Cleantech Market Intelligence
New Demand Response/Energy Storage Partnership Poised to Reduce Customer Deployment Hurdles
In my most recent Navigant Research blog, I highlighted how load management and optimization solutions, which include demand response (DR) and energy storage, fit within the energy as a service (EaaS) framework. The EaaS solutions framework is now positioned to support how corporate commercial and industrial (C&I) energy and sustainability managers apply these new technologies and business model innovations to meet their energy management and sustainability needs.
EaaS Deployment Options
In Navigant Research’s Energy as a Service report on the evolution of EaaS, I highlight how EaaS solutions like load management and optimization will be deployed, which can be summarized as follows:
- Pure-play EaaS solutions provider: Customers engage with a pure-play EaaS provider such as a solar PV developer or an energy efficiency performance contracting provider that provides just a single financed solution.
- Bundled EaaS solutions provider: Vendors offer multiple EaaS solutions across a project development/financing platform that meet customer needs while also decreasing their customer acquisition costs.
- Integrated facilities management plus EaaS solutions: A single vendor manages the customer’s day-to-day building operations and EaaS solutions over longer-term agreements that can enable financing innovation.
- Managed energy services agreement (MESA): Customers with predictable energy use and spend outsource their entire energy management operations to a comprehensive EaaS provider under long-term agreements to unleash long-term financing innovation.
- Asset monetization or public-private partnerships: Private and publicly traded C&I companies, universities, or municipalities monetize their energy assets in a sale leaseback arrangement that results in the outsourcing of energy operations.
One significant challenge for the deployment of new load management and optimization EaaS solutions to date from the customer perspective is that the market is populated by pure-play solutions providers. This scenario presents a challenge to C&I customers given the potential interdependence of solutions like DR and energy storage on the overall business case for deploying these technologies.
Potential of DR/Energy Storage Partnership
However, a recent partnership announcement by CPower and Stem will combine Stem’s energy storage capabilities services with CPower’s DR and curtailment services to better manage customer energy load and spend. Given the current contracting and revenue models that each vendor provides, an integrated Stem/CPower offering has the potential for an improved customer savings business case that can exceed the business case of each technology individually, as highlighted below:
- For existing Stem customers, this partnership can result in an increased bonus payment over their equipment lease payment/demand charge savings scenario given the added DR market participation that CPower can enable. Stem’s existing customers can also benefit from an improved battery use case scenario over time given that additional building controls under CPower DR technology control can be leveraged instead of just the battery energy storage system (BESS).
- For Stem sales contacts looking to deploy new BESSs, this partnership can result in a better bonus payment scenario given that a potentially smaller BESS could be installed (or one with a lower cost use case scenario over time), thereby potentially lowering the equipment lease subscription price.
- And for existing CPower customers and sales contacts looking to participate in DR programs, this partnership can result in and improved DR market participation revenue scenario given the added response capabilities that the deployment of a Stem BESS can enable. This can help reduce the over subscription/under commitment challenges that DR aggregators face given the need to keep building occupants comfortable during demand response events.
It will be important to keep an eye on how the CPower/Stem partnership handles the integration of dispatch algorithms and customer dashboards as the partnership matures. But this partnership appears poised to reduce customer barriers for the deployment of integrated DR/energy storage EaaS solutions.