Navigant Research Blog

EnerNOC Drives Demand Response in Europe

— February 25, 2014

EnerNOC, one of the largest demand response (DR) integrators and service providers in the world, made two big acquisitions last week that deepen its strategy for expansion into new markets.  The first was the acquisition of Entelios, the main DR integrator in the nascent DR market in Germany.  The second was the purchase of Activation Energy, the leading provider of DR software and services in Ireland.  Although financial terms were not disclosed, EnerNOC CEO Tim Healy stated on the company’s most recent earnings call that the company spent $30 million on business development-related activities.  With these additions, EnerNOC establishes itself as the main player in these respective country markets, thereby dramatically altering the competitive landscape for DR in Europe.

The European market for DR lags far behind the United States in terms of capacity and revenue.  The main reason is a regulatory landscape that lacks the scope and diversity of the market in the United States, where independent system operators (ISOs) have created robust DR markets.  However, the need for new resources to help manage the grid are just as pressing as countries like Germany continue to add renewable energy and the intermittency created by solar and wind creates more demand for balancing resources.  As a result, there remains significant untapped potential, which EnerNOC and other players in Europe are working to unlock.

Barriers Broken

However, the European electricity grid contrasts dramatically with that of the United States, making it difficult to export some practices and technologies across the pond.  Whereas much of the DR market in the United States is focused on reducing summer peaks created by air conditioning demand, one of the drivers for demand response in Europe – particularly the large markets in Northern Europe, where air conditioning capacity is limited – is winter peaks due to high heating demand.  And, long-term projects such as the European supergrid would further open up a diversity of opportunities for flexible assets to provide benefits to the electricity system overall.  These differences make it all the more critical for a player like EnerNOC to enter the market via acquisition of players that have sifted through the technological and regulatory barriers to create viable DR markets, rather than trying to build a business from scratch.

EnerNOC already maintained a presence in the European DR sector, primarily in the United Kingdom, Europe’s most advanced DR market.  Other firms, such as London-based KiWi Power, are already active in that market, whereas other country markets are still in the more tumultuous early stages, allowing outside players such as EnerNOC to enter.  As DR becomes a higher-demand grid service in Europe, we expect to see the competitive landscape heat up with further merger and acquisition activity.


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