Navigant Research Blog

Opower Releases Behavioral Demand Response Results

— November 4, 2015

Opower, one of the largest providers of behavioral energy efficiency and demand response (DR) solutions to utilities, recently announced results from its latest behavioral DR (BDR) program this summer. The company reports that it deployed over 12 million personalized communications across 29 DR events, delivering 3% average peak reduction and over 5% savings for programs employing peak time rebate pricing plans. Utilities included Baltimore Gas and Electric, Commonwealth Edison, DTE Energy, Consumers Energy, Pacific Gas and Electric, and Hydro Ottawa.

This news underscores a growing trend of utilities looking to expand their demand-side management (DSM) programs through non-hardware-based methods in order to more cost-effectively engage a larger swath of their customer bases. With increased access to advanced metering infrastructure (AMI) smart meter data, electronic communication methods, and software-based tools, many companies are designing ways to use behavioral and analytical concepts in the energy industry that have been successfully implemented in other industry sectors.

Behavioral methodologies include ideas like home energy reports, which compare residential customers’ usage to their neighbors, and BDR, where customers get notifications when energy prices are high or when the grid is stressed. These methods rely on customer actions, as opposed to automated responses through hardware like thermostats or light bulbs. Such programs may capture less savings per customer than hardware, but due to a lower capital cost, they can be rolled out to many more customers to achieve a similar or greater aggregate impact.

Analytical tools like virtual energy audits and end-use disaggregation provide opportunities to greatly increase the effectiveness of DSM programs for commercial and industrial customers. As opposed to the standard practice of utilities sending energy engineers to do onsite audits of every building in order to determine energy savings potential, software programs can take in utility meter data and layer on facility characteristics and weather history to create an accurate picture of energy usage before stepping in the door. This allows for prioritization within a portfolio of buildings so that the highest-potential sites can be targeted first for further investigation, rather than random door-to-door approaches.

These types of programs are described in Navigant Research’s new report Behavioral and Analytical Demand-Side Management. The programs are still emerging, and there are barriers to overcome in order to reach large-scale deployment, but the path does appear favorable for success. Most of the activity currently comes from vendors and utilities in the United States, but it will soon spread to Europe, Asia, and beyond.


Ecova’s Retroficiency Acquisition Spurs DSM Momentum

— October 30, 2015

Data analytics for energy efficiency and demand-side management (DSM) programs is a relatively new trend in the energy industry. Data analytics can be used in residential DSM programs to teach consumers how their home is using energy (by appliance level in some cases) and in commercial and industrial (C&I) DSM programs to help find opportunities for energy savings in large buildings. Data analytics can even be used in retail, restaurant chains, or in other small and medium businesses in order to make operations more efficient, as has been seen in the work done by PlotWatt.

Many of the companies that have been advocating data analytics for energy efficiency are either startups (working on a handful of small deployments) or pilots or large companies with the resources to dabble in energy management, such as Apple with HomeKit. Because of this, data analytics as a solution for DSM programs is still in the early stages of market adoption

Acquisition Makes for New Player

That is, until October 14, 2015 when Ecova announced its acquisition of Retroficiency. A building efficiency analytics startup founded 6 years ago, Retroficiency initially worked at streamlining onsite audits, which quickly evolved into its current Building Efficiency Intelligence software platform to enable utility-scale customer targeting and engagement. Ecova, a large provider of energy and sustainability management services, has a behind-the-scenes style platform that helps utilities manage DSM programs. In addition to developing joint solutions for utility customers, Ecova will be able to use Retroficiency’s data analytics capabilities to provide its C&I clients—which collectively have more than 700,000 sites in North America—with better information on where they can save energy, where to prioritize efficiency investments, and how to manage energy costs.

Ecova’s acquisition of Retroficiency sends an important message to other players in the energy industry that there is value in data analytics for energy efficiency, which means even more when considering that Ecova has the backing of a larger energy efficiency company. In 2014, Ecova itself was acquired by Cofely USA, a subsidiary of French utility company Engie (GDF Suez). The depth of experience, geographic reach, and expanse of resources that a company like Engie can bring to the data analytics market through subsidiaries like Ecova can mean real growth and development in a very similar way to what the home energy management market saw when Google acquired Nest.

Furthermore, Engie also happens to be an investor in Tendril, a Boulder, Colorado-based startup offering a cloud-based energy services management platform for helping energy providers better engage residential customers. With Ecova’s acquisition of Retroficiency, the company now has the resources to offer a combined residential and C&I platform to utilities that can counter Opower and Firstfuel’s new platform. The newly joined forces of Ecova and Retroficiency not only signal to others the value of data analytics, but also bring to the market a big name in energy and increased competition, which could give the data analytics market the momentum it needs to take off and become a vital part of energy efficiency.


SCOTUS on FERC Order 745: Nothing but a G Thing

— October 26, 2015

Now that it seems like we are past the point where we might see a quick decision by the Supreme Court on the Federal Energy Regulatory Commission (FERC) Order 745 case on demand response (DR), let’s reflect back on the hearing last week. Unfortunately, I did not actually get into the hearing, despite waiting outside in line for 4 hours. Looking at the court’s website, it seemed like there should be room for a couple hundred public viewers.

