American utilities are investing in broader efforts to simplify the customer experience across separate digital ecosystems.
Evaluating and integrating distributed energy resource (DER) marketplaces -- platforms offering energy-saving products and services to their customers -- into an overall customer engagement strategy is becoming more commonplace, according to a new GTM Research report, The Emergence of Utility-Branded DER Marketplaces.
These marketplaces are one tactic aimed at fulfilling regulatory mandates to increase customer engagement with their energy services. This is particularly true for the 12 marketplaces in California and New York, which represent approximately 15 million customers. In total, there are 32 million metered customers with access to a DER marketplace, and 56 different utilities in the U.S. are operating or planning a marketplace.
FIGURE: Utility-Branded DER Marketplaces in the United States, 2017
Source: The Emergence of Utility-Branded DER Marketplaces, GTM Research
“Most operational DER marketplaces are still in an early stage and have focused on selling energy efficiency items to residential customers -- resulting in limited revenue upside for the utilities,” said Fei Wang, senior grid edge analyst and author of the report.
These initial platforms are giving customers access to products like smart thermostats and LEDs -- with integrated point-of-sale rebates and compliance tracking. Future evolutions of these marketplaces could include more substantive load-altering programs, products and services, such as demand response, distributed generation, energy storage and electric-vehicle charging equipment, noted Wang.
FIGURE: Typical DER Marketplace Offerings
Source: The Emergence of Utility-Branded DER Marketplaces, GTM Research
Strong competition from other traditional and online retail players such as Home Depot, Lowe’s and Amazon limit the revenue potential for residential energy-efficiency products, creating a difficult business case for maintaining utility DER marketplaces on these products alone. “Utilities are working to expand existing marketplace products and services to catalyze higher load-modifying potential and capture larger additional value from the deployment of energy storage or the contracting of reliability services,” said Wang.
DER marketplaces can reduce customer-acquisition costs associated with the adoption of newer energy management technologies such as solar, storage and management software, along with traditional energy-efficiency products. The potential for customer benefits and utility revenue is greatest with large power users, notes Wang.
“Utilities can be natural energy advisers for businesses with significant consumption of power because they both value reductions in peak demand -- and DERs are a path toward that goal," she said.
Ultimately, the combination of retail purchases in these DER marketplaces alongside broader participation in utility demand-side programs can have a substantive impact on efforts to more fully integrate DERs into electricity markets, noted Elta Kolo, grid edge analyst at GTM Research. “The potential for aggregating these DER services to ultimately provide grid services is perhaps the greatest value that these market platforms can deliver.”
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The full report from GTM Research includes further details on business models and market size, plus an analysis of technology vendors. Learn more about the report here.
To learn more about demand-side programs in electricity markets, see GTM Research's quarterly series on U.S. Wholesale DER Aggregation.
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