Navigant Research Blog

The Amazonification of Energy Efficiency

— July 12, 2018

Online marketplaces aren’t only for Amazon and utilities anymore. On July 2, the American Council for an Energy-Efficient Economy (ACEEE) and Enervee announced that they are partnering to give energy product purchasers a new way to shop. This in-kind partnership will provide free resources that combine ACEEE’s efficiency expertise with Enervee’s data, analytics, and marketing capabilities to make it easier for consumers to find the most efficient products that meet their needs.

How Will the ACEEE/Enervee Marketplace Work?

The concept involves a two-step process. When a consumer is ready to purchase a new product, they can visit SmarterHouse to find ACEEE’s energy-saving tips and buying guidance. There, they can view a summary of the most efficient product models available today, featuring the 0-100 Enervee Score. Once they decide on a purchase choice, they will be directed to Enervee’s portal, where they will find detailed product information, pricing, and incentives offered by their utility.

ACEEE and Enervee will share key takeaways to consumers via the SmarterHouse Energy Saver blog and to energy efficiency professionals via ACEEE’s blog. For example, Enervee tracks model-level retail price offers and product market trends, offering a dataset that can provide insights into online shopping behavior, effective messaging, and consumer response to utility program offerings.

Enervee’s vice president of market development, Dr. Anne Arquit Niederberger, said “ACEEE’s large team of researchers and analysts will amplify our ability to tease out valuable insights from our data. And our utility clients will benefit from the informed audience that SmarterHouse channels to their consumer-facing marketplaces.”

Rather than competing with its current portfolio of utility marketplace customers, Enervee believes that this partnership will benefit its utility clients, as informs visitors of available utility rebates and these customers will be people pre-conditioned to seek out energy efficient products. For smaller utilities, Enervee may develop an interface that allows them to input their incentive data themselves.

Customer Engagement Continues to Become More Popular

This trend toward more energy customer engagement and marketplace opportunities is highlighted in the recent Navigant Research report Utility Customer Engagement through Demand Side Management. Most of this activity has taken place through the utility channel, but there are more examples of competitive energy suppliers, product manufacturers, and now non-profits trying to reach customers and influence their buying behavior.

Other Customer Engagement Programs

Another current example of this trend is Shave the Peak, a new program sponsored by the Mass Energy Consumers Alliance and by People’s Power and Light, two non-profit energy organizations. The goal is to get people to reduce their peak loads during grid peak days, not through financial incentives but by appealing to their environmental and community sensibilities. Local utilities like National Grid have their own demand response programs to try to achieve the same goals, but these non-utility outlets might fill a need and reach a different audience than utilities traditionally meet.

The transition for the energy industry to become more consumer-friendly will continue, and many traditional and non-traditional players will lead the way.


DER and the Role of Aggregated Demand Management

— July 10, 2018

The California investor-owned utilities—Pacific Gas and Electric, Southern California Edison, and San Diego Gas and Electric—recently concluded the latest Demand Response Auction Mechanism (DRAM) for 2019. DRAM bidders include traditional demand response (DR) aggregators, energy storage vendors, and EV charging providers.

The Evolution of DR Aggregation

DR aggregators have been enrolling commercial and industrial (C&I) customers in DR programs for 2 decades. The business model is mature and customers are comfortable with their benefits and responsibilities. More recently, other types of distributed energy resources (DER) such as energy efficiency, solar PV, energy storage, generator sets, and EVs have started to proliferate and become eligible for energy market participation. However, it is not necessarily a simple endeavor to integrate different resource types or to find the right mix of vendors to provide them.

While the concepts and technologies behind utilizing DER have been developing since the energy crisis in the 1970s, each asset type has been developing at its own independent pace due to different drivers for growth, without full consideration of how they could be integrated and optimized. As the cost of DER have come down, demand-related charges have continued to increase rapidly. It is just in the past few years that technological, economic, and regulatory changes have made the idea of integrated DER feasible for C&I customers. The control systems to optimize them and the aggregation platforms to connect them create the link between DER assets and the grid.

Since DR programs have matured in the market, other technologies have been used to increase grid reliability and reduce a C&I customer’s net energy spend. Assets such as curtailment, storage, and dispatchable generators can fill in for or operate in parallel with DER that are not controllable, such as solar, fuel cells, and cogeneration units. Revenue from these assets can then be used to revenue stack multiple programs using multiple resources.

What Can Customers Do to Efficiently Integrate DER Value?

To take DER programs to the next level of optimization, integrated DER has been conceptualized in the US in the last decade. However, efforts to integrate local generation, energy efficiency, and DR thus far have been challenging and little progress has been made. Traditionally, energy efficiency and DR have been siloed within utilities, with misaligned goals and barriers to transferring funds between programs, while distributed generation has happened outside the utility realm.

Barriers to integration include different vendors for different resource types, different purchasing agents at customers, different financing models, different technology platforms, and regional differences in DER market rules and access. These obstacles may seem daunting to overcome and lead to paralysis or piecemeal DER adoption; however, there are examples of customers successfully managing these challenges. To address these barriers, customers can take certain actions to assure a more cohesive DER aggregation approach.

Join me on July 25, I am moderating a discussion with CPower on how companies can act to assure a cohesive DER aggregation approach. This free webinar will provide some background on the technologies, highlight the major integration issues, and offer recommendations for customers to choose the right vendor(s) for their situation.


