Making Sense of the Demand Response Market
- April 8, 2013
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If the demand response market overwhelms you, you’re not alone.
Mike Gordon, CEO of Joule Assets and formerly of Cpower, which was sold to Constellation, has been in the business for years, and sees confusion everywhere. “There wasn’t transparent and easily accessible information on the market,” he said.
The problem, of course, is there is no one market. Demand response and ancillary services come in various flavors based on region.
Enter Joule Asset’s new Energy Reduction Asset Market Tools, which was launched about six weeks ago.
For the past few years, demand response has been morphing into demand management. Instead of large commercial users just shedding electricity load during the hottest days of summer, automated energy management systems and market changes make it possible for companies – and maybe even residents – to earn money for tweaking their electricity load year-round.
“The ERA Market Tool is helping to redefine how market players – building owners to utilities, product and service providers to consumers – can use this accessed value as a strategic asset, “Gordon said in a statement.
The promise of matching supply to demand, however, is harder than it sounds. “Where’s the specifics on how to engage in energy reduction markets?” asked Gordon. The answer: he wants to provide it.
The software platform is available in two flavors, one for engineering firms that just want to license it to find programs for its clients. “Demand response isn’t necessarily their central business,” said Gordon. Instead, consulting with clients on programs available to them is value-add service.
“Bringing our clients value through Energy Reduction is a core component of our corporate strategy,” David Unger, COO of US Energy Group, an engineering and energy management controls company, said in a statement. “The insights Joule’s ERA Market Tool gives us translate into business models that we can utilize to deliver more value for our clients. We are excited by the opportunities this brings US Energy in engaging with new clients and expanding our portfolio.”
The other option is for larger firms that want an API that fits into their software. Gordon said that those customers want to offer this as one line of a proposal to a client, but want it to be seamlessly integrated into their offering. Whether potential customers have one facility or a portfolio across the U.S., the ERA tool assesses the building’s capability to participate in more than 750 programs.
As the lines blur between energy efficiency and demand response, there are multiple opportunities for large C&I customers, but sometimes it’s hard to take the money directly from demand response and funnel it into energy efficiency programs. Some companies, like Constellation or World Energy are helping their clients do just that.
The other part of Joule’s new offering is an investment fund that allows businesses to install load controls or do retrofits that will, in turn, help them tap even more market opportunities. For a project, Joule might offer a 3 percent fixed rate, and then they take a cut of the demand response payments.
Gordon is bullish on the long tail of demand-side management, down to the individual home. “We just need simplicity and clarity on the return on investment,” he said. “More people are implementing control and it’s becoming more open source.” He sees a role where community choice aggregators could help set up products for homeowners to take part not only in demand response but also frequency regulation.
“We just need minimal changes to market structure to bring in every single cash flow,” said Gordon.
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