Navigant Research Blog

AESP Conference Makes DSM Gumbo in the Big Easy

— March 22, 2018

I hadn’t attended the Association of Energy Service Professional’s (AESP’s) annual conference in 10 years. I hadn’t been to New Orleans in 20 years. When the two came together in February, I decided it was time to kill two birds with one stone. Neither disappointed. I’ll focus on the conference here, but the beignets, bands, and Bourbon Street were as epic as I remembered.

Buzz-Worthy Presentations

The conference was twice as big as the last time I was there, and the topics have become much broader, reflecting the maturation of the industry. The opening session, Business Models – The Evolving Role of Demand-Side Management (DSM) in Utilities, was a shot across the comfort zone bow that most DSM professionals have settled into. Val Jensen, Senior Vice President of Customer Operations at ComEd, stated that while the energy efficiency group is now a driver of revenue for the company, he would like to see the end of energy efficiency programs as we know them today. He views it as an inefficient cottage industry that is not as unique as we think and is really more of a commodity. Energy efficiency program design is more a reflection of program evaluation than serving customers in a useful way. He believes that the utility should become a platform, where energy efficiency is a high value application that can be offered. The notion that utilities should make money from energy efficiency has been viewed as dirty, but being incented financially to do something is a powerful motivator.

After that wake-up call, I enjoyed seeing some of the presentations that were on the leading edges of DSM. There was a notable smattering of natural gas presentations—a field historically dominated by the electric side of the house. Integrating natural gas and electric DSM programs plays a growing role as utilities try to find more cost-effective ways to meet their goals. Converting fuel oil heating customers to natural gas, and natural gas HVAC applications to electric (like heat pumps) holds promise in saving energy and emissions.

Another buzz term I focused on was customer engagement, in part because I am working on a report covering that topic. A panel with three utility marketplace offerings, energyOrbit, Enervee, and Simple Energy, showed how customers could be enticed to make more efficient purchases by providing information and comparisons on product ratings and costs. It was even posited that traditional energy efficiency rebates could be rendered obsolete through superior data sharing, but that point was hotly contested by the panel.

Not Just a Bystander

I also participated in my own panel, Non-Wires Alternatives: The New Model to Integrate and Target DSM and DER, but that wasn’t nearly as intriguing as the talk on using drones for energy efficiency site visits!

All in all, it was great to get back to the AESP crowd and see some familiar faces as well as new, innovative companies and young, enthusiastic industry players carrying the mantle for the next generation of DSM.


Old McDonald Had a Grid, EIA AEO

— February 15, 2018

The US Energy Information Administration (EIA) released its 2018 Annual Energy Outlook (AEO) on February 6. Several short- and long-term trends warrant highlighting as follows:

  • US net energy exports occur over the projection period to 2050 in most scenarios that are modeled.
  • The US becomes a net energy exporter by 2022 in reference case, due to strong domestic production and relatively flat demand.
  • The fuel mix of energy consumption changes significantly over time, with natural gas and renewables growing while coal, nuclear, and oil decrease.

Energy Consumption by Source (Reference Case) – Quadrillion British Thermal Units

(Source: US Energy Information Administration, Annual Energy Outlook)

GDP Outpaces Energy Consumption

Residential and commercial sectors will likely have increased energy efficiency offsets growth in energy demand in residential and commercial sectors. Energy consumption grows about 0.4% per year on average, while GDP is expected to average 2.0% annual growth to 2050 in the reference case, showing a decoupling between economic expansion and energy use. Lighting displays the largest drop in both sectors due to the increasing penetration of LEDs.

On the residential side, all types of appliances are expected to become more efficient, water heating shows a sizable decrease due to heat pumps, among other reasons, while cooling actually has an increase resulting from a continued population shift to warmer parts of the US, lower heating demand, and increase cooling demand. However, increased adoption of electronic devices contributes to growth in residential use of electricity.

Electricity used for commercial HVAC equipment is likely to drop by more than one-third from 2017 to 2050 in the reference case because of increases in energy efficiency and a continued population shift toward warmer parts of the country in the South and West. Although the US has no federally-mandated commercial building energy code, state and local-level building codes reduce energy used for heating and cooling.

Use of Purchased Electricity per Household (Reference Case) – Thousand Kilowatt-Hour per Household

(Source: US Energy Information Administration, Annual Energy Outlook)

Use of Purchased Electricity per Square Foot of Commercial Floor Space (Reference Case) – Thousand Kilowatt-Hour per Square Foot

(Source: US Energy Information Administration, Annual Energy Outlook)

Natural Gas or Renewables Take the Lead

Most new electricity generation capacity will likely be natural gas or renewables after 2022 (per the reference case), as a result of low natural gas prices, declining renewables technology costs, and supportive policies, mostly at the state level. These findings lineup with Navigant Research’s recent forecasts in its Global DER Deployment Forecast Database report, which expects distributed energy resources capacity additions to outpace centralized generation going forward.

Annual Electricity Generating Capacity Additions and Retirements (Reference Case) – Gigawatts

(Source: US Energy Information Administration, Annual Energy Outlook)

Light duty vehicle fuel economy will likely improve as sales of more fuel-efficient cars grow and as electrified powertrains gain market share, but gasoline vehicles remain the dominant vehicle type through 2050 in the reference case. Combined sales of new EVs, plug-in hybrid EVs, and hybrid vehicles are likely grow in market share from 4% in 2017 to 19% in 2050.