Don’t Call It a Comeback: DR Rebounds in Latest PJM Capacity Auction

— June 5, 2018

Last year at this time, the big question was whether PJM’s new Capacity Performance (CP) construct was going to kill demand response (DR) in the reliability pricing model capacity auction. While it took a hit, it was merely a flesh wound. In 2018, there has been uncertainty about where prices would end up and if DR bidders would feel more comfortable with CP the second time around. All signs point to a healthy DR rebound based on recently released auction results for the 2021-2022 delivery year.

Is 2018 the Year for DR?

Stu Bresler, PJM’s senior vice president of operations and markets, stated that based on this auction, “the death of coal has been greatly exaggerated.” The same can be said for DR. Cleared DR grew from 7,820 MW in the 2020/2021 auction last year to 11,126 MW this year. Every utility zone but one (Duquesne) saw increases, with the biggest changes coming in AEP, Dominion, and ComEd. The 2018 auction had 2,000 MW more DR bid versus 2017’s (11,887 vs. 9,847), and that may be a sign that bidders felt more comfortable after seeing how the first year with CP shook out. For comparison, in 2016, prior to 100% CP, there were 11,818 MW of DR bid, so this year was back to the normal range.

Why the 40% increase? First, the fact that the price nearly doubled from $28,000/MW/year to $51,000 for most of the PJM region could only entice many DR resources that sat out last year to get back in the game. One way to measure the price effect is to see that out of 9,800 MW DR bid last year, 80% cleared, while this year, 94% cleared. Clearly there were a lot of price-sensitive bids last year that could have cleared if the prices ended up higher like this year.

How Important Are the Seasons?

Another major concern was how much DR would bid in as annual resources versus summer-only resources. Only 4% of cleared DR was summer-only, showing that most bidders felt comfortable with the annual CP requirements. Bresler noted that the results seem to counter fears from DR providers on how the seasonal split would affect their competitiveness. He commented, “I was a bit surprised…I question whether we really have a seasonal issue here.”

What Do Providers Have to Say?

Enel X, through its subsidiary EnerNOC, the largest DR provider in PJM, did not publicly provide the megawatts that it cleared, but it did report that it secured more than $180 million in annual capacity payments through the auction, driven by higher capacity prices and an 18% year-over-year growth in MW. “The results are good news for all PJM ratepayers and for commercial and industrial customers who get paid to reduce their energy consumption during times of grid stress to help ensure a clean and reliable grid at least cost to ratepayers,” said Christian Weeks, Head of Flexibility Solutions for Enel X in North America.

CPower, the second biggest PJM DR provider, stated “This result increases the opportunity for DR-capable customers and also prevents even higher price increases for consumers.”

Voltus, a newer DR player, said “The uptick in pricing is exactly what the generators wanted to get out of moving to CP. The uptick in DR is possibly DR, nimble as ever, adopting its offer behavior to price in these new requirements, doing things like teaming up with generators and other resources that have excess winter supply. None of this, however, represents efficient market design and the losers are the ratepayers.”

This isn’t to say that DR in PJM is growing, since it is basically flat from the 2 years prior to CP. But we can certainly say that reports of its death were premature.


Making the Utility-Customer Relationship a Two-Way Street

— May 24, 2018

I recently received a home energy report (HER) on my Honeywell thermostat app. It showed my monthly heating and cooling usage, compared it to last year, provided some thoughts on what factors affected my usage, and offered tips to save money in the future.

The Quest to Increase Customer Engagement

I was intrigued that Honeywell would offer this service outside of a utility-sponsored program, as most HERs are provided. The Honeywell app also includes a marketplace to buy some HVAC-related products and find local home contractors who can provide HVAC services. Both offerings appear to be gaining traction with utilities and retail energy suppliers across the globe in their quest to increase customer engagement.

Honeywell HER

(Source: Honeywell)

The widespread adoption of smartphones, mobile apps, and social networking tools has changed the way that consumers interact with their service providers. Utility customers are becoming more proactive and are expecting more insight into energy usage. The days of a once-a-month bill have morphed into potentially ongoing conversations and numerous points of contact that utilities need to embrace and exploit. Changing tools for engagement such as online, mobile, social networks, and marketplaces create a myriad of choices for utilities that seek to meet current customer expectations.

An Intersection of Technologies and Strategies

Between the distinct functions within a utility of general customer service and demand-side management (DSM) program management lies an intersection of technologies and strategies. These tools can merge the two areas to enhance customers’ experience with the utility and save energy in the process. The changes in consumer expectations brought about by companies like Amazon, Netflix, and others have led utilities to seek DSM software solutions that can lower the cost-to-serve and improve customer satisfaction and engagement.

Utilities are also under pressure to build fewer power plants, accommodate cleaner sources of fuel, and keep rates low. This has caused regulators to place higher priority on better customer service, increasingly incentivize utilities to pursue DSM, and improve their customer relationships. This same effect has occurred in regions experiencing deregulation, such as Texas, Europe, and Australia, which creates a more competitive marketplace. It also results in retail suppliers pursuing DSM offerings to differentiate themselves and evolve to become service providers in the eyes of their customers, rather than commodity providers.

Navigant Research’s new report Utility Customer Engagement through DSM highlights these trends and provides case studies of utilities and retail suppliers offering such products and profiles of vendors that provide such solutions. This market is getting ready for strong growth based on advances in methodologies and technology, utility willingness to try new means of customer outreach, and a myriad of other drivers for DSM in general and these products specifically.

Now back to my Honeywell HER to see how I can use less energy than my neighbors!


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