Navigant Research Blog

Adapting to the New Demand Response Landscape

— January 27, 2015

Demand response (DR) was first employed in the United States the 1970s.  At that time, DR was implemented as a component of the energy conservation focus of demand-side management (DSM) programs to encourage consumers to use less electricity during peak hours or to shift their energy use to off-peak times.  Utilities have run residential direct load control programs as forms of demand management and offered interruptible rates to commercial and industrial customers for many years.

Today, however, the electric grid needs resources beyond just meeting peak demand situations, requiring more flexibility and faster response.  A number of drivers point toward increased DR adoption by utilities and grid operators around the world.  The changing resource mix in electric grids globally is creating more potential for DR to play a pivotal role.  As coal and nuclear plants retire due to economic or environmental factors, clean replacements are needed that can be built in short timeframes.  Conversely, as large-scale intermittent renewable resources like wind and solar power fill in this gap, they require backup solutions when the wind is not blowing and the sun is not shining.

New Training Course

At the same time, new market types, including ancillary services such as spinning reserves and frequency regulation, are opening up to DR.  The concepts of resilience and microgrids have taken strong root along the Atlantic Coast following Hurricane Sandy in 2012, and DR will be an integral part of those developments.  The advent of grid modernization is also tied to this new view on how the grid should be designed.  With the proliferation of advanced meters that can record usage at very small intervals, more dynamic types of pricing can be applied down to the residential level.

To help utilities navigate through this changing landscape, the Peak Load Management Alliance has developed a series of DR training courses.  The next session, DR Program Design and Implementation, will take place from February 18 to 19, hosted by NV Energy in Las Vegas.  The 2-day course will first cover program development topics like DR program types; how to determine market potential; designing programs and managing portfolios of programs; and calculating cost-effectiveness.  The second day will delve into program implementation strategies and tactics such as staffing and operations; strategic outsourcing; technology architecture and integration; and evaluation, measurement, and verification.

A Visit to the NOC

NV Energy is a pioneer in testing out innovative DR program designs in an extreme climate.  The company has a diverse portfolio of programs that includes a range of applications, along with various flavors of direct load control, dynamic pricing, and DR in combination with energy efficiency programs.  The Las Vegas course will include a visit to NV Energy’s operations center, along with a first-hand look at its DR management system in action.

For utilities considering or being required to implement DR programs (which includes just about every utility today), this is a great opportunity to hear from industry experts and meet peers from across the country to exchange experiences and best practices.  For more information on the course, please click here.

 

Busy Start to 2015 for Smart Grid Companies

— January 22, 2015

Smart grid companies must have gotten their wishes granted during the holidays, because they are in a sharing mood to kick off the new year.  A burst of merger and acquisition and partnership activity shows that the ecosystem is growing and there’s enough room for everyone to get a piece of the bigger pie.

Trilliant and Innovari announced the completion of interoperability testing of the Innovari Interactive Energy Platform (IEP) and the Trilliant Smart Grid Communications Platform (SCP).  This combination enables utilities to improve operations and benefit customers with a shared communications infrastructure for smart grids.  The Innovari IEP provides automated demand response (DR) for commercial and industrial customers.  The Trilliant SCP complements the IEP with a two-way communications network to deliver grid situational awareness that enables real-time demand side management and the integration of distributed renewable energy resources.

Analytics and Engagement

Silver Spring Networks acquired longtime partner Detectent, which provides software to improve advanced metering infrastructure and utility grid operations, ensure revenue protection, and deliver enhanced customer engagement programs.  Detectent’s utility analytics solutions will be offered both as a standalone solution or powered by Silver Spring’s smart grid big data platform, the SilverLink Sensor Network.

Schneider Electric, meanwhile, announced two recent partnerships.  The first is a partnership with PlanetEcosystems to provide utility service providers with Efficiency Advisor, an integrated suite of software-as-a-service customer management offerings.  Combining Schneider’s Wiser Home Management system with PlanetEcosystems’ P-ECOSYS customer engagement platform, Efficiency Advisor will offer features like behavioral usage efficiency, home usage reporting, personalized recommendations, and an energy marketplace for customers to find contractors and financing options for energy efficiency programs.

Schneider’s second announcement involves a partnership between its European DR division, Energy Pool, and Hyosung, a South Korean industrial conglomerate, to offer DR in the newly opened South Korean marketplace.  Energy Pool will provide its DR expertise and manage operations, while Hyosung will tap into its network of industrial partners and provide IT support.

Just Couldn’t Wait

Often, companies will wait for the DistribuTECH conference to make big announcements about partnerships and new technologies, but these deals apparently couldn’t wait.  They’ll be discussed at this year’s DistribuTECH in San Diego, running February 3 to 5.  Last year, the theme at the conference seemed to be data analytics, as vendors showed how they can extract usable information from the plethora of data now available from meters and devices.  Based on these early announcements, it appears that the one-word summary for this year’s conference will be “interoperability.”

Now that the analytics are available, vendors are realizing that they likely can’t offer all possible analytical tools for utilities on their own, so collaboration will be necessary.  Whether that is through mergers and acquisitions or partnerships, I expect this trend to continue and am sure there will be more announcements at DistribuTECH from those who held back their surprises.

