Girding the Grid: How EnerNOC Sold Utilities and Big Electricity Users on Demand Reduction

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graphs comparing sites’ baseline and actual electrical usage, along with critical contextual data such as oil prices and temperatures in various regions of the country.

When utilities are looking for ways to prepare for periods of peak demand, they’re beginning to treat demand reduction exactly the same way they’d treat peaking power plants—by signing contracts with companies like EnerNOC and Comverge, who guarantee they will deliver a certain number of negawatts within a certain time frame. Of course, convincing utilities that demand-response technology would work and that such contracts could be fulfilled was another long battle for the company. “Electric power managers are not allowed be risk takers, because their job is keep the lights on for all of us,” Brewster says. “So we’ve always known that the burden is on us to prove that this is as good or better than the traditional modes of meeting peak power demand. But as we’ve grown, we’ve had hundreds of demand response events in our history, so now we have a body of work that we can point to that really makes knocking down that barrier much easier. Instead of PowerPoint presentations, we now have reams of actual data to demonstrate how quickly we are able to respond to grid emergencies.”

EnerNOC’s Network Operations CenterIn fact, in California, the state public utility commission now requires utilities to look for ways to meet energy needs through efficiency and demand reduction before it will hand out permission to build new generating plants. That, plus concerns over greenhouse gas emissions, has created what Brewster calls “strong tailwinds” for EnerNOC. “Coal-fired power plants all over the country have been getting rejected based on environmental concerns, while demand for electricity is continuing to skyrocket,” says Brewster. “So demand reduction is getting more and more positive attention than ever before, in terms of being a real solution to our energy problems.”

Sooner or later, investors may realize that demand reduction and other efficiency measures made possible through advances in information technology aren’t options to be tossed away at the first sign of dropping fossil-fuel prices. Indeed, they’re the only way we’re likely to get a real handle on energy consumption and greenhouse-gas emissions— while still somehow managing to keep the lights on.

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Wade Roush is a freelance science and technology journalist and the producer and host of the podcast Soonish. Follow @soonishpodcast

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6 responses to “Girding the Grid: How EnerNOC Sold Utilities and Big Electricity Users on Demand Reduction”

  1. Ned Tyler says:

    The closing statement sums-up the long term concern with the viability of EnerNOC — “while still somehow managing to keep the lights on” The central story includes an appropriate description of your visit to EnerNOC, wondering how many times the employees (negative connotation) have to endure demonstrations for visitors. I don’t believe that curtailment solutions that pay for discomfort are sustainable. The peak demand problem on the grid is triggered by multiple day heat wave events (3 or more days). The central risk to the business will be proven over time–How many of these events per year will business endure? Also, I think you should dig deeper I believe there are a significant number of “Steves” in EnerNOC’s customer base.

  2. Jim C says:

    Jim Cramer recommended ENOC last week.

    CAVEAT EMPTOR :)

  3. USMG says:

    The business model makes sense. They provide a service that is significantly less expensive than the alternative (building even more peak capacity). They take advantage of technology. And… their revenue model is almost all annuity based.

    They may continue to attract distractors (good for people who want to slowly accumulate) until they turn cash positive or get profitable because people don’t fully appreciate that they have to spend today on sales and orgaizational growth for contracts which generate revenue over time.

    Salesforce.com (CRM) suffered many of the same negative comments at the exact point in their public life.

    Long term keys will be: Renewal rates and gross margins.