Navigant Research Blog

May Ends as It Began for Demand-Side Management: With a Bang

— June 3, 2016

AnalyticsAs I wrote a few weeks ago, May came in like a lion in the demand-side management (DSM) space with some key acquisitions and regulatory happenings. It appears that the month ended with a similar bang, with the PJM auction, EnerNOC’s divestment announcement, and AutoGrid’s investments all stealing headlines.

The annual breath-holding for the PJM Base Residual Auction (BRA) results ended with many sighs, as prices for the 2019/2020 delivery year came in lower than most analysts predicted. At a high level, the PJM load forecast was lower than before, and more generation entered the market than expected, so basic supply and demand ruled the day. Digging into the demand response (DR) and energy efficiency (EE) results, there are a few findings that bear notice. There were actually more DR megawatts offered into this auction than last year, but fewer megawatts cleared, likely due to the reduced price. Only about 6% of DR megawatts cleared as Capacity Performance (CP), with the vast majority clearing as Base Capacity product. The relatively small spread ($20) between the two products may explain this result, but with the Base product set to be abolished for the next auction, there is a big question as to how much DR will clear in a CP-only environment next year.

Meanwhile, about 66% of EE cleared as CP, showing a more-certain future for EE. There is still an open question regarding summer-based DR and EE (and renewable) resources, which PJM is undertaking a stakeholder process to address. Finally, in a quirk in the auction mechanics, the price for DR and EE in the Pepco zone cleared at $0.01 due to a constraint on the amount of DR and EE that can be procured in a given zone. This likely means that the DR megawatts that cleared in that zone were mostly utility program megawatts bid in as price-takers.

Investments and Divestments

In other news, EnerNOC announced that it was ready to divest its acquisition of Pulse Energy’s utility customer engagement business from a couple of years ago, essentially laying off 5% of its North American workforce. The company still feels that the business has value and growth potential, but it doesn’t fit EnerNOC’s focus on enterprise software rather than utility services. Furthermore, the long sales and decision cycles for utilities may not be a good fit for a growth-focused company, as witnessed by the recent Oracle-Opower deal.

Finally, AutoGrid, a DR management system and data analytics vendor, announced a new $20 million investment led by Energy Impact Partners (EIP). EIP is a consortium of utilities Southern Company, Xcel Energy, Oncor, and National Grid. These companies aren’t necessarily utilizing AutoGrid’s software at this point, but this commitment signals that utilities see the need to be in front of the transformative nature of data and analytics for their business models.

It will be hard for June to top this whirlwind of activity, but we’ll stay on the lookout for more news and developments from the DSM world.

 

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