The Top Five Players in Demand Response

As summer heats up, we take a look at the leading players, and who to watch, in the world of demand response.

Ah, summertime! Nothing but long days complete with ice cream cones, sandy beaches and peak load management. As temperatures smolder in the 90s after hitting triple digits early in the season, electricity demand is soaring around the country, hitting near record highs in some regions.

While demand response was already a hot topic in smart grid circles (not to mention load shedding, which has been around longer than the phrase 'smart grid'), it has become absolutely necessary during these periods of critical peak demand. And this might be just the beginning. The Federal Energy Regulatory Commission estimated there was a reduction of 37 gigawatts in peak demand from demand response in 2009, and FERC projected that the figure could jump to 188 gigawatts in 2019.

Demand response is also shifting these days from just shedding that critical peak load to offering more constant management, a trend that is altering the field, creating opportunities for the current players, and carving openings for other companies looking to get in on the action.

So 'tis the season to take a look at the demand response leaders:

1. EnerNOC (Nasdaq: ENOC  )
Might as well start with the big boys. EnerNOC has been piling on megawatts under its management in the first half of this year. At the end of 2009, the Boston-based company claimed to have 3,550 MW, and deals with TVA, the PJM Interconnection and various utilities bring its current load management closer to about 5 GW. Last year, EnerNOC also bought two other companies: Cogent Energy, a company that provides energy efficiency and building control systems, and eQuilibrium Solutions, a carbon accounting company. The acquisitions by the demand response leader will allow it to expand its long-range plan of offering more complete services to its customers to stay competitive in a field that is seeing a lot of competition.

2. Comverge (Nasdaq: COMV  )
Going almost toe-to-toe with EnerNOC is Comverge, which also manages more than 4 gigawatts of load. While Comverge has been known for its focus on the residential market, which made up 25 percent of its business in 2009, it has been shifting focusing on the commercial and industrial market in 2010. Comverge is not a one-trick pony; it also sells hardware like remote-control thermostats to customers. Comverge also scored with the PJM auction this year, adding about a gigawatt of energy to its business. Although Comverge sees no end in sight for the C+I business, it is uniquely positioned to take advantage of the residential market, which will expand as states, like Pennsylvania, legislate demand response across the board.

3. CPower
CPower comes in a solid third in terms of megawatts, managing 2,800 of peak load as of April 2010. But like the big two, CPower is also looking to other load management and energy services, including renewable energy credits and energy efficiency, because after all, peak critical demand is only a few dozen hours every year. It doubled its management load in 2009 and was the largest aggregator on the Texas grid, a market that is at the top of the DR list. Despite being a startup, CPower boasts some big-name clients, including Walmart, and the company is even thinking of expanding overseas.

4. Honeywell (NYSE: HON  )
While EnerNOC is moving from demand response into building management, one of the biggest names in that space is going in the other direction. Earlier this year Honeywell bough Akuacom, a demand response company that uses open automated demand response, or OpenADR. Demand response is going to continue to grow no matter what, but for many companies, the appeal of an automated system is going to trump a digital message telling the building manager to adjust the HVAC system. Before the building controls giant even purchased Akuacom, it was already building an OpenADR system for Southern California Edison to help automate the utility's critical peak pricing program. Voluntary critical peak programs are expanding, both in the commercial and residential side, which gives Honeywell a key advantage as its systems are already in place in many buildings.

5. Schneider Electric
The French electricity giant may not be directly managing load for utilities the way that EnerNOC or Comverge are, but it provides the equipment and systems that allow for substantial load reduction and is positioning itself to take demand response to the next level. As the big peak load management companies try to diversify for the next step in demand response, Schneider is already there with both hardware and software that allows for not only turning power off during the hottest days of the year, but also shifting and tweaking demand throughout the year. As demand response moves from being an added bonus to a mission-critical must-have for utilities across the globe, Schneider is well positioned to answer their needs. Deep pockets don't hurt, either. Schneider was also named one of Greentech Media's Top 10 Green Giants.

Honorable Mentions
With more than 100 gigawatts potentially up for grabs in the next decade, the demand response market could easily accommodate a host of players. There are plenty of startups that may make their own mark, or be folded into the ranks of an established giant.

