Last month, U.K.-based Centrica announced it was joining the ranks of European utilities like Enel, Engie and EDF in seeking a piece of the North American distributed energy market -- with a little help from the fact that it also owns one of the continent’s biggest retail energy providers.
The new company, Centrica Business Solutions, is actually a combination of acquired and home-built business units with significant existing market share in the U.S. and Canada. Backed by the promise of $910 million in investment through 2020 by its parent company, it’s selling combined heat and power (CHP), solar, battery energy storage and standby generators, along with the software and services to put them to use.
This package will be marketed and managed by Direct Energy Business, the commercial services arm of Direct Energy, which is owned by Centrica as well. Direct Energy serves than 4 million customers in the 14 U.S. states and western Canadian provinces that allow for retail competition in energy markets, making it a significant channel partner for the new business.
In fact, Direct Energy is already operating some “significant” amounts of demand response with its customers in the Northeast U.S., Stephen Prince, senior vice president overseeing North America commercial operations for Centrica Business Solutions, said in a Wednesday interview. This portfolio, and the software behind it, will now be part of the new company, he said.
The company’s presence is heavily weighted toward the Northeast today, as well as Texas. “We’re expanding rapidly [and] organically” in those markets, he said. Centrica is also active in other states, through the customers of several companies acquired over the past few years, he added.
The first is Panoramic Power, which makes tiny wireless sensors that clip onto the circuits in a building’s circuit panel, along with the software to collect and analyze the data to provide energy efficiency and management insights. It was bought by Direct Energy for $60 million in late 2015, and has “a significant customer base in North America,” he said.
The second is ENER-G Combined Heat and Power and Rudox Power Generation, which provide CHP systems and backup generators, and were bought by Centrica for $212 million in May 2016. Rebranded as ENER-G Rudox last year, the business sells, rents and supports both CHP and standby generation, mainly natural-gas-powered units, in sizes from 30 kilowatts to 2 megawatts, he said. “We have units on top of the U.N. building -- we’re a very well-known brand in New York, New Jersey, Massachusetts” and other Northeast competitive energy markets, said Prince.
REstore, which Centrica bought for $81 million in November, wasn’t mentioned in Centrica Business Solutions' press release last month. But Prince noted that the Belgian company’s technology, which controls building energy loads at split-second intervals to meet grid operator and energy market needs, will also be part of Centrica Business Solutions’ rollout in North America.
“Their virtual power plant capabilities, their aggregation capabilities, their remote control capabilities behind the meter -- all of that software -- has become part of the backbone of our solutions offering in North America," he said. At the same time, “We have our own platform, we have our own operations, we have our own intellectual property around our software. We’re serving customers with Panoramic and integrating it with REstore.”
The solar part of the business will be covered by Direct Energy Solar, which last year retreated from the residential space to focus solely on commercial and industrial solar projects. The business, now combined under Centrica Business Solutions, works mainly in the Northeast, but has been expanding in Texas, Illinois, California and other states, he said.
The smart home connection: Centrica Hive and OhmConnect
While Centrica Business Solutions is squarely focused on the commercial and industrial customer base, Centrica has its own line of smart thermostats, motion sensors, cameras and other smart home devices, under the brand name Hive.
British Gas, one of the U.K.’s big six retail energy providers, built the Hive platform on software from startup AlertMe, which it bought for $64 million in 2015. It’s now more or less the incumbent smart home platform in the U.K., with hundreds of thousands of customers, Roy Vella, vice president of Centrica Hive Limited, said in a Tuesday interview.
In North America, by contrast, “We’ve been in the experimentation phase,” Vella said. “The U.S. market is quite unlike the U.K. market. So is the Canadian market.” Direct Energy started testing the devices in seven markets last year, and expects to be “expanding our footprint” in 2018, with a focus on Texas and other states where it has a significant residential customer base.
Last week, Hive inked an interesting new partnership with San Francisco-based startup OhmConnect, aimed at expanding the value of its smart home devices by adding energy market revenue to the equation. OhmConnect has signed up thousands of homeowners in California to receive text or email alerts to turn down energy use when grid demand is peaking, and has used programs like the state’s Demand Response Auction Mechanism to turn that behavioral demand reduction into cash value.
Under the deal announced this week, OhmConnect customers will get a 20 percent discount on Hive gear such as internet-connected thermostats, door and motion sensors, cameras and LED lightbulbs, and will receive 4,000 OhmCredits -- rewards for participating customers -- when they turn them on.
“This is a direct partnership where OhmConnect customers can buy a Hive on the site, or we can bring new customers to OhmConnect in partnership with us,” Vella said.
It’s not the first time OhmConnect has partnered with a smart thermostat provider -- it tested out a similar bring-your-own-thermostat concept with Schneider Electric’s Wiser brand of devices in 2015.
For Centrica Hive, it’s an opportunity to link the startup’s energy-saving rewards systems to its nascent North American smart home business, Vella said. “I think that home energy management as a space is barely touched. I think demand response is just starting to get going. And we’re excited about the opportunities in this area.”
Centrica Business Solutions is competing against a host of European energy giants, each of which has amassed its own stable of acquired companies with market share in distributed solar, energy storage, backup power, demand response, and other grid edge lines of business.
One big competitor is Italian utility Enel, through its Enel Green Power North America subsidiary. In January, it acquired Demand Energy, an energy storage and demand management provider for commercial and industrial customers, and in June it bought EnerNoc for $250 million, giving it a major share of the U.S. demand response market. EnerNoc, in turn, acquired EV charging startup eMotorWerks in November.
Engie, the services arm of GDF Suez, has bought an 80 percent stake in U.S. behind-the-meter battery startup Green Charge Networks, and French mega-utility EDF bought Groom Energy Solutions through a subsidiary last year, launching a C&I distributed energy business in January. Last year, Royal Dutch Shell bought MP2 Energy, the Texas-based developer of large-scale wind, solar and gas projects; geothermal power giant Ormat acquired Viridity Energy; power plant engineering firm Wartsila bought Greensmith; and Aggreko bought energy storage firm Younicos.
Domestic competition comes from the energy services arms of utilities like Duke Energy, Southern Company and Enel Green Power, as well as conglomerates such as GE Current and Edison Energy. In the backup power space, we’ve seen some large-scale efforts to link building backup generators and on-site energy controls, as NRG Energy and Cummins are doing, or to make use of batteries as part of a broader microgrid system, as Southern Company’s PowerSecure is doing with Advanced Microgrid Solutions.