Navigant Research Blog

CPower Reemerges as a Demand Response Player

— December 15, 2014

In October, I wrote about the announcement that Comverge and Constellation would combine their commercial and industrial demand response (DR) businesses into a standalone entity.  The questions were: What would the new company be called?  Would they take one of the existing names?  Combine the two names?  Come up with something new?  Instead, they brought back a familiar brand: CPower, the name of the DR provider that Constellation bought 4 years ago.

But this is not your mother’s CPower, according to Chris Cantone,  the company’s senior vice president of sales and marketing.  The C in CPower carries multiple meanings aside from the lingering brand recognition: the combination of Comverge and Constellation, customer engagement, and curtailment services.  “The market has been excited about the announcement, and our channel partners have been waiting for an independent DR provider,” Cantone told me in a phone interview.  The company is still in a little bit of stealth mode as the behind-the-scenes business combination unfurls, but expect a media splash in the near future.

Divide and Succeed

What value does this new structure bring to the parties involved? Cantone says that the future of DR will entail greater technical requirements, which were hard to fulfill under a larger organization like Constellation.  CPower can be more strategic and proactive on its own, while maintaining a preferred provider relationship with Constellation for its customers.  From Comverge’s perspective, there was a lack of synergy between its utility-focused residential business and its market-focused commercial and industrial business, so it made sense to split them up and allow them to build to their own strengths.

So was Constellation’s purchase of the original CPower 4 years ago a mistake?  No, asserts Cantone.  It was an invaluable experience for the old CPower DR experts to get immersed in the energy markets and learn how DR fits into the bigger picture on the wholesale side with generation and the retail side with customers’ energy procurement strategies.   Additionally, the 2011 deal was the move that set in motion the trend of larger energy entities investing in the DR realm, as Johnson Controls bought Energy Connect, Siemens bought Site Controls, Schneider bought Energy Pool (in Europe), and NRG bought Energy Curtailment Specialists.  Will those combinations survive?  Cantone thinks they will have to deal with the same issues that Constellation did, and we will have to see who can find internal solutions and who sets DR free.

The Real Threat

Regarding business strategy, the initial intent is to focus on the existing markets in the United States, like PJM, ERCOT, NYISO, ISO-NE, and California.  An expansion into utility programs could be the next growth step, followed by selective entry into the burgeoning international arena.

I contacted executives at EnerNOC to get their take on what looks to be their strongest competition, but they declined to comment .  In the meantime, EnerNOC and CPower may find common ground to combat the potential disruption from the court drama over FERC 745 to remove DR from the wholesale markets, which could affect them more than any amount of friendly competition could.

 

Warily, Utilities Go Digital

— December 10, 2014

Utility customers are changing their behavior rapidly, increasingly viewing the utility much in the same manner they would their bank, cellular provider, or – even worse – preferred online retailer.  J.D. Power affirmed this in July with the publication of its 2014 Electric Utility Residential Customer Satisfaction Study.  Consumer engagement technologies are also detailed in Navigant Research’s white paper, Smart Grid: 10 Trends to Watch in 2015 and Beyond.  These other types of providers, the banks and the cellular providers, have at least one thing in common: they’ve completely rearranged their strategy and operating model around a growing digital environment.  But utilities by and large are behind in developing effective and user-friendly digital presences, and I would argue that this is largely due to not having approached digitization as a firmwide strategy.

What is digitization?  It’s a broad topic, including everything from advanced gathering and analysis of data to social media.  The slowest movers have been government and public service organizations, such as utilities, simply because they’ve had more or less inelastic demand and monopoly status.  But now deregulation and growing expectations are forcing utilities to improve their public image and provide services in a more competitive manner by enhancing historically low/declining customer satisfaction.  These changes include the ability to easily monitor all activity and make services changes online, incorporate services such as prepay and prosumer options, and develop specific and targeted web/mobile-based marketing campaigns.

Resistance in the C-Suite

A couple of barriers are keeping utilities from becoming better digital organizations.  Probably the greatest barrier has been the resistance of utility executives.  It’s no longer possible to assign an intern to maintain a Facebook page and call that a digital strategy – digitization needs to involve all parts of the firm, and will probably change the business model altogether.  Utilities are not only characteristically slow adopters of change, but also traditionally siloed both functionally and informationally.

At the heart of a digital strategy is the information that is gathered to guide it.  The utility must consolidate comprehensive internal and external information from distributed sources like smart meters, customer information systems, intelligent electronic devices located on the grid, social media, and weather reports, just to name a few.   If this information is located within different parts of the utility and structured differently than other types of data, it can be nearly impossible to analyze in one place, and utilities will only see a half-formed image of demand patterns and customer preferences.

Beyond the Web Site

Once this information is in place, however, the utility still faces a second and even greater challenge of determining if and how to restructure its offerings in order to provide services in a different manner.  This can trigger investments in reorganization efforts, such as human capital investment, cross-functional collaboration, IT purchases, and outsourcing.

It comes as no surprise that many utilities are reluctant to consider these sorts of reorganizations, as they already operate with relatively low margins and typically have restricted investment budgets.  In those cases, managed services can ease the cost of digitization through highly focused products and outsourcing.

Managed services companies can assist utilities in developing firmwide digital strategies and provide resources that allow them to do so at a lower cost (with less risk of faulty investing) than integrating internally.  Until recently, the majority of these companies’ services have been adopted for very specific programs and needs, but more competitors are ramping up to offer enterprise service models where customer-facing digitization only scratches the surface.   In our report, Smart Grid as a Service, Navigant Research provides an in-depth assessment of the utility IT services market globally.  It will be worth watching how this market forms as more utilities ease, or are shoved, into the full transition to digital.

