When World Energy first launched its World DR Exchange in February, Gregg Dixon, senior vice president of demand response giant EnerNOC, wrote that, "Auctions aren't well suited for business relationships in which value is realized during the entire business relationship."
But for World Energy's largest single demand response customer to-date, value is coming from the auction house itself. The Worcester, Mass.-based company has secured at least 1,500 megawatts from Alban Engine, an authorized dealer for Caterpillar generators and power systems with more than 1,000 customers, which will be sold to the highest bidder.
The appeal for Alban Engine was due in part to the customer experience that it felt it couldn't get by simply going straight to one curtailment service provider. "World Energy makes it a lot more customer-friendly," said Matt Graham, energy program manger for Alban.
When customers come to World Energy, they are generally coming off of a two- to five-year demand response contract. World Energy sits them down to look at their capability and hashes out what type of program is the right fit and what sorts of bells and whistles they will need to effectively carry out demand response.
Once they engage a company to find out what they need, World Energy then invites different players in the market -- generally six to eight DR providers -- to come bid on how much DR revenue they'll share with customers. For Alban, all 1,500 MW won't be auctioned at once, but rather, their customers will have tailored packages that will be auctioned off a few at a time. Auctions generally average about four or five megawatts.
Customers are seeing about 80 percent of the demand response payout using World Energy, according to Andrew Thomas, the senior vice president of wholesale operations for World Energy -- about 20 percent more than customers typically see when they go straight to a DR provider.
Besides the money, it's just plain fun. Many customers gather in a room and put the auction, which lasts about 15 to 30 minutes, on a big screen to watch the bids come in. At a recent auction, "people were cheering," said Phil Adams, president and COO of World Energy.
EnerNOC's Dixon argues that demand response services aren't a commodity, but that is not World Energy's intent. "You're educating the market," said Adams. "We're not here to upset an industry or ruin margins."
That education could have big payoffs for everyone involved. Alban Engine is one of about 50 authorized Caterpillar dealers in North America, and Graham said that they're hoping that they can be an example to other dealers who want to offer demand response services in their package. "I think we are on the leading edge here for Caterpillar dealers, or maybe all electric power providers," he said. "Our intent is to take our service experience and help [other Caterpillar dealers] capture demand response opportunities." Let the bidding begin.