Controlling Demand Response Instrumental in Lower Electric Bills and Higher Profits
Whitefish, MT / ACCESSWIRE / December 10, 2014 / Most utilities offer financial incentives to customers through "Demand Response" programs in an effort to reduce electricity load during the utility's peak periods. For some states, such as California, the list of possible savings for reducing electricity load offered by governments and utilities is extensive and quite generous. All four of California's investor-owned utilities: Pacific Gas and Electric, a subsidiary of PG&E (NYSE: PCG); Southern California Edison, the largest subsidiary of Edison International (NYSE: EIX); and Sempra Energy (NYSE: SRE) subsidiaries Southern California Gas and San Diego Gas and Electric, all participate in programs to reward customers for energy efficiency and decreased load and peak times.
Utilities can't do everything alone; they need partners and that's where companies like EnerNOC (NASDAQ: ENOC) play an important role to educate on customer marketing and retention and to crunch data to pinpoint patterns and savings opportunities, amongst other things. Using advanced technologies and analytics, EnerNOC specializes in optimizing energy usage for its worldwide client base, including all four aforementioned majors in California. Most of EnerNOC's offerings are centered on demand response, providing software, technology, and managed services for load reduction, whether controlled and managed by EnerNOC, the utility or the utility's customers. Demand response was responsible for 90% of EnerNOC's $383 million in revenue last year.
Last week, EnerNOC bolstered its demand response suite and portfolio of analytics and customer engagement software with the acquisition of Pulse Energy. It's the latest in a series of acquisitions this year by EnerNOC, including buying the German company Entelios and Ireland-based Activation Energy. Pulse Energy's software enables utilities to deliver targeted energy saving recommendations in a branded environment, catered to each customer's unique profile, including business type, location, and energy use. It has detailed analytics models for over 100 commercial customer market segments and is currently deployed by utilities in North America, Europe, and Australia, including BC Hydro, British Gas, Ergon Energy, FortisBC, and Pacific Gas & Electric. Cumulatively, EnerNOC and Pulse Energy serve 54 utilities globally.
EnerNOC said the merger will be dilutive this year and in 2015 because of planned investments in it utility offerings. In the bigger picture, EnerNOC has expanded its footprint in Canada and should be a more formidable in general as its primary focus of managing energy for large companies is complemented by Pulse's focus on small and medium-sized customers.
EnerNOC isn't the only firm consolidating the industry. Smaller rival Comverge (formerly NASDAQ: COMV) was acquired by private equity firm H.I.G. Capital in 2012. In October, Comverge and Constellation, a subsidiary of Exelon (NYSE: EXC), agreed to combine their demand response businesses serving commercial and industrial customers (C&I), spinning out the blended business as a standalone company, dubbed CPower, focused on delivering a full spectrum of demand response offerings to C&I customers in the U.S. Point here is when an energy provider giant like Exelon is making moves in a sector, it is worth taking note where they're looking for opportunity.
Tecogen (NASDAQ: TGEN), a technology company specializing in high efficiency products, including cogeneration systems, is delivering a different method for companies to save money and reap rewards offered through demand response incentives. The largest portion of Tecogen's business is the sale and service of its cogeneration (or combined heat and power, CHP) systems, which qualifies users for incentives on its own merits of producing two forms of energy from one source, maximizing efficiency nearly three-fold over conventional grid energy while vastly cutting emissions. This can certainly play a factor in load reduction as the company's natural gas-powered InVerde CHP systems can serve as stand-alone sources of energy to power facilities during peak demand.
That's only one component of how Tecogen delivers value and opens the opportunity for customers to benefit from incentive programs. Tecogen also manufactures and installs patented emission retrofit kits, called simply "Ultra." The aptly named kits deliver simple, cost-effective solutions to reduce criteria pollutants from rich-burn natural gas engines to ultra-low levels that meet even the most stringent emissions standards.
Ultra is more relevant than might seem at first blush. Current sales of natural gas engines in the 50 to 500 horsepower range in North America are over 80,000 units, many of which are for backup power. These generators play an important role in many operations across the country to serve as backup power for utilities (especially in remote locations), industrial applications and more, but their usage can be minimized because of emissions. For example, in California, standby generators are exempt from strict requirements only if their annual operation does not exceed 200 hours. The regulations are not easily met, keeping most generators idle or in violation of the law as only 8 days of operations per year can disappear quickly. As Tecogen said in October, "Permitting of a natural gas generator for operation as a non-emergency operator is the most strict permit category in [South Coast Air Quality Management District] Rule 1110.2. This is because the single purpose engine-generator must achieve the base limits published in rule without the heat recovery credit afforded Combined Heat and Power systems."
In laymen's terms, this means that natural gas generations could be used more frequently for primary or supplemental power in addition to emergency uses, but emissions regulations limit use hours to a nominal figure per year because of the release of pollutants. Tecogen's Ultra emission system is aiming to be the first to meet the tough standards. The company recently sold an Ultra retrofit kit to an unnamed "Fortune 500 industrial customer" for use on a natural gas emergency generator. The system is at Tecogen's factory being retrofit and tested for emissions. If it passes testing as expected, the engine will be capable of non-emergency operation and the customer will retrofit other generators operating at its Southern California facility.
Because of the Tecogen upgrade, the generator legally can run indefinitely. The benefits are multi-faceted. Consider that high winds in remote locations can cause mandated shutdowns for power supplies due to forest chance of starting forest fires. Generators, or standby power, step-in when this happens, but they can quickly surpass maximum hour usages legally allowed, meaning the choice of no power or breaking the law is in effect. That threat is eliminated with the Tecogen Ultra.
For the purpose of demand response, there is no simpler way to cut down demand from grid than an alternative power supply. Even if a generator with an Ultra system wasn't run continuously, systems supported technology like that of EnerNOC or CPower, can define and control the best times for the generator to run to avoid spikes and grid strain, with no worry about run-time length or emissions. This then opens the door to the generous incentive programs offered by governments and utilities.
Power generated at peak times is the most expensive electricity for all involved. Small tweaks to save fractions of kilowatts quickly aggregate to tremendous savings, which utility providers can then pass on to customers. The technology at the backbone of all of this may be complex, but the concept certainly is not. The results - lower electricity bills, less strain on the grid and fewer emissions - are even simpler to grasp, all the while boosting revenues for companies leading the way and helping the bottom line for companies adopting the technology.
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SOURCE: Emerging Growth LLC