The business of turning down big industrial and commercial power loads to match grid needs is mainly a U.S. activity. But in Europe and Asia, it’s starting to gain more traction -- and in Europe, most of that business belongs to Energy Pool.

The French demand response aggregator, founded in 2008, is responsible for managing about 1,300 megawatts of demand response capacity, with about four-fifths of France’s market, and a growing presence in Belgium and the U.K.

In 2010, French grid giant Schneider Electric bought a majority stake in the company, and has since sought to expand Energy Pool’s reach beyond traditional capacity markets into more demanding (and more lucrative) services, such as fast-reacting tertiary reserves markets and localized, distribution-scale demand response (PDF).

Now it’s making another move into new markets, this one geographic in nature. On Friday, Japan’s Tokyo Electric Power Co. (TEPCO) announced it is working with Energy Pool and Schneider, along with Japan’s Sojitz Corp., to set up a 50-megawatt industrial demand response pilot, under the auspices of Japan’s New Energy Promotion Council (NEPC).

The goal is to test industrial demand response, not just for peak power mitigation, but also for “reserve capacity in the event of a unexpected outage of generation units, as well as balancing capacity for supply volatility caused by renewable energy,” the announcement stated.

Japan certainly needs help in all three categories of demand management. The 2011 earthquake and Fukushima nuclear power plant disaster that led to the shutdown of Japan's nuclear power fleet has since forced the country to curtail peak power in an unprecedented fashion. It has also pushed a whole host of smart grid and energy management projects into fast-track development, and helped spur big growth in solar power projects. (See GTM Research’s The Smart Grid in Asia, 2012-2016: Markets, Technologies and Strategies report for more details.)

These factors have made Japan the target of demand response companies from around the world, ranging from big U.S. aggregators such as EnerNOC and Comverge, to partnerships between domestic giants and overseas technology providers, such as the one between Japan’s NTT Data and U.S. startup AutoGrid.

On the residential side, Japanese companies like Hitachi and Panasonic are working on smart city projects to link household energy management, energy storage, rooftop solar, plug-in electric vehicles and community-wide microgrids. The deployment of smart meters could help that along: earlier this year, Toshiba, which owns metering giant Landis+Gyr, won the communications contract for TEPCO’s upcoming 27-million-smart-meter deployment, the first of what is expected to be a series of nationwide deployments.

As for Energy Pool, about 95 percent of its European business is with large industrial customers, Jean-Yves Blanc, senior vice president of demand response for Schneider Electric, told me in an interview earlier this month. It works as a direct intermediary between industrial customers and the transmission system operators (TSOs) that manage European grids, and also provides its platform to utilities that want to manage their customers’ loads.

Energy Pool expects its portfolio to reach 1,600 megawatts by the end of 2013, he said. Out of that share, a “very significant amount” is able to respond in less than 30 seconds' notice -- a capability that could open it to being played into European TSO primary and secondary reserve markets, once that’s allowed as of mid-2014.

“We are now able to control some loads with less than five seconds” of  advance notice, he added, and “we are in tests with different TSOs to demonstrate, to make them comfortable with this ability.” That’s the kind of responsiveness that could open demand response to mitigating fluctuations in wind and solar power output on a local level, as part of a virtual power plant setup.

That kind of distribution grid-scale virtual power plant capability is now being tested as part of the European Commission-funded EnR Pool project, he added.

“This is a pilot project to bundle demand response and renewables, and to build the kind of virtual power plant where we have an overall 90 megawatts of renewables, and we balance the flexibility with large processes,” including 100 megawatts of industrial loads, aggregated in units ranging between 500 kilowatts and 3 megawatts, with a combination of direct load control and “some scattered processes with smaller things we do in Schneider, with products that we place at some buildings.”

Schneider Electric has grid management software that can help utilities measure how changing customer demand affects grid operations, as well as an entire energy services business that could be tied to grid-balancing needs. All in all, it’s a combination of capabilities like those that Siemens has used to create its virtual power plant for RWE in Germany, or that Japanese giants like Hitachi, Toshiba and Panasonic are putting to use in that country’s smart city projects.

“In this field of virtual power plant there are two dimensions,” Blanc said. “One is the technical [aspect], and I’d say it’s not the most complicated, because it’s our day-to-day business to aggregate loads, and some intermittent generation, and optimize the load to the generation.”

“The key point on these virtual power plants to me is to find a way to make a business from that,” he said. “How to monetize this capacity is not yet settled.” In Europe, new EU directives that include demand response capacity as part of national energy efficiency mandates could help open up those monetization possibilities, he said.

In Japan, demand response is certainly a critical piece to solving the country’s post-Fukushima energy supply-demand imbalance. But how these capabilities will be incorporated into the energy markets that govern these transactions is less clear -- part of the reason Japan is so heavily engaged in pilot projects at present.

Tags: autogrid, comverge, demand response, energy management, energy pool, enernoc, europe, france, hitachi, honeywell, japan, ntt, openadr, panasonic, schneider electric