Over the past decade, Cincinnati-based startup Integral Analytics has built a software suite that’s helping utilities around the country integrate distributed energy resources for real-time grid operations or decades-long planning horizons.
Now IA’s software and customer base will be boosting the business of Willdan Group. The Anaheim, Calif.-based engineering design and services firm announced last week that it’s acquiring Integral Analytics in a deal worth up to $30 million, depending on performance over the next three years.
According to Willdan’s 8-K filing with the U.S. Securities and Exchange Commission, the acquisition will include $15 million in cash paid at closing, a purchase of common stock valued at $3 million, and up to $12 million to be paid “for a percentage of sales attributable to the business of Integral Analytics” over the next three years.
These “earn-out payments” will be calculated as 2 percent of gross contracted revenue for new work generated “in close collaboration with Integral Analytics,” as well as 20 percent of gross contracted revenue for each software licensing agreement it lands over the three-year period.
In other words, Willdan will be looking to incorporate Integral Analytics’ capabilities into its existing business lines, as well as profiting from continued growth in grid-DER planning software. Integral Analytics offers a source of recurring revenues from software licenses to augment Willdan's project-by-project revenue models. In the longer term, its analytics will serve Willdan’s broader range of work, which increasingly includes municipal and utility efforts to expand traditional efficiency programs to incorporate DERs, said Kevin Kushman, Integral Analytics' chief operating officer, in a Monday interview.
For most of its 50-plus years of existence, Willdan has mostly served as a civil engineering department for California cities and counties, he said. But in the past decade or so, it’s expanded outside the state, with work in Arizona, Florida, Texas, Illinois, Washington state and Washington, D.C., and taken an increasingly large share of its revenues from contracts with utilities like New York’s Consolidated Edison.
Integral Analytics has built its software business on its own revenues, with a relatively small team of employees. While Kushman wouldn’t reveal how much money the company’s shareholders are making on the Willdan acquisition, “I can say proudly that it’s a great success story for a company that was self-funded through its entire history,” he said.
Integral Analytics, founded in 2005, is working with more than 40 utilities tackling “emerging system regulations in California, New York, Massachusetts, Texas, Arizona, Hawaii and other jurisdictions,” with software designed to calculate and manage the impact of distributed energy resources like solar PV, energystorage on-site generation and load control, and electric vehicles.
IA’s software suite manages these DER impacts on both the long-term scale, through its LoadSEER (Load Spatial Electric Expansion and Risk) and DSMore (Demand Side Management Option Risk Evaluator) platforms, and in real time, through its IDROP (Integrating Distributed Resources into Optimal Portfolios) platform. Utilities using the software include Duke Energy, Southern California Edison, DTE Energy, San Diego Gas & Electric, ComEd, AEP, Seattle City Light and Xcel Energy.
One of the most interesting applications of IA’s software is in creating “distributed marginal price,” or DMP, values for DERs at the local distribution grid level. It’s a term taken from the locational marginal price (LMP) values used by transmission grid operators, but shrunken down to low-voltage distribution grid scale. These screenshots of IA software show how it’s being used by utilities, including Hawaiian Electric on the island of Oahu and Pacific Gas & Electric in Fresno, Calif., respectively.
In the course of working on a project together, the two companies “started to see that we were very nice complements for each other,” Kushman said. “They’ve been a project engineering type business, and they like the way we can repeat our solution in different places, and pick it up and move it across their whole portfolio.”
Meanwhile, Willdan’s work with more than 150 municipalities opens up new potential customers for Integral Analytics’ software, he said.
Willdan has been playing a role in some high-profile distributed energy-grid integration projects, said Tom Brisbin, the company's chairman and CEO, in an interview. It's delivering much of the energy efficiency savings behind Con Edison's Brooklyn-Queens Demand Management project, for example, and is working with many of its municipal clients on integrating DERs into their efficiency efforts.
"When we do energy efficiency for utilities, Integral Analytics helps us target the congested areas of the grid," he said. "If we can reduce the load in the congested areas, it helps utilities become more efficient with their capital expenditures. That’s where we see IA really helping us."
Ben Kellison, director of grid research for GTM Research, noted that the acquisition “positions IA more as an investment in internal capabilities to enhance program delivery” for utility efficiency, demand response, or distributed energy implementations. In that way, he said, it’s a bit like how NRG Energy has taken its SpaceTag distributed energy optimization platform, developed by its Station A research team as an internal planning tool, and brought it to market for use by utilities in California and other states.
Integral Analytics is one of a small but growing number of companies with software taking on the challenge of integrating DERs into utility planning and operations. Others with similar approaches include Smarter Grid Solutions, Opus One Solutions, Spirae, AutoGrid and Enbala Networks, as well as grid giants such as General Electric, Siemens, ABB and Schneider Electric.
The rise of DERs as a significant grid resource is pushing utilities in forward-looking states such as California, New York, Hawaii, Illinois and Minnesota to look at ways to break down the traditional separations between energy efficiency, demand response, distribution grid operations, and infrastructure investment planning, Kushman noted. “Instead of saying, ‘We need 100 megawatts of DR,’ they’re starting to say, ‘We need 100 megawatts of available capacity -- and fill it at the lowest possible marginal cost.’”
As for when the combined companies will be revealing how they work together, “The time since the acquisition has only been a couple of weeks, but we’ve spent a lot of time cross-pollinating our work with theirs, and finding places we can collaborate on projects that are in flight right now.”