World Energy Unveils “Demand Response” Auctions, Disrupting a Market Dominated by Boston’s EnerNOC

2/24/10Follow @wroush

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a boon for both electricity users and curtailment service providers, since it provides a ready-made meeting ground.

“We see this as a win-win,” says Phil Adams, president and chief operating officer at World Energy. “The customer gets a good price for what they’re looking for, meaning the highest share of the fees, and on the other side the CSP gets access to a customer that is ready to contract for zero sales cost.” (In return for running its auctions, World Energy keeps a small percentage of any payouts from the curtailment agreements its users negotiate.)

The reaction to World Energy’s move from executives at EnerNOC might best be described as dismissive.

On the one hand, the company says it welcomes anything that makes the demand response market more competitive. “Competition spurs innovation,” says Gregg Dixon, EnerNOC’s senior vice president of marketing. “If we were the only ones who were successful in demand response—and I think it’s safe to say we are the only ones who have been truly successful so far, having just had our first profitable quarter—it wouldn’t be healthy for the industry.”

But at the same time, EnerNOC argues that demand response capacity isn’t a simple commodity like the other forms of energy traded on World Energy’s platform, and that auctions are therefore a poor way for customers to discover the true value of a relationship with a curtailment service provider.

“I’ve seen their auctions platform, and it’s not a stretch to say that it’s world-class,” says Dixon. “We just don’t think it has a tremendous amount of applicability for demand response, if customers are trying to get the most out of program participation.” While an online reverse auction might be a good way for customers to get the best percentage split for their curtailment commitments, Dixon says, it won’t help them discover which service providers are best at tasks like identifying curtailable load or managing load during an actual demand-response event.

For World Energy, demand response auctions are a natural extension of the company’s existing business running auctions for power and gas contracts, carbon emissions allowances, and renewable-energy credits. