---
title: "9 Hidden Costs of Staying with Legacy Direct Load Control (DLC) Systems vs. a Grid-Edge DERMS"
id: "6506"
type: "post"
slug: "9-hidden-costs-of-staying-with-legacy-direct-load-control-dlc-systems-vs-a-grid-edge-derms"
published_at: "2026-10-14T13:00:28+00:00"
modified_at: "2026-10-12T12:04:53+00:00"
url: "https://virtual-peaker.com/blog/9-hidden-costs-of-staying-with-legacy-direct-load-control-dlc-systems-vs-a-grid-edge-derms/"
markdown_url: "https://virtual-peaker.com/blog/9-hidden-costs-of-staying-with-legacy-direct-load-control-dlc-systems-vs-a-grid-edge-derms.md"
excerpt: "With electric demand spiking, demand flexibility initiatives like demand response, virtual power plants, BYOD programs, or EV charging are critical […]"
taxonomy_category:
  - "Sustainability"
  - "Technology"
---

Sustainability

# 9 Hidden Costs of Staying with Legacy Direct Load Control (DLC) Systems vs. a Grid-Edge DERMS

[Virtual Peaker Team Published Oct 14, 2026](https://virtual-peaker.com/author/virtual-peaker-team/)

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With electric demand spiking, demand flexibility initiatives like [demand response](https://virtual-peaker.com/demand-response/)
, [virtual power plants](https://virtual-peaker.com/topline-demand-control/)
, [BYOD programs](https://virtual-peaker.com/bring-your-own-device/)
, or [EV charging](https://virtual-peaker.com/ev-charging/)
 are critical strategic initiatives to affordably meet rising demand, while strengthening grid resiliency. Utilities can manage these programs by one of two ways: using [Grid-Edge DERMS](https://virtual-peaker.com/platform/derms-suite/)
 software that aggregates, [forecasts](https://virtual-peaker.com/platform/forecasting-suite/)
, dispatches, and reports on behind-the-meter [distributed energy resources (DERs)](https://virtual-peaker.com/blog/distributed-energy-resource/)
 across multiple demand flexibility programs, or legacy direct load control (DLC), which switches a narrow set of devices off and on.

Utilities that keep legacy DLC in place often pay for that choice in ways that never show up as a single line item.

Those costs matter because demand flexibility is now a core grid resource. Much of the U.S. grid is [40-70 years old](https://gizmodo.com/what-will-it-take-to-modernize-the-us-power-grid-2000755720)
, and upgrading it is [projected to cost more than $2.5 trillion by 2035](https://www.powermag.com/reimagining-the-u-s-grid-why-vpps-could-be-the-bridge-to-a-more-reliable-future/)
. By contrast, the Brattle Group found that [virtual power plants cost roughly 40% to 60% as much as alternative resources](https://www.brattle.com/wp-content/uploads/2023/04/Real-Reliability-The-Value-of-Virtual-Power-Full-Report.pdf)
 providing the same reliability. Programs like demand response, virtual power plants, bring your own device (BYOD), and managed EV charging let utilities shift load to when and where it is needed instead of building new capacity.

The control system behind those programs determines how much value a utility captures. Below are nine hidden costs of staying with legacy DLC, compared directly with a Grid-Edge DERMS.

## In This Article

1. What is Legacy Direct Load Control?
2. What is a Grid-Edge DERMS?
3. 9 Hidden Costs of Staying with Legacy DLC
4. Legacy DLC vs. Grid-Edge DERMS at a Glance
5. The Bottom Line
6. FAQs
7. Glossary of Terms

## What is Legacy Direct Load Control?

Direct load control is a demand-side management program in which a utility [signals customer appliances to stop operating to reduce electricity demand](https://regulationbodyofknowledge.org/glossary/d/direct-load-control-dlc/)
, usually in exchange for a [financial incentive](https://virtual-peaker.com/incentive-processing/)
. NERC classifies it as a form of [direct control load management](https://nercipedia.com/glossary/direct-control-load-management/)
, where the system operator controls the load rather than the customer. [Typical targets](https://www.sciencedirect.com/topics/engineering/direct-load-control)
 are central air conditioners, water heaters, and pool pumps.

“Legacy” DLC refers to the hardware-centric systems utilities built decades ago: one-way radio or paging switches physically installed on equipment, dispatched from a standalone head-end. As the [history of demand-side management](https://virtual-peaker.com/blog/the-history-of-demand-side-management/)
 shows, these programs were designed to shed load during a few peak events per year. FERC data once counted [380 DLC programs serving nearly 6 million participants](https://www.renewableenergyworld.com/power-grid/smart-grids/not-your-grandfather-s-load-control-helping-utilities-maximize-demand-response/)
, and nearly all of them ran on one-way paging networks that were already nearing obsolescence.

## What is a Grid-Edge DERMS?

A distributed energy resource management system (DERMS) is, according to NREL researchers, [a software platform focused on controlling DERs to provide grid services](https://docs.nlr.gov/docs/fy21osti/78798.pdf)
 such as peak load management. A Grid-Edge DERMS applies that capability to behind-the-meter devices that customers own: smart thermostats, water heaters, EV chargers, home batteries, and [solar inverters](https://virtual-peaker.com/blog/what-are-solar-inverters/)
, plus commercial and industrial loads.

The distinction matters because grid-side systems such as an advanced distribution management system (ADMS) typically [do not have access to behind-the-meter assets](https://docs.nlr.gov/docs/fy21osti/78798.pdf)
, according to the same NREL study. A Grid-Edge DERMS fills that gap by connecting to devices through cloud APIs and two-way communications, then layering forecasting, dispatch optimization, measurement and verification, and customer engagement on top. In the NREL test bed, a DERMS dispatching residential batteries cut feeder demand by roughly 800 kW while keeping voltages within ANSI limits.

## 9 Hidden Costs of Staying with Legacy DLC

### 1. Incentives paid for load that never dropped

One-way switches send no data back to the utility, so there is no confirmation that a device actually curtailed. Utilities [continue to pay incentives to every participant whether or not load was shed](https://www.renewableenergyworld.com/power-grid/smart-grids/not-your-grandfather-s-load-control-helping-utilities-maximize-demand-response/)
. A Grid-Edge DERMS receives device-level telemetry, so incentives can be tied to verified performance.

### 2. Aging hardware and rising maintenance

Legacy systems [require ongoing upkeep](https://virtual-peaker.com/blog/legacy-load-control-vs-grid-edge-derms/)
: staff tracking down archaic manuals, protecting equipment from heat and dust, and maintaining power supplies and communications that vendors no longer support. Every failed switch can mean a truck roll. A Grid-Edge DERMS connects to devices customers already own, shifting hardware costs off the utility’s balance sheet.

### 3. Capacity lost to silent device failures

Paging networks have dead spots, and because they are one-way, failed devices go undetected and event success rates decline over time. One analysis found that moving to two-way control can reach [over 99% of devices and deliver up to 40% greater program benefits](https://www.renewableenergyworld.com/power-grid/smart-grids/not-your-grandfather-s-load-control-helping-utilities-maximize-demand-response/)
. Every megawatt lost to an unseen failure is a megawatt the utility must buy or build elsewhere.

### 4. No forecasting, so no confident dispatch

Legacy DLC can shed load but cannot predict it. Without [demand forecasting](https://virtual-peaker.com/platform/forecasting-suite/)
, operators call events on instinct, which risks missing the true peak or over-dispatching customers. That gap is expensive, since NREL notes that [peak demand charges are often a significant part of a utility’s overall expenses](https://docs.nlr.gov/docs/fy21osti/78798.pdf)
. A Grid-Edge DERMS forecasts system and feeder load alongside available flexibility, so dispatch decisions are planned rather than reactive.

### 5. Thin reporting and difficult measurement and verification

Regulators, wholesale markets, and boards increasingly want [proof of performance](https://virtual-peaker.com/blog/how-to-measure-the-success-of-your-demand-flexibility-program/)
. With no return data, legacy DLC makes it difficult and costly to verify load reductions. Grid-Edge DERMS platforms generate event-level reporting on baselines, kW reduced, device participation, and opt-outs, which simplifies cost-effectiveness filings and capacity accreditation.

### 6. Locked into a single program type

Legacy DLC was built for one job: shed air conditioning or water heating load during a peak. It cannot easily orchestrate batteries, solar inverters, or EV chargers, even as the [U.S. DER market is projected to nearly double by 2027](https://www.woodmac.com/press-releases/us-distributed-energy-resource-market-to-almost-double-by-2027/)
. A Grid-Edge DERMS manages many device types in one platform and assigns them to demand response, [BYOD](https://virtual-peaker.com/bring-your-own-device/)
, [EV managed charging](https://virtual-peaker.com/ev-charging/)
, and [virtual power plant](https://virtual-peaker.com/topline-demand-control/)
 programs at once.

### 7. Blunt control that drives opt-outs

On/off cycling treats every home the same, regardless of comfort or occupancy. Blunt curtailment [frustrates customers and erodes participation](https://virtual-peaker.com/blog/what-to-look-for-in-energy-management-utility-software/)
. A Grid-Edge DERMS can pre-condition homes, stagger devices, and adjust setpoints by small increments, preserving comfort while still delivering a predictable aggregate load shape.

### 8. Manual program administration and weak customer engagement

Legacy DLC handles control, not people. Enrollment, eligibility checks, event notifications, and incentive payments often live in spreadsheets or separate systems. Grid-Edge DERMS platforms add [customer engagement](https://virtual-peaker.com/platform/customer-engagement-suite/)
 tools, [incentive processing](https://virtual-peaker.com/incentive-processing/)
, and [program management automation](https://virtual-peaker.com/program-management-automation/)
, which lower administrative cost and improve retention.

### 9. Missed non-wires alternatives

Legacy DLC dispatches system-wide, so it cannot target a single constrained feeder or substation. That leaves utilities defaulting to expensive infrastructure upgrades. With [localized dispatch](https://virtual-peaker.com/localized-dispatch/)
, a Grid-Edge DERMS groups DERs by location and relieves specific grid constraints, helping defer capital projects.

## Legacy DLC vs. Grid-Edge DERMS at a Glance

Legacy DLC still has real strengths: it is proven, simple, already paid for, and does not depend on customer Wi-Fi. Its limits appear once a utility needs visibility, flexibility, or more than one program type.

- **Communications**: Legacy DLC relies mostly on one-way radio or paging, while a Grid-Edge DERMS uses two-way cloud [API](https://virtual-peaker.com/apis/) and IoT connections.
- **Device types**: Legacy DLC controls air conditioners, water heaters, and pool pumps. A Grid-Edge DERMS adds smart thermostats, EV chargers, batteries, solar inverters, and C&I loads.
- **Program types**: Legacy DLC supports demand response. A Grid-Edge DERMS supports demand response, VPPs, BYOD, EV managed charging, and [C&I programs](https://virtual-peaker.com/commerical-industrial-load-management/) from one platform.
- **Forecasting**: Legacy DLC offers none. A Grid-Edge DERMS forecasts system load, feeder load, and available flexibility.
- **Reporting and M&V**: Legacy DLC results are estimated and hard to verify. A Grid-Edge DERMS provides device-level and event-level reporting.
- **Customer engagement**: Legacy DLC leaves enrollment and incentives to separate systems. A Grid-Edge DERMS manages enrollment, notifications, and incentives together.
- **Locational dispatch**: Legacy DLC dispatches system-wide. A Grid-Edge DERMS can group and dispatch DERs by feeder or substation.
- **Hardware ownership**: Legacy DLC depends on utility-owned switches. A Grid-Edge DERMS mostly uses customer-owned devices.
- **Main strength**: Legacy DLC is proven, simple, and independent of customer connectivity. A Grid-Edge DERMS is flexible, scalable, and data-rich.
- **Main weakness**: Legacy DLC is aging, opaque, and single-purpose. A Grid-Edge DERMS depends on device connectivity and customer enrollment.

## The Bottom Line

The true cost of legacy DLC is not the hardware already installed but the value it cannot capture: unverified incentives, undetected failures, unforecast peaks, and programs it cannot run. A Grid-Edge DERMS turns the same customer relationships into a multi-program, data-driven resource that can grow with DER adoption. Utilities do not have to switch overnight. Many run both systems during a transition, but the longer that period lasts, the longer they pay the cost of maintaining two systems. For a framework to evaluate options, see [what to look for in energy management and utility software](https://virtual-peaker.com/blog/what-to-look-for-in-energy-management-utility-software/)
.

