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>Why Won’t Utilities Pay Homeowners To Cut Use?

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Please Pay Me To Use Less EnergyEnerNOC pays companies to cut energy use. Why won’t someone pay homeowners to do the same?

Illustration by Robert Neubecker. Click image to expand.In this project, “The Efficient Life,” Slate has been seeking your best ideas for helping people use less energy at home and save money. You can read Daniel Gross’ explanation of The Efficient Life here, his article about compact fluorescent light bulbs here, his article about utility bills and peer pressure here, his passionate exhortation that you get a home energy assessment here, his speculation about whether we should pay fuel bills in cash herehis annoyance with his vague heating bill here, and his love letter to home insulation here. You can scan all the proposals submitted by readers hereIn the next week or so, Slate will be announcing the top dozen ideas.
Over the last few weeks, I’ve talked to a lot of professionals about things I can do to make my home more energy efficient. The most satisfying aspect has been shelling out a small amount of money to have people come in and make some quick, cheap fixes that will pay dividends. My home energy assessment was heavily subsidized by Connecticut’s energy efficiency fund and was a form of triage. If I want to pursue more serious efficiency, I will need to make significant investments, in insulation, for example. As I’ve been wondering about whether to make that investment, I have been thinking it would be great if there were a private-sector company that could, for little money down, analyze my energy use and set up a system that would help me use less energy—and pay me for doing so.
It turns out there is one—but the catch is that it pitches its services only to businesses.
EnerNOC solutions, which got started in 2003, is a company that has grown rapidly during the recession. Its revenues tripled between 2007 and 2009. (Here’s a recentearnings report.) EnerNOC has a couple of different business models, each of which depends on delivering energy savings to buildings.
EnerNOC’s main line of business is demand response. Utilities like to say that the most efficient power plant is the one that doesn’t have to be built. The theory in the utility industry is that it’s much cheaper to invest in measures that can cut use by 5 percent or 10 percent at peak periods (90-degree days in August) than it is to build and maintain a stand-by power plant that will be called into action a few days per year. Hence: demand response. Utilities negotiate deals with big users who agree to dim lights and turn down air conditioning or heating when called upon. They also pay companies like EnerNOC to do it for them. EnerNOC signs up big users—hospitals, colleges, office buildings—and installs software that analyzes facilities’ energy use and then calculates how they can shed load quickly without disrupting operations. There’s no installation cost for the user. EnerNOC shares with its customers the payments it gets from the utilities just for agreeing to be part of the plan to reduce usage. When customers actually do cut their use, they get additional payments. The demand-response model has proved attractive in a recessionary environment of pinched capital spending. Last year, EnerNOC’s “megawatts under management” rose 73 percent. Its Demand Response program has 2,800 customers and 6,500 sites. Unlike many energy efficiency programs, its benefits are clear and transparent. You get a check merely for agreeing to reduce energy use at certain times.
In order to figure out how buildings might shed demand quickly in peak hours, EnerNOC uses software to analyze buildings’ energy use in microscopic detail. It checks out how much energy each office, hallway, closet, nook, and cranny is using and analyzes the air flow through every piece of equipment.”When we submeter a facility, we can receive 6,000-10,000 data points on a building’s management system in real time,” said Tim Healy, CEO of EnerNOC. “As a result, we can see where air is being unnecessarily moved.”
And this capability has led to EnerNOC’s second main business, SiteSmart. Essentially, EnerNOC sells software that analyzes buildings and generates ideas on how to cut energy use. “We’re selling them software as a service and then guaranteeing that they’ll be able to identify energy savings opportunities worth at least twice what they pay us on an annual basis.” In effect, EnerNOC will contract to reduce energy use by 8 percent to 10 percent and share the savings. Its Web site includes case studies such as Morgan Stanley’s New York headquarters, where it identified more than $100,000 worth of savings “from operational energy efficiencies, such as refining automated schedules to better align with actual occupancy behavior.” (Translation: turning off lights and cranking down the air conditioning when fewer people are around.)
Last year, solutions such as SiteSmart accounted for only 3 percent of the company’s revenues. But Healy says EnerNOC’s approach—for both Demand Response and SiteSmart—have found greater traction in this environment because they offer energy efficiency on the cheap. “Traditional energy efficiency is characterized by big-ticket capital expenditures. You pay a lot for equipment and it takes a few years for the investment to pay back.” Today’s building managers have limited budgets and need to generate savings more quickly to justify investments.
Interesting, right? But how does this bear on my desire to cut my own energy use at home? I’d love it if my utility would pay me to agree to dim the lights, unplug the unused television, and unplug the half-empty wine fridge when they ask. And I’d love it even more if someone could rig up fancy software that would program my heating and cooling systems more effectively. But as of now, EnerNOC doesn’t have a practical application for individual users or for smaller businesses. The electricity load of any given store or home is so small in comparison with overall usage that it doesn’t make much sense for utilities or EnerNOC to target them for Demand Response. And most homes don’t have complex commercial energy systems that could benefit from SiteSmart. But Healy believes that it’s a matter of time. It’s all about data. As appliances, homes, and the grid get smarter, consumers, utilities, and third parties will have much more granular information about energy use. “I think the residential market does look appealing,” he said.
How about you? Are you able to participate in demand-response programs with your utility? Do you know of any third parties that will do for homes what EnerNOC does for large businesses? Please tell me about them in the comments section below.
Or join the discussion
on the Fray
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