 

New Relay Technology Is Transforming the Grid

— December 9, 2014

A major transformation is occurring in the electric transmission industry, as new digital technologies, high-speed communications, and big data analytics are being deployed to improve transmission grid reliability and resiliency.  This transformation starts at the basic level of protective relays – technology that has been utilized on the transmission grid for years.  These devices are beginning to evolve from mechanical and solid-state relays to next-generation digital relays that perform all of the standard system protection functions, they but also have new digital capabilities for phasor measurement units (PMUs), data collection, and synchrophasor analysis that are largely untapped in today’s transmission utility market.

My conversations with major vendors, such as Schweitzer Engineering Labs (SEL), Alstom Grid, ABB, and General Electric (GE), as well as major utilities, indicate that the new technologies will change the way transmission operators detect and respond to transmission system disturbances and outages.  Now that network operators have the ability to detect sub-second disturbances in phase angle and voltage (which lead to outages and other reliability issues), with data coming in 30 to 60 times per second, a new major market for smart grid data analytics, visualization tools for the operations center, and communications is opening up.  Recent information on the nine U.S. Department of Energy smart grid demonstration projects in the United States, funded by stimulus grants, suggests that utilities are in the early stages of deploying these technologies, and that next-generation synchrophasor analytics, high-speed fiber communications systems, and high-speed sub-second automation solutions are in the early stages of adoption, at best.

Current Locations of PMUs on North American Power Grid 

(Source: North American SynchroPhasor Initiative)

In mid-October, I attended the 46th Western Protective Relay Conference (WPRC) in Spokane, Washington.  Along the Spokane River, salmon were rising in the afternoon to a late season fly hatch.  I’ll have to admit that I had not expected a conference featuring three days of technical papers that included some true power engineering discussions of second derivatives, Fourier transforms, phasor analysis, and phase angle diagrams, plus a couple of presentations on the use of comparative synchrophasor analysis for management of the transmission grid.  The 500-plus attendees included a mixture of vendors, experienced transmission planners and engineers, and a large number of new transmission engineers and trainees that were attending to learn from the experts from across the industry.

As advanced digital protective relays are deployed across the grid, consumers will benefit from improved reliability and grid resiliency.  Transmission utilities will also benefit, as they look to these lower-cost systems to add additional synchrophasor coverage and capabilities at a much lower cost.

 

In Germany, a Small Town Becomes an Energy Dynamo

— December 8, 2014

A small town in Germany has become a symbol of what is possible for renewable energy and of the challenges it presents to the traditional utility model.  Wildpoldsried, in southern Bavaria, produces 500% more energy than it needs.  The town of approximately 2,600 people does this through solar, wind, biogas, and hydro systems and a healthy dose of government subsidies.

The transformation of the town’s energy use enabled it to produce all of its electricity well before the target date of 2020.  The excess energy, however, presented the regional utility, Allgäuer Überlandwerke GmbH (AÜW), with a problem: How to integrate the surplus renewable energy into the wider grid? So the utility partnered with Siemens on a project called the Integration of Regenerative Energy and Electrical Mobility (IRENE).  Using sensors throughout the town’s energy systems, operators are able to measure various levels of current, voltage, and frequency, and then a self-organizing automation system balances supply and demand to stabilize the grid.  In addition, local homeowners who have energy-producing systems (e.g., solar PV) are now prosumers, and each has a small device that controls how much power is sold back to the grid and at what minimum price, creating, in effect, a small-scale distributed energy resource market that feeds into the larger grid.

Cars, Solar PV, & the Grid

Wildpoldsried is not alone in attempts to modernize and create a more efficient grid.  In the wake of the March 2011 Fukushima disaster, officials in Japan have been wrestling with how to create more sustainable cities.  The Japan Smart City initiative includes projects in Yokohama, Toyota City, Keihanna (Kyoto), and Kitakyushu.  In Yokohama, for instance, one of the trials involves a home energy management system provided by Panasonic that integrates solar PV systems with battery storage.  In another trial, automaker Nissan has been testing a vehicle-to-home system, in which electrical power is furnished to homes from the batteries mounted in electric vehicles. (For more on these types of vehicle-grid integration projects, please attend Navigant Research’s free webinar, Electric Vehicles and the Grid, on February 10, 2015, at 2 p.m. ET.  Click here to register.)

Net Zero

Similarly, in the United States, California continues to be a bellwether for renewable energy and sustainability.  The state’s Zero Net Energy (ZNE) policy requires all new residential construction to be ZNE by 2020; a ZNE home is one that produces as much renewable, grid-tied energy onsite, such as from a solar PV system, as it uses during a calendar year.  Homebuilder KB Homes has constructed such a zero-net home in the Sacramento area that features a rooftop solar PV system with battery storage, an advanced greywater recycling system, triple-pane windows, and heavy duty insulation.  In the city of Lancaster, builders are offering similar types of ZNE homes as that city attempts to become a leader in alternative energy.

What Wildpoldsried and these other cities demonstrate is that through technology, regulations, and cooperation with utilities, a smarter and eco-friendly grid is possible.  For skeptics, these are real world examples of what is possible.  Yes, this can mean disruption of current business models.  But it does not have to mean destruction.  As noted in Navigant Research’s free white paper, Smart Grid: 10 Trends to Watch in 2015 and Beyond, these and other smart grid trends are expected to unfold in the coming years, and stakeholders must adapt to this transforming energy landscape.

 

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