 

A Tumultuous Year for Demand Response

— January 6, 2015

Weatherman_webThe participation of demand response (DR) in the wholesale markets has been fairly stable for the last 5 years or so.  2014 blew those trends out of the water.

The year came in like a lion, with the polar vortex hitting the entire United States during the first week in January.  Virtually every region of the country activated DR resources during that freeze.  Overall, DR performed well, dispelling myths that it could not contribute to winter reliability.

The spring brought the annual forward capacity auctions for the 2017-2018 power year for ISO New England and PJM, which both showed lackluster results for DR.  In New England, while capacity prices doubled around the region, the amount of DR cleared capacity stayed flat from the prior year’s auction.  Meanwhile in PJM, while the capacity price in the eastern region stayed flat and the western price doubled compared to the prior year’s auction, DR cleared 10% less capacity than last year.

Legal Bombshell

Then the fireworks began.  Everyone in the industry had been waiting for a ruling from the U.S. Circuit Court of Appeals on Order 745 from the Federal Energy Regulatory Commission (FERC) on DR compensation in response to a challenge that was raised by the Electric Power Supply Association a couple years earlier.  The court dropped a bombshell by questioning the very jurisdiction of FERC over DR, and the entire DR community stopped in its tracks.

The rest of the year was consumed by appeals and writs and stays and various other legal maneuvers, with some parties trying to get the court’s decision to take immediate effect and others trying to delay it as long as possible and get the U.S. Supreme Court to take up the case.  As we enter 2015, the fate of the order is still in the balance, and probably will be until the spring, when the Supreme Court will likely decide whether to take up the case.

Meanwhile, Elsewhere …

Other accomplishments in the DR world have been overshadowed by the FERC 745 case.  Baltimore Gas and Electric unveiled the first default Peak Time Rebate program.  New York and California are undertaking large-scale utility transformation efforts.  Internationally, many markets in Europe are percolating with DR activity, and Asia is heating up as well, led by South Korea opening up its electricity market to DR in November.  Finally, merger and acquisition activity in the space has accelerated, with EnerNOC going on a buying spree and Constellation selling its DR business to Comverge to create CPower.  Many of the above topics, along with several other interesting developments, can be found in Navigant Research’s free white paper, Smart Grid: 10 Trends to Watch in 2015 and Beyond.

Will 2015 be equally eventful?  I certainly don’t expect a repeat of the polar vortex situation, so in that respect, DR should get a respite.  I do expect chaos on the regulatory front to continue, though, regardless of the outcome on Order 745.  The regional transmission organizations will likely continue to squeeze all resources, including DR, for higher reliability standards.  More states are expected to push for retail-level DR, both as a reaction to Order 745 and out of their own needs.  And the international arena is likely to expand strongly, providing a relief outlet for companies looking to diversify outside the United States.

 

CPower Reemerges as a Demand Response Player

— December 15, 2014

In October, I wrote about the announcement that Comverge and Constellation would combine their commercial and industrial demand response (DR) businesses into a standalone entity.  The questions were: What would the new company be called?  Would they take one of the existing names?  Combine the two names?  Come up with something new?  Instead, they brought back a familiar brand: CPower, the name of the DR provider that Constellation bought 4 years ago.

But this is not your mother’s CPower, according to Chris Cantone,  the company’s senior vice president of sales and marketing.  The C in CPower carries multiple meanings aside from the lingering brand recognition: the combination of Comverge and Constellation, customer engagement, and curtailment services.  “The market has been excited about the announcement, and our channel partners have been waiting for an independent DR provider,” Cantone told me in a phone interview.  The company is still in a little bit of stealth mode as the behind-the-scenes business combination unfurls, but expect a media splash in the near future.

Divide and Succeed

What value does this new structure bring to the parties involved? Cantone says that the future of DR will entail greater technical requirements, which were hard to fulfill under a larger organization like Constellation.  CPower can be more strategic and proactive on its own, while maintaining a preferred provider relationship with Constellation for its customers.  From Comverge’s perspective, there was a lack of synergy between its utility-focused residential business and its market-focused commercial and industrial business, so it made sense to split them up and allow them to build to their own strengths.

So was Constellation’s purchase of the original CPower 4 years ago a mistake?  No, asserts Cantone.  It was an invaluable experience for the old CPower DR experts to get immersed in the energy markets and learn how DR fits into the bigger picture on the wholesale side with generation and the retail side with customers’ energy procurement strategies.   Additionally, the 2011 deal was the move that set in motion the trend of larger energy entities investing in the DR realm, as Johnson Controls bought Energy Connect, Siemens bought Site Controls, Schneider bought Energy Pool (in Europe), and NRG bought Energy Curtailment Specialists.  Will those combinations survive?  Cantone thinks they will have to deal with the same issues that Constellation did, and we will have to see who can find internal solutions and who sets DR free.

The Real Threat

Regarding business strategy, the initial intent is to focus on the existing markets in the United States, like PJM, ERCOT, NYISO, ISO-NE, and California.  An expansion into utility programs could be the next growth step, followed by selective entry into the burgeoning international arena.

I contacted executives at EnerNOC to get their take on what looks to be their strongest competition, but they declined to comment .  In the meantime, EnerNOC and CPower may find common ground to combat the potential disruption from the court drama over FERC 745 to remove DR from the wholesale markets, which could affect them more than any amount of friendly competition could.

 

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