Don’t call it demand response anymore — call it “Intelligent Energy Management.” That’s the name that Comverge (s COMV), the country’s second-largest publicly traded demand response company, gave in a Monday announcement of a new “vision” of how it will do business from now on.
So what’s in the new name? In an interview on Friday, CEO R. Blake Young laid out some hints for how this rebranding might change the way Comverge approaches its different markets, its competition with leading demand response provider EnerNOC (s ENOC) and other competitors, and how it’s adapting to a future where demand response and smart grid look more and more alike. The move is also part of the overall trend that I outlined in my report: demand response as the backdoor to the smart grid (subscription required).
1). Two-way communications will rule the future: Comverge got its start as a demand response aggregator, using one-way paging networks to turn down power-using equipment in commercial and industrial sites to help utilities manage peak load events. That’s a cheap and direct way to manage peak load, and will continue to be part of the company’s business — as Young put it, “We’ll never be completely finished with the smart grid,” meaning lower-tech solutions will be necessary for decades to come.
But Comverge and its competitors will also need to be able to use the smart meters and other two-way links between utilities and their customers to expand on the ways it helps shave peak loads and save energy. Comverge already has a number of utilities — most recently Texas’s TXU Energy — using the old one-way pager system that plan to switch over to Comverge’s “Apollo” platform for two-way control through smart meters once they’re installed. (Part of Monday’s rebranding includes renaming Apollo as “Intellisource,” by the way.)
2). Integrated solutions may de-emphasize equipment: While Young didn’t identify any existing endeavors that Comverge would be leaving behind with Monday’s rebranding, he did emphasize that the company has “not sold solutions as aggressively as I think we should.” One might see that as a hint that business lines that don’t link back into a broad solutions set are going to be de-emphasized — and that may include Comverge’s line of branded smart thermostats, now installed in some 5 million homes around the country. What that might mean for more future-forward efforts — such as Comverge’s plug-in vehicle charging efforts — remains to be seen.
3). A move toward energy services models: While Comverge, like its competitor EnerNOC and others in the traditional demand response business, works under service contract models, it has also created a turnkey load control platform that it sells to utilities to do their own demand response directly. That turnkey business has grown increasingly popular of late with stimulus cash-rich utility customers. Still, “we know the stimulus is finite,” Young said, and that could push utilities toward Comverge’s “Virtual Peaking Capacity” contracts — those in which Comverge invests the up-front capital, assures customer enrollment, and then contracts over a period of years to return that peak reduction capacity.
4). The path to Intelligent Energy Management lies through internal development: Unlike competitor EnerNOC, which has acquired a host of companies to expand its business, Comverge hasn’t done an acquisition since it bought Enerwise Global Technologies in 2007. Still, Young said, the Intellisource platform has “millions of dollars invested in it, and we’ll invest millions of dollars more in the next year.”
5). Comverge, Not On the Block: Citigroup analysts in September speculated that Comverge could be an acquisition target, noting that the company has seen shares slide amidst operating losses in recent quarters. But Young declared that Comverge wasn’t for sale, and that any acquisition talk was being spurred by the purchase of demand response provider CPower by competitor Constallation Energy last month — a purchase that more than anything “gives validation to what we do.”
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