In case you didn’t know what to watch for in the demand response market in 2014, Greentech Media offered some trend predictions in December. Some, like the need for load shedding all year round, have already come to pass.
Another trend is the convergence of demand response and energy efficiency, which has already started to happen in the commercial and industrial market and is now coming to the residential market. Companies that were once just energy efficiency providers, and those that delivered demand response, are all now converging to offer platforms that can offer behavioral efficiency, load shedding and endless offers of thermostat aggregation in the market.
The latest entrant with the latter offering is Comverge, which announced its retail device aggregation platform at DistribuTECH in San Antonio this week as part of an updated offering of its IntelliSOURCE system. The offering is similar to others on the market, such as what AutoGrid and EnergyHub are doing, but Comverge hopes to be the first to support any popular smart thermostat on the market to give utilities the most choice possible.
“Anyone can come get an API and plug stuff in,” said Blake Young, CEO of Comverge. “We don’t want to go to utilities and say, 'Here are your three choices'; we want to give them any choice.”
Comverge has already been working with many legacy thermostat manufacturers, such as White-Rodgers and Carrier. But it will also have to court the darling of the thermostat market, Nest, which so far hasn’t allowed its thermostat to run on another company’s demand response platform. That could change, however, as Nest has said it is offering an API in 2014. Comverge said it is speaking to Nest.
It’s not just thermostat manufacturers that Comverge will have to approach. It will also have to entice third-party vendors, such as security companies or telecoms, to integrate on the platform.
“Everyone is at a different stage of technology evolution,” said Young.
It could take years to get everyone playing happily in the sandbox together, and there are many factors that could prevent some third-party providers or thermostat makers from wanting to participate in demand response programs.
Despite the challenges, there is already a land grab going on among companies that want to be the utility’s gateway into the home, since it is increasingly clear that most utilities do not have the desire to build and manage sophisticated home area networks just for peak shaving purposes.
Peak shaving, however, is just one piece of the market. Increasingly, demand response providers like Comverge are also offering energy efficiency services to utilities, and energy efficiency companies like Opower also want to offer demand response services. Comverge is still in the business of controlling a load to get guaranteed megawatt reductions for utilities, but it also enhanced its SmartConsumer product to help utilities engage customers on mobile platforms all year long, and not just during peak events.
With the convergence of energy efficiency and demand response happening across both residential and commercial settings, companies that once might have been partners are now competing over the middle ground where the two services meet.
Opower announced at DistribuTECH the first results of its partnership with Honeywell. The Opower Thermostat Platform, which currently only supports Wi-Fi Honeywell thermostats but will support others in the future, will be used by retail electric supplier Direct Energy for its load control program.
Direct Energy will offer a special rate plan (it is unclear as to whether it will be variable at this time) to customers who enroll in the program. Customers will be given up to three Honeywell thermostats for the home.
For retailers like Direct Energy, the offering is more about giving customers control and convenience, as well as the chance to save money through Opower’s targeted messaging. Although the platform can be used for specific peak events, it is meant to help shave energy use on more than just the hottest days of the year. Even if utilities control 30 percent of residential thermostats, “That’s still 70 percent of homes [that are] not touched at all,” said Kevin Hamilton, senior director of devices and real-time services at Opower.
The ultimate goal is to provide hardware to those who want it, as well as targeting the homes the utility could benefit most from having access to, plus offering a more low-touch behavioral approach to the rest for added savings. Comverge has also beefed up its SmartConsumer platform to offer utilities one-stop shopping for energy efficiency and demand response.
Opower’s behavioral demand response approach, which is being used at Baltimore Gas & Electric, can be paired with hardware, but it isn’t dependent on hardware. In some ways, Opower is more like Comverge than other competitors in that it only serves utilities, whereas other companies such as EnergyHub, Tendril and EcoFactor are courting relationships with telecoms, security companies andsolarinstallers.
The solution will depend on what a utility is looking for. For Direct Energy, the cost of buying and installing the thermostats may offset customer churn, whereas for another utility, leveraging third-party thermostats in its territory may be enough to help with peak reduction. Other utilities may need more sophisticated offerings targeted to the largest residential users to entice them into demand response programs. Solar installers and telecoms would also like to court the largest users to sell them energy services and could eventually compete directly with utilities in deregulated states. Comcast is already moving in that direction.
But not every company is swimming toward the middle of the energy efficiency/load control pond. Simple Energy just landed $6 million in a Series B to expand its software-as-a-service energy-efficiency platform that uses microtargeting to offer customized efficiency that could involve games, rewards or competitions to entice customers. The startup is working with utilities such as National Grid and San Diego Gas & Electric.
Although some utilities are searching for sophisticated offerings, there is still space for players like Simple Energy to target just energy efficiency. Even Opower, which has arguably seen the most success with its nearly 100 utility customers, many of them big names, says that the biggest competition is not other companies with tailored energy efficiency offerings, but rather the utility itself.
“We still see utilities trying to do it themselves,” said Rod Morris, SVP of marketing and operations at Opower. Just getting risk-averse utilities to accept novel customer-centric platforms, which are the basis of interactions in nearly every other industry, is still a challenge.
At the opening keynote of DistribuTECH, a utility executive noted that just a few years ago the industry was still referring to customers as "ratepayers," which elicited a chuckle from the audience. The cultural leap that has come with simply calling them "customers" today shows just how far utilities still need to go, no matter how integrated or siloed their energy efficiency and load reduction programs may be.