike batteries or EV chargers, HVAC can shift significant load with minimal impact on occupant comfort—particularly in commercial settings where pre-conditioning strategies can bank hours of flexibility. That’s a valuable grid asset.

We’ve done this before

We recently worked with a global pool equipment manufacturer facing the same fundamental challenge: California regulation was creating a compliance requirement for demand-responsive capability, and they needed to move fast. Pool pumps, like HVAC systems, are high-consumption assets with significant thermal inertia, meaning they can shift load without anyone noticing.

Using Codibly’s pre-built VEN accelerator, we integrated a certified OpenADR VEN into their existing IoT platform in six weeks. Full OpenADR Alliance certification. Products eligible for California utility DR programs. The manufacturer went from having hardware that was invisible to the grid to having a fleet of dispatchable assets participating in paid demand response.

The same path is available to any HVAC OEM. The implementation burden with OpenADR 3.0 is significantly lower, and the commercial opportunity is significantly larger, given the scale of HVAC load relative to pool pumps.

And Europe is right behind

While the U.S. market is more mature for DR programs today, the European opportunity is developing fast. The EU’s Network Code on Demand Response (submitted to the European Commission in March 2025) will create harmonized rules for demand-side participation across all EU electricity markets from 2027. Member states must assess flexibility needs by July 2026 and set national targets by January 2027. Heat pumps and HVAC are explicitly identified as flexibility assets.

For OEMs with global ambitions, building OpenADR capability now means being ready for both markets with a single protocol investment.