PG&E Ups In-House Demand Response — Utility Trend?

PG&E announced the launch of its PeakChoice demand-response program this week, which asks business customers to voluntarily reduce energy use by at least 10 kilowatts during peak demand times, in exchange for incentives. Demand-response programs are gaining popularity across the U.S. as utilities try to better manage increased energy use and avoid building new power plants to meet peak demand.

Given that PG&E will be handling this program in house, what does this mean for third-party vendors like EnerNOC and Comverge? EnerNOC and Comverge were some of the early success stories to come out of the cleantech world — EnerNOC has some 1,643 megawatts under management, while Comverge has a total of 2,075 megawatts. If utilities start managing their own demand response programs that could in theory mean less business for these types of vendors.

PG&E tells us that it will continue to grow its demand-response portfolio with third-party contractors. And PG&E actually currently administers a dozen demand-response programs, including PeakChoice, which together are comprised of a total of some 60,000 participating customers producing 695 MW of potential load relief. Some of the programs are facilitated by third parties, including a 50-megawatt deal with Comverge and a 40-megawatt contract with EnerNOC.

EnerNOC CEO Tim Healy told us earlier this year that historically utilities tend to favor outsourcing non-core activities to third parties. For the time being, Healy seems right. Portland General Electric and Idaho Power have both recently put in requests for proposals for demand-response services from third-party vendors.

For now, PG&E appears to be ahead of the curve in terms of utilities managing their own programs. That’s in part because, according to California state mandates, PG&E’s profits are “decoupled” from electricity sales. Decoupling has changed the utility landscape; for PG&E in particular, it has encouraged the utility to move from simply selling more power to being in the business of energy efficiency. According to the California Energy Commission, the average cost of power saved from energy efficiency is much lower than the cost of base-load power generation.

PeakChoice, which has been flying under the radar since early this year, allows customers a lot of flexibility. Business participants can choose how much notice they need before an event, how long they will sustain lowered energy use, how many separate events they will participate in and even how firm the commitment is to providing that promised capacity. PeakChoice already has eight participating customers who provide a total of 4.1 megawatts of demand response.

Check out the utility’s explanatory video, and web site.

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