## FAQs

**What is the difference between direct load control and a Grid-Edge DERMS?** Direct load control is a program method in which a utility remotely switches specific appliances off during peaks, usually over one-way radio. A Grid-Edge DERMS is a [software platform](https://virtual-peaker.com/platform/)
 that aggregates many types of behind-the-meter DERs over two-way communications and adds forecasting, reporting, and customer engagement.

**Can a utility run legacy DLC and a Grid-Edge DERMS at the same time?** Yes. Many utilities phase out legacy switches gradually as devices fail or customers churn, while enrolling new smart devices in the DERMS. The trade-off is the expense of operating two systems in parallel.

**What DERs can a Grid-Edge DERMS control?** Common examples include smart thermostats, connected water heaters, EV chargers, residential batteries, solar inverters, and commercial and industrial loads. Supported devices vary by platform and integration partners.

**Is a Grid-Edge DERMS only useful for large investor-owned utilities?** No. [Cooperatives](https://virtual-peaker.com/cooperatives/)
 and [municipal utilities](https://virtual-peaker.com/municipal-utilities/)
 often see strong value because peak demand charges are a large share of their costs and legacy DLC hardware is common in their territories.

**How does a Grid-Edge DERMS support virtual power plants?** It aggregates thousands of DERs and dispatches them to follow a target load shape, forecasting available flexibility beforehand and verifying performance afterward. Legacy DLC can shed load but cannot shape it predictably.

## Glossary of Terms

- Behind-the-meter (BTM): Equipment on the customer’s side of the utility meter, such as thermostats, batteries, or EV chargers.
- Bring your own device (BYOD): A program in which customers enroll devices they already own rather than receiving utility-installed hardware.
- Demand flexibility: The ability to shift or reduce electricity use in response to grid needs.
- [Demand response](https://virtual-peaker.com/blog/what-is-demand-response/) : Programs that reduce or shift customer load during peak or constrained periods, usually for an incentive.
- Direct load control (DLC): A demand response method in which the utility remotely switches customer appliances off or cycles them during peaks.
- [Distributed energy resource (DER)](https://virtual-peaker.com/blog/distributed-energy-resource/) : A small-scale energy resource connected to the distribution grid, including solar, storage, EVs, and smart appliances.
- [Distributed energy resource management system (DERMS)](https://virtual-peaker.com/blog/distributed-energy-resource-management-systems-derms/) : A distributed energy resource management system: software that monitors, forecasts, and controls DERs to provide grid services.
- [Grid-Edge DERMS](https://virtual-peaker.com/blog/the-difference-between-grid-edge-derms-grid-derms/) : A DERMS focused on aggregating customer-owned, behind-the-meter DERs across multiple demand flexibility programs.
- [Managed EV charging](https://virtual-peaker.com/blog/what-is-managed-charging/) : Shifting or throttling EV charging to off-peak times or to relieve grid constraints.
- Measurement and verification (M&V): Methods for confirming how much load a program actually reduced against a baseline.
- [Non-wires alternative](https://virtual-peaker.com/blog/what-are-non-wires-alternatives/) : Using DERs or demand flexibility to defer or avoid traditional grid infrastructure upgrades.
- [Virtual power plant (VPP)](https://virtual-peaker.com/blog/what-is-a-virtual-power-plant/) : An aggregation of DERs dispatched together to act like a power plant, delivering capacity or grid services.

### Is Your Grid-Edge DERMS Built for What’s Next?

[Explore Shift](https://virtual-peaker.com/platform/derms-suite/)

About The Author

[https://virtual-peaker.com/author/virtual-peaker-team/](https://virtual-peaker.com/author/virtual-peaker-team/)
Virtual Peaker is a remote-first company based in Louisville, KY, with employees in many time zones. Since 2015, Virtual Peaker has worked to help our utility partners around the world build a better, greener grid through scalable, cloud-based software solutions. Founded by Bill Burke, Virtual Peaker has grown to serve utility DER and demand response management needs, as well as providing resources to help utilities meet decarbonization regulations and grid reliability.

[More About Virtual Peaker](https://virtual-peaker.com/author/virtual-peaker-team/)

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