It’s been a tough winter. The polar vortex hit the grid hard, and the nation’s electric utilities faced high demand, extended outages, and disgruntled customers.
But it could have been worse. While many older fossil fueled power plants were called into action, this winter saw the emergence of demand response – the practice of reducing demand during peak hours – as a year-round resource. Traditionally used on the hottest summer days when everyone is cranking their air conditioners, demand response became a critical resource in keeping the power on for millions of customers.
“We saw demand response save the day for PJM in January on more than one occasion,” Blake Young, CEO of Comverge, told Utility Dive.
But becoming more than a summer resource is just the first step. Comverge, one of the big players in the demand response market, wants take demand response beyond emergency events. Comverge aims to position demand response as “a first-call resource for operational reasons,” Young said. Demand response can provide “utilities looking for grid reliability and capacity management the promise of a program that produces like a generator.”
It wasn’t always that way.
Unlike many cleantech startups making headlines, Comverge has been in the game for a while.
“We take great pride in the fact that we invented direct load control for the industry,” claimed Young, citing the company’s engineering roots at Scientific Atlanta and Bell Labs.
But while the company has manufactured nearly 7 million devices in its lifetime, Comverge’s business extends beyond just making control switches. “10 years ago, we would have defined ourselves as a company that sold a lot of load control devices,” Young said. “Today, we think of ourselves as a solutions company in the energy management space.”
To match this vision, Comverge rebranded itself as an intelligent energy management company in 2011.
“We made this evolution because of what we saw coming,” Young said. “It was clear that if we didn’t make the move, we would be left in a commoditized world. We might sell a lot of devices, but we’d be getting an increasingly small margin on each sale – and it’s a heckuva lot more fun solving energy management problems than it is selling a switch.”
Comverge continues to manufacture load control devices, but "the utility-based residential business is going to be the legacy of the company," Young said.
“I just think we’re at a pretty exciting time,” Young said. “30 years ago, load control was essentially on/off. Today, it’s become so much more intelligent.”
Solving utility problems
Comverge may have “cut its teeth” on direct load control, but its mission today is to help solve utilities’ problems. And, boy, do they need help.
Disruptive forces – from the rise of distributed energy resources to the integration of variable renewable generation – are creating a whole host of new challenges for electric utilities. But there are also new opportunities.
“We’re on the tail end of the big AMI push in the U.S.,” Young said. “The American Recovery Act put gazillions of dollars into the pockets of utilities. But that investment now requires smart apps like demand response to achieve the full return that’s anticipated.”
Comverge prides itself on being able to provide utilities with a “guaranteed load drop” – and doing so at scale. For example, Comverge provides Pepco Holdings with 300 MW of residential demand response, which equals 40% enrollment saturation in the utility’s service territory in the D.C. area.
“That’s a lot different than a sexy player in the market with a pilot of 5,000 homes,” Young said.
Comverge will sign a virtual power capacity (VPC) agreement with a utility to provide capacity “on demand” as though it were a generator, Young said. “When we bid a VPC, we bid against incumbent generation. We guarantee that when you need the capacity, it will show up. That’s how we make money.”
That's why Comverge believes demand response is not just for emergencies. It doesn't need to be a "potentially massive 2-hour event that runs across 200,000 homes," Young said. "The idea is to selectively and very surgically cycle demand response on a soft basis. It might cycle for 10 minutes to deal with an operational constraint or a transformer outage, and then be off."
While Young maintains "the heavy lifting is in sophisticated, scaled demand response,"apps that give customers control of, say, their smart thermostat are "the cherry on top." Comverge has expanded its product base accordingly.
“I think utilities are actually waking up to the fact that there is a customer,” Young said. “It’s not an end-point on a network that they’re providing power to.”
Despite the disruptive challenges they face, Young believes “utilities are going to continue to play a big part.”
“We wouldn’t be making such a big bet on the utility sector if we didn’t think that,” he said.