SureGrid
SureGrid takes automated demand response, similar to what Honeywell is doing, and takes it to the next level. The company has created a cloud computing-based building management system that attempts to curb energy by fine-tuning the HVAC system. The system examines weather data, room occupancy, traffic and use patterns and turns the chillers up or down accordingly without a building manager having to do anything. Just this week, the company also released PowerCommand 2.0, which allows utilities to see their aggregated load in real-time, 60-second intervals. Although it only has a small fraction of the megawatts that EnerNOC and Comverge control, the company's approach to automated demand response makes it ripe for acquisition.

BuildingIQ
The weather is at least partly to blame for peak load in the first place; after all, it's all of those sweltering or freezing days that make people run to their thermostats. BuildingIQ, a building management startup out of Australia, is using weather information to enhance building management systems that are already in place (it's not looking to be the next Johnson Controls). The software collects data about air conditioner settings, thermostat levels, etc., and combines it with a weather feed that provides forecasts for the next 24 to 48 hours and other data like electricity rates. A computerized simulation of the building and its thermal characteristics is also added to the mix. Servers at BuildingIQ's data center then mine all this data to devise a refined building management plan that gets updated every ten minutes. On the residential side, EcoFactor offers a weather-based service as well, and while it can provide demand response, the company is pitching itself as providing cost savings to customers rather than load management to utilities. 

EPS
EPS Corp. offers a real-time energy management system that includes both software and hardware that is sold as a service. The company focuses on curbing power at industrial sites, but it recently landed an agreement with the Energias de Portugal to provide its software to the utility's customers in Portugal and Spain. Building management giants like Siemens offer similar services, but many are proprietary, while EPS' hardware and software can accommodate any industry standard.

Optimum Energy
It's no secret that HVAC systems are one of the biggest energy hogs. So it makes sense that Optimum Energy is focusing on the air conditioning system to save customers money and earn them LEED points. While an average building might require up to 1.4 kilowatts of energy to chill a ton of water for its air conditioning system, Optimum can reduce that to 0.5 kilowatts per ton. It has developed a software-as-a-service system that monitors and controls the chilling systems, which provide the water for air conditioners in large buildings. It's not the first system to control water chillers, but this software has greater complexity. It uses an algorithm that allows the water temperature to rise without the building temperature creeping up. Optimum Energy CEO Nathan Rothman estimates there are as many as 150,000 buildings in the U.S. that could benefit from such a system, saving a whopping 75 gigawatts in the process.

Light Controls
Lighting also eats up a lot of energy in the commercial space, and there is no shortage of companies that have solutions to manage lights. Adura Technologies and Lumenergi are both primarily focusing on dimming or switching off fluorescent bulbs, which account for 85 percent of the lighting in commercial office buildings. Redwood Systems has another approach to networking, replacing lighting wires and regular bulbs with Ethernet cables and LEDs that can then be managed. Digital Lumens offers networking technology, too, but it is dealing strictly with LEDs that are connected by a mesh network that pays for itself in just a few years. Any of these companies could get scooped up into a building management giant to offer a more complete suite of demand response services that moves beyond tweaking HVAC systems.

World Energy Solutions
The World DR Exchange is just what it sounds like: an online exchange for demand response capacity. A seller figures out how much it can voluntarily curb power consumption (with the minimum requirement being at least one megawatt), and then once they put it on the market, demand response companies can bid on it and resell it to a local utility. The DR Exchange just got off the ground earlier this year and could lead to more accurate market prices from buyers and sellers. The company has been around since 1996, and the DR Exchange is just one of its markets. It also supports the Regional Greenhouse Gas Initiative's (RGGI) cap and trade program for CO2 emissions.

Pennsylvania's Act 129
There's nothing here to be bought, sold or acquired, but Pennsylvania's Act 129 deserves a mention for its call to cut peak demand by 4.5 percent by 2013. The reductions coincide with an elimination of caps on utility rates, which, ideally, could drive even more conservation through the threat of high prices. Although the sweltering days of summer make the case for demand response, legislation certainly plays a key role and other states are expected to follow. Interestingly, the law also calls for 70 percent of the demand response to come from the residential sector, so there will be ample opportunity for home management companies to team up with demand response providers in order to hit that mark.

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