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Smart meter and home energy management companies have been getting the bulk of the attention when it comes to the rollout of the smart grid. But the old skool demand-response firms are still going strong. One of the largest demand-response providers in the country, CPower, said […]

Smart meter and home energy management companies have been getting the bulk of the attention when it comes to the rollout of the smart grid. But the old skool demand-response firms are still going strong. One of the largest demand-response providers in the country, CPower, said Tuesday it has raised $10.7 million in its second round of venture funding to expand into new geographies and market segments, including some energy-efficiency programs beyond demand response.

Demand-response service providers, like New York-based CPower, help utilities avoid outages by reducing energy users’ electricity demand at critical times. Utilities pay for the unused megawatts, and energy customers get a cut of the cash. CPower targets large commercial, industrial and institutional power users, as well as some residential clients, in New England, New York, the mid-Atlantic region, Texas, California and Ontario, Canada.

The deal is a good sign for CPower, and highlights the fact that demand-response programs remain “very attractive” to utilities in the downturn, said John Quealy, a managing director at investment bank Canaccord Adams. He pointed as well to EnerNOC, which recently signed three new customers. “We’re seeing very few orders in other energy [segments], but in demand-response, we’re seeing new order flow,” he said.

With the $4 billion expected in smart-grid stimulus funding; a House bill that, among other provisions, calls for utilities to set up demand-response plans; as well as a PJM Interconnection capacity auction planned for next week, the market for demand-response services looks rosy.

CPower’s funding was the first energy investment for venture firm Mayfield Fund. Other investors in the round include Bessemer Venture Partners, Expansion Capital Partners, Schneider Electric Ventures, New York City Investment Fund and Consensus Business Group.

CPower does face growing competition from a crop of new companies that have hit the market in the last few years. But with little technology differentiation between most demand-response services, the name of the game is scale, and that’s where large companies like CPower and EnerNOC have an advantage. “Utilities don’t want risk — they are relying on you to curtail demand and are making supply decisions based on your ability to [do this] — and I would expect larger companies would give utilities that comfort, and a lower price point,” Quealy said.

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By Jennifer Kho

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