Navigant Research Blog

PLMA Fall Conference Highlights Key Trends in the DR Industry

— December 2, 2016

Power Line Test EquipmentIn early November, the Peak Load Management Alliance held its annual fall conference in Delray Beach, Florida. Aside from the election excitement surrounding the conference, some interesting sessions and trends emerged from the meeting.

The conference agenda has expanded over time as more special interest groups have formed to tackle hot topics in the industry. Community storage and thermostat groups have been meeting for the past several conferences, and this year customer engagement and retail pricing groups were added to the mix. The retail pricing group had a lot of ground to cover and had to first define the boundaries of its scope, since pricing can become a very broad topic if not properly fenced. There was an interesting dichotomy between the public power agencies, which have freedom to offer whatever rates they please, and the investor-owned utilities, which must get regulatory approval for any new rate structures.

Rate Making at the Center

The full conference got underway with an opening panel on rate making. Edison Electric Institute moderated a group including NRG Curtailment Solutions, Georgia Power, Consolidated Edison, and the Independent System Operator of New England. The panel showcased a wide range of perspectives based on varying beliefs in the power of competitive markets, the coordination between retail and wholesale markets, and whether utilities should get directly involved in customer enablement or if it should be left to market players.

Next, some utilities explained their demand response (DR)/smart grid programs for residential customers. National Grid detailed its Smart Energy Solutions pilot in Worcester, Massachusetts, which provided smart thermostats and Wi-Fi gateways to customers. Old Dominion Electric Cooperative described how it went beyond hardware to obtain more DR from customers through innovative communication methods to encourage behavioral changes based on pricing and usage information.

I had the pleasure of moderating a panel on demand response management systems (DRMS) that included PECO, NV Energy, and Consumers Energy. Each of the utilities outlined their implementation experiences with different DRMS vendors and offered best practices and lessons learned to those in the audience who hadn’t yet gone through the process.

Varieties of DR

After lunch, a panel that included North Carolina Electric Membership Corporation, NB Power, ecobee, Portland General Electric, and Nest covered the topic of winter DR. Winter DR has garnered interest in northern climates as well as areas where natural gas constraints are causing a lack of electricity generation (i.e., New England, PJM, and California).

After a long election night, presenters provided a smorgasbord of ideas throughout the next day. Hawaiian Electric discussed the impact of energy storage in combination with automated DR. Duke Energy outlined lessons learned from a smart thermostat program that did not get the desired benefits. CPower navigated the muddy waters of DR in California. National Grid and Weatherbug Home explained how to leverage Internet of Things devices for customer engagement.

The conference closed with a thought-provoking session with speakers from NV Energy, Skipping Stone, Navigant, Alternative Energy Systems Consulting, and Joule Assets pontificating upon the future of the DR industry. I’m looking forward to seeing everyone again in Nashville in April for the next round.


What the Reaction to Toll Road Congestion Pricing Means for the Future of Energy Dynamic Pricing

— November 2, 2016

Electric Vehicle 2In my home state, the Massachusetts Turnpike is moving from manned toll booths to open-road tolling, known as gantries. While this change in itself has the potential to disrupt the status quo, local news investigators discovered some hidden ideas that could be rolled out in the future. These disclosures caused such an uproar that the governor publicly announced that the ideas are not being considered now but may be in the distant future.

One of those ideas, congestion pricing, is that toll prices would be higher during rush hour to encourage people to avoid those times, thereby reducing traffic. Sound familiar to those in the energy industry? Terms like dynamic pricing, time-of-use rates, and critical peak pricing are used to describe such mechanisms. There has been a lot of interest in these concepts since advanced metering infrastructure has made them possible. More people are installing smart thermostats, solar, and energy storage, which give customers a greater ability to respond and take advantage of such rates.

A Cautionary Tale

The reaction to the congestion pricing revelation should prove a somewhat cautionary tale for enthusiasts of dynamic pricing for electricity. In general, people were outraged that the government would consider enacting this type of scheme and assumed there was some ulterior motive. Some people felt that tolls should be lower during rush hour since those drivers are the most frequent travelers and a lot of workers can’t control their work schedules to avoid those times. Other people were just concerned about the government knowing that much about their travel habits and how that type of data could be used.

The point is, despite all the logic that can be used to explain the benefits and economic purity of such designs, human nature is the biggest obstacle to be overcome to ensure mass adoption. Many people will always mistrust the government or utilities trying to enact new structures, assuming that said structures must have some kind of advantage for those entities. Others will feel that it is unfair to charge the biggest users of a resource (electricity, roads) more, since for many other goods and services there are cheaper prices for more consumption. The concern for those who cannot control when they use the resource (those with 9-5 jobs, the elderly, or low-income residents for energy) must be successfully countered, particularly for the political establishment to get onboard. Finally, data privacy concerns must be addressed, although 100% of the users will never be satisfied with solutions in that regard.

Of course, the cases of electric dynamic pricing and automotive congestion pricing aren’t an exact comparison, but energy industry dynamic pricing proponents may face the same fate if they fail to consider the human side of the equation.