Light Duty Vehicle Sales by Fuel Type – Millions

(Source: US Energy Information Administration, Annual Energy Outlook)

During the press conference where these results were reported, there were audience questions that challenged some of the AEO’s assumptions about renewable energy and energy efficiency growth. Such concerns have also been raised after reading the report as well. The AEO does include a number of high and low cases to try to represent the range of potential outcomes. It is important to consider the AEO as a point of reference, but not take it as gospel. As a professional market research analyst, my goal is for my analysis and forecasts to reflect the general trends in the industry and spark intelligent debate.


DERMS Is the Word at DistribuTECH

— January 30, 2018

After attending DistribuTECH in years 2014 through 2016, I took 2017 off because it seemed like there was less emphasis on demand-side management (DSM) and behind-the-meter distributed energy resources (DER) like demand response, energy efficiency, and energy storage. The biggest standalone public companies in the space at the time, Opower and EnerNOC, had seriously pulled back or ended their presence at the show. Acquisitions added additional doubt of direction in the industry; in 2016, Opower was bought by Oracle—putting into question its future focus on the space—and in 2017, EnerNOC was acquired by Enel.

DSM and DER Back in Focus

With that backdrop, I did decide to make the return trip to San Antonio in 2018 to see if anything had changed. I can’t speak to whether last year’s conference was any kind of transition, but I was floored with the level of attention given to DSM and DER topics by both DistribuTECH stalwart companies and startups alike.

From the big boys, like GE, Siemens, and Schneider, a common theme emerged of connecting advanced distribution management systems with DER management systems (DERMS). I alluded to this trend in Navigant Research’s 2016 report, Demand Response Management Systems, and my experience at DistribuTECH solidified the notion. Those vendors had intricate displays showing how the systems integrate, but there is still little real-world experience with such cases. The Smart Electric Power Alliance (SEPA) held a concurrent session aimed at standardizing DERMS requirements and terminology since it means something different to every vendor and utility.

On the startup side, a plethora of newbies were hawking their technologies for energy efficiency, and in particular, customer engagement. The majority of these applications are based purely on software, analyzing meters and other forms of data, as opposed to any new hardware that the utility or its customers would need to install. Companies like Grid4C, Powerley, Mach Energy, and Bidgely—along with more-established players like Oracle, Itron, Landis+Gyr, Honeywell, Lockheed Martin, and AutoGrid—touted their algorithms, segmentation tools, and disaggregation capabilities designed to help utilities and end-use customers save energy, detect anomalies, and engage in more meaningful ways. The Smart Energy Consumer Collaborative held its annual Consumer Symposium onsite to highlight these technologies and strategies.

DistribuTECH or ConsumerTECH?

Of course, the majority of the show floor was dominated by the usual suspects with transmission and distribution equipment and operational systems, but I was more interested in what was bubbling up around the edges. If things keep progressing in these directions, the show might have to change its name to CustomerTECH!


Increasing SMB Customer Engagement through Integrated Demand-Side Management Programs

— October 5, 2017

For decades, utilities have had success reaching large commercial and industrial (C&I) as well as residential customers with demand-side management programs like energy efficiency and demand response. Large C&I customers typically have utility account managers catering to their service needs, while mass marketing techniques like bill stuffers, direct mail, door-to-door canvassing, advertising, social media, and retail channel partnerships effectively reach residential consumers.

However, the small to midsize business (SMB) customer segment is typically underrepresented when it comes to demand-side management (DSM) program participation, so it is considered hard to reach. Obstacles include the facts that there are too many SMBs for utilities to have a dedicated account managers, SMBs typically do not have staff resources focused on energy issues, and mass marketing does not easily penetrate the segment. In addition, no clear definition of SMBs exists. Some utilities and vendors use square footage, others use annual kilowatt-hours, and still others use kilowatt peak demand.

Examining the Issues

A 2016 study in California found that SMB customers accounted for 78% of customers, but only 33% of energy efficiency program incentives and 32% of energy savings from programs. The program participation rate for SMB customers is about one-third of the average for all business types. In Massachusetts, 1.4% of eligible customers participated in the small business direct install program, and the smallest customers did not receive attention comparable to customers closer to the 300 kW program cutoff. In PSEG Long Island’s energy efficiency program, the participation rate among SMBs was 3 times lower than among non-small business customers (5% vs. 15%).

Reaching SMBs

However, this segment makes up a large percentage of a utility’s customer base and has specific characteristics that make these customers great candidates for these programs. They are cost-conscious and will be more likely to participate if energy projects can be put in terms that resonate with them. They also care about community relations, so they will see value if they can show that they are doing something to help the local economy or environment. Recently, utilities have started aggressively pursuing SMBs with new integrated DSM (IDSM), demand response (DR), and energy efficiency product offerings to better leverage this untapped load resource and engage them to help improve J.D. Power customer satisfaction scores.

Join the Conversation

Navigant Research will host a free webinar on the topic of increasing SMB customer engagement through IDSM programs on October 10 at 2 p.m. EDT. I will be joined by Robert Duval, director of operations at Itron, and Jeremy Morrison, program manager at Duke Energy, and we will share best practices related to designing and deploying DR and energy efficiency programs for SMBs.

Key topics covered will include tips for DR and energy efficiency program design, recruitment strategies to maximize customer participation, approaches to maximize energy efficiency savings, and insights from a utility that has successfully deployed an integrated DR and energy efficiency program for SMBs.


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