The demand response (DR) sector is increasingly facing consolidation and potential disruption by new technologies, and the resulting ecosystem is causing players to move further out into other smart grid sectors. At the same time, smart grid firms are starting to tread into demand response. Now the question is, where will the two meet?
For decades, utilities have been paying customers to help shave peak power demand via low-tech means like phone calls to facility managers. While new controls and communications technologies are opening more efficient and scalable models, the DR industry remains, at its heart, a service business, according to a recent Cleantech Group analysis (pdf).
That gives DR incumbents like EnerNOC and Comverge, who are essentially middlemen between building owners and utilities, a chance to expand into regions traditionally considered the realm of smart grid.
EnerNOC, for instance, has acquired a series of businesses including building energy efficiency software and wireless controls — markets potentially much bigger than demand response. While EnerNOC mainly turns off factory lines and other industrial processes today, it can also shift air conditioner loads, turn down store lights, and perform other energy efficiency-style functions — all while offering DR premiums beyond simple power bill reduction.
I recently learned that EnerNOC also plans to announce a partnership with Cisco around building management in the near future. Cisco is already laying plans to network every other part of the grid. Could it be looking to use EnerNOC’s customer relationships to jumpstart its building energy management plans?
The DR giant also has a technology called PowerTalk to send signals to automatically control building power loads. Right now a rival tech called OpenADR is the lead contender for a new standard of next-generation DR. But if EnerNOC can get PowerTalk widely adopted, standards-setting bodies may bring it into the fold as well.
Building management system incumbents such as Siemens, Honeywell, Johnson Controls and Schneider Electric are making moves into demand response as well. But EnerNOC’s advantage is that it ties multiple systems and customers together. BMS vendors have traditionally been more proprietary and vertically integrated, though many are promising future interoperability.
Comverge, on the other hand, differs from EnerNOC in a few key ways: It provides demand response for homes as well as commercial and industrial spaces; it makes its own smart thermostats and other gear; and it provides a turnkey line of business for utilities that want to hold the reins. While it has slightly fewer megawatts under management than EnerNOC, it’s also pursuing different opportunities, most recently with its Apollo platform, which enables DR over smart meters as well as its traditional pager networks.
Word on the street is that Comverge may soon announce a rebranding and business shift, and I’m curious to see if it might involve a more smart grid-focused platform based on Apollo. It will have competition if it does; similar systems from Lockheed Martin, Cooper Power and UISOL promise to give utilities enhanced capability to manage DR on their own terms.
The main point is that demand response offers unique opportunities to turn extra revenues into faster technology deployments, whether through traditional DR channels, smart meters, building management systems, virtual power plants (aka microgrids) or other smart grid configurations. A host of recent smart grid acquisitions — including the purchase of DR provider CPower by competitor Constellation Energy, Honeywell’s acquisition of OpenADR server maker Akuacom and Cisco’s purchase of Arch Rock — show that the big boys in play are paying attention.
At the same time, new pricing schemes and new technology offer major challenges to traditional DR business models. Whether success comes in building new tech capabilities around existing service contracts or making that technology available to would-be usurpers is anyone’s guess.
Related Research: Report – An Open Source Smart Grid Primer