DR Market Ready for Auctions?

Jesse has been warning for a while that the demand response market would soon get much harder than it has been for pioneers such as Comverge and EnerNOC. The announcement today of an "auction" for demand response is one danger to their current business models. Follow the links below for other competitive threats. 

World Energy Solutions, Inc., an online exchange operator for energy and environmental commodities, has jumped into the demand response (DR) market with its new online auction platform. The World DR Exchange^TM auctions will give price transparency, increase competition and grow the industry's share of DR revenues, the company says.

"Just as we have done for energy procurement in deregulated markets, World Energy is now doing for demand response — creating an efficient, transparent and liquid marketplace that benefits customers and suppliers alike," World Energy CEO Richard Domaleski said. "For customers, the World DR Exchange answers the key question, 'what is the market value of my curtailable load?' — netting them more dollars in the process. For CSPs (curtailment service providers), it addresses the high cost of customer acquisition, providing a low-cost channel to qualified customers."

World Energy says DR now shows the fastest growth in the energy technology field, and that Barclays Capital estimates the market could hit $20 billion annually by 2020.

CSPs work with customers to get them to cut down their energy use during peak demand periods. Grid operators benefit significantly because reducing consumption during peak demand can help prevent blackouts and reduce the need for new power plants. Operators pay CSPs a set amount for megawatt and CSPs in turn hand over part of the payment to their customers.

World Energy's DR auction procedure is based on its energy transactions program, The World Energy Exchange® and its The World Green Exchange®. The company works with its clients and develops and markets their RFPs to the CSPs, then runs the auction and awards a contract based on its clients' choices.

CSPs bid against each other in real-time "forward auctions" which push up the percentage of DR revenue the award winner shares with the customer. World Energy's fees are paid by the CSP.

Audrey Zibelman, CEO of Viridity Energy, Inc. explained it this way: "World Energy provides an easy entry point for businesses into these competitive wholesale markets. The future Smart Grid supports deep and broad participation in these markets, which will in turn promote greater efficiencies along with greater market penetration for clean, distributed energy resources — a vision shared by both Viridity and World Energy."

From the source ...

World Energy press release

Related SGN resources ...

Smart Grid Demand Response: Big Opportunity for ESCOs

Smart Grid Demand Response: Competing by Adding More Services and Becoming a Platform

Smart Grid Demand Response: Stealth-Mode Startup Could Shake Up the DR Market

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