EnerNOC Restructures: Is It Back to Basics for the Demand Response Company?

— October 13, 2016

AnalyticsA couple of weeks ago, EnerNOC announced a restructuring, a move which included laying off 200 employees, about 15% of the demand response leader’s workforce. Many of these positions were at its corporate headquarters in Boston. I didn’t want write on the topic until I had a chance to talk directly with the company and get its side of the story, which took a week or so of phone tag to complete. Here’s what I heard and my reaction.

I spoke with Sarah McAuley, senior director of marketing at EnerNOC. She explained that the layoffs were focused on the enterprise software side of the business, and they were cross-functional across sales, operations, and other functions. I have since learned that employees in other parts of the organization that dealt with the software business tangentially were also affected by the restructuring. There were no changes to the senior management team, but changes did extend up to the vice president level. McAuley said that there is nothing else at this scale planned in the near future, but that EnerNOC is taking a close look at how it is operating the business and will continue to optimize resources and shift personnel around the edges.

McAuley also stated that EnerNOC is not retreating from the software business, and the company’s core strategy hasn’t changed. However, its go-to-market path and operational delivery models will be different, focusing on becoming more targeted and lean rather than wide and broad.

Pivot to Software

I remember first hearing about the company’s pivot to software at EnerNOC’s Analyst Day in 2013. At the time, it seemed to me like a risky proposition; EnerNOC is not a software company at heart, and it was an uphill battle against the incumbents to carve out its space in that field.

A similar experience appears to have occurred in the energy efficiency space. EnerNOC made a series of acquisitions over a span of 5 years or so, trying to parlay its demand response position into that adjacent space. All of those deals have since been unwound, presumably at a loss.

It’s important to remember that public companies need to take risks to show constant growth for shareholders. Not all of these are expected to completely succeed, but it appears that few have worked outside of EnerNOC’s core competencies.

Potential Paths Forward

So what’s next? Being the only publicly traded demand response/energy efficiency company left, there are a couple examples of previous outcomes. Comverge, EnerNOC’s closest peer, also went public in the heyday of the economy during the last decade. It only lasted a few years before being bought out and brought private, and it has continued to operate steadily since that time. Opower is the most recent case, having tried the public life for a few years before being acquired by Oracle earlier this year—time will tell how that situation will play out. One of those two scenarios seems plausible for EnerNOC at this point, either going private or being swallowed by a larger corporation (though I am not a financial professional, so don’t take this as investing advice).

In any case, I hope EnerNOC’s passion for and leadership in the demand response field will not be lost. Its tide has truly lifted all boats in the sector, and there is a lot of work left to be done to ensure that it keeps its place in the world’s future low-carbon resource mix.


ISO-NE Meeting Attracts Natural Gas Protestors

— September 22, 2016

Oil and Gas ProductionMost regional transmission organization (RTO) stakeholder meetings are about the most dry, boring, and technical sessions you could imagine, usually consisting of a bunch of energy policy wonks debating market rules and cost allocation. But once in a while, something will happen to liven up the scene in an unexpected way. Such was the case at the September 15 Independent System Operator of New England (ISO-NE) Consumer Liaison Group (CLG) meeting in Providence, Rhode Island.

It started out as a typical CLG meeting. Heavy hotel lunch, meeting introduction from the chairperson, ISO-NE update, policy keynote speaker. Then the fun began with a panel on energy infrastructure projects in Rhode Island. First up was the CEO of Deepwater Wind, the developer of the first US offshore wind project to be completed, a 30 MW installation located off of Block Island. Offshore wind used to be controversial in the days of Cape Wind, but now it seems to have become more accepted, and there were no vocal naysayers at this meeting.

Natural Gas Power Plants

Next up was Invenergy, the developer of a new proposed natural gas-fired power plant in Rhode Island. The speaker outlined the basics of the project and made the case for the ISO-NE grid’s need for it. As he got into more of the details of the emissions and gas pipeline needs, a woman stood up on the side of the room and silently held up a sign in opposition to the proposed plant. That action alone was more excitement than is typically seen at one of these meetings, but it was just the appetizer.

Next, a speaker from Spectra Energy (soon to be part of Enbridge) took to the podium. Before he could get too far into his remarks about natural gas pipeline projects in New England, several audience members stood up and walked toward the stage. Two held signs opposing gas pipelines and one acted as the voice for the group, talking loudly to the speaker and the audience about the dangers of fracking.

The speaker from Spectra was obviously used to these types of demonstrations, as he calmly proclaimed that he welcomed the group at the meeting, as long as they didn’t disrupt the event and spoke when the allotted time for questions and answers arrived. The group persisted for a few minutes, but eventually went back to their seats. No need to call in the National Guard.

It was a fresh reminder to me that the discussions undertaken and decisions made in these often esoteric venues have effects on real people in the public and on the land and environment. I honestly don’t think most of the people in the room would disagree with the concern over issues with natural gas extraction and delivery. There is just a difference in opinion over the best path forward for our shared energy future from a cost, reliability, and environmental standpoint. It was a very respectful example of our free society at work.

Now back to those less-than-respectful election campaigns!


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