However, only about 50 people who lined up, starting at 4 a.m., got in to see the full case. Apparently, a lot of seats were taken up by other spectators with priority access. Who knew so many energy geeks cared about this case? Regardless, the line outside was like an independent system operator stakeholder meeting, with many interested parties hoping to get a glimpse inside but holding mock trials while waiting.

I was able to read the hearing transcript and listen to the audio recording, so I could visualize the proceedings. There were two main issues at hand: does the FERC have jurisdiction over DR, and if so, should DR receive the full locational marginal price (LMP) for participating in the wholesale energy markets? The solicitor general of the U.S. Department of Justice, Donald Verrilli, represented the FERC’s case that it does have jurisdiction. Next, Carter Phillips, a lawyer representing EnerNOC and other petitioners, attempted to bolster Verrilli’s message and also weighed in on the LMP issue, which was the original scope of FERC Order 745. Finally, Paul Clement, a former solicitor general, spoke on behalf of the Electric Power Supply Association (EPSA) and other parties that supported the court of appeals’ ruling, which negated the FERC’s jurisdiction and rejected the LMP argument.

Weighing In

Of course, throughout that testimony, the justices interjected questions and comments on all sides of the issues. Justice Samuel Alito recused himself from the case, so there is a chance that a split vote could result, leading to an upholding of the lower court’s ruling. Justices Clarence Thomas and Ruth Bader Ginsburg were silent during the hearing, so assuming they sit along party lines on this issue, we have to interpret the comments of the remaining Justices. Chief Justice John Roberts and Justices Antonin Scalia and Anthony Kennedy appeared to favor the lower court’s ruling based on their peppering of Verrilli and Phillips. Justices Sonia Sotomayor, Elena Kagan, and Stephen G. Breyer seemed to lean toward deferring to the FERC, with Breyer referring to the “G thing,” meaning the LMP-Generation (G) payment method that EPSA preferred. It was interesting to hear analogies made to Ferraris, McDonalds, and Walmart by parties to try to explain how the wholesale and retail electricity markets interact.

There was a chance that a quick split decision could be announced and put us out of our misery, but it appears that window has closed, so now we have to wait probably several months for the final verdict. If DR ever appears before the Supreme Court again, I’ll know to bring my tent.


Intelligent Buildings as a Bridge to Climate Resilience

— October 21, 2015

On October 6, the Environmental Defense Fund (EDF) showcased the benefits of intelligent building technologies outside the facility walls. The business case for investment in intelligent building solutions can be amplified by the capacity to support grid reliability and resiliency in addition to direct economic and performance benefits. The Federal Energy Regulatory Commission (FERC) has ruled that demand response (DR) and energy efficiency resources must be allowed to participate in the PJM market on equal footing with other capacity resource. In fact, in Chicago, a collaborative pilot with the PJM Interconnection known as the Combined Capacity Asset Performance Project is demonstrating this opportunity. After the fallout of the polar vortex of 2014, PJM established these requirements to ensure that capacity resources would be immediately responsive at any time year-round. These requirements move away from PJM’s former model, which allowed for summer-only DR participation; the Chicago pilot is poised to show just how well intelligent buildings can fare in these circumstances.

“Demand response has demonstrated its potential to cut peak electricity demand, help balance the grid, and save customers money. The project offers an inventive way to preserve and grow this valuable resource in the PJM market. The collaboration will serve as a strategic model for buildings, which will be able to combine their demand response potential to enter the market where they wouldn’t be able to participate on their own,” explained Andrew Barbeau, president of the Accelerate Group and senior clean energy consultant for EDF.

Sounds Great, but What Gives?

The development of the DR market has not been a smooth ride. Three months following the FERC ruling in July 2015, the Supreme Court debated DR’s validity for generating revenue while maximizing grid reliability. As Penn State professor Seth Blumsack explained, “The case, however, ultimately goes far beyond demand response. The issue at hand is all about the ability of the federal government to set market rules for local power systems—that is, the portion of the grid that reaches individual homes and businesses—versus the regional grid that transports power over long distances across the United States.” It is yet to be seen how the court will rule on the issue.

DR-Enabling Technology Expected to Overcome Regulatory Uncertainty

If anything can pull the brakes on market development, it’s market uncertainty. Luckily, in this market, the enabling technology is expected to continue selling. On the commercial building side, the critical layer is the software and services that orchestrate load management. Navigant Research follows these solutions through its Building Innovations program. The future is bright for building management systems; not only do these systems provide the software analytics and services that can not only support DR, but they also provide load management for the customer to generate internal financial benefits. For example, a customer may integrate a software solution that provides insight into energy consumption across their portfolio. The information can direct change in equipment operations that can deliver new revenue streams formally (through DR participation), or informally by actively shifting the energy load to reduce peak demand charges. In the end, the building energy management system investment is a win-win. This kind of benefit underscores the optimistic outlook for intelligent buildings that will be grid-ready as the DR market prevails over regulatory uncertainty.


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