Industrial, commercial, and residential facilities are progressively adopting automation and generation capabilities. By having flexible demand and renewable energy generation, traditional passive customers are becoming active participants in electric power system operations. Through profound coordination among grid operators and active customers, the facilities’ capability for demand response (DR) and distributed energy resource (DER) management will be valuable asset for ancillary services (ASs). To comply with the increasing demand and flexible energy, utilities urgently require standards, regulations, and programs to efficiently handle load-side resources without trading off stability and reliability. This study reviews different types of customers’ flexibilities for DR, highlighting their capabilities and limitations in performing local ancillary services (LASs), which should benefit the power grid by profiting from it through incentive mechanisms. Different financial incentives and techniques employed around the world are presented and discussed. The potential barriers in technical and regulatory aspects are successfully identified and potential solutions along with future guidance are discussed.