Blog Post

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

Stay on Top of Enterprise Technology Trends

Get updates impacting your industry from our GigaOm Research Community
Join the Community!

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.

3 Responses to “PG&E Ups In-House Demand Response — Utility Trend?”

  1. I agree with USMG… Enernoc shouldn’t have much of a problem in terms of competition. They continue to grow as a company and are signing more and more contracts. It will be interesting to see what happens after their energy management/energy analytics services start picking up steam.

  2. Don’t read too much into this. In a lot of service areas the incumbent utility offers Demand Response services, but they tend to only get a small percentage of marketshare because the ratio of customers to reps is very large and sales coverage spotty.

    Sometimes the Utility just legitimizes the pratice in the customer’s mind.

    Finally, some of these same utilities will put our RFP’s for servicing contracts which the independents (Like ENOC) can compete for and given the robustness of their backend processing services it is actually cheaper for them to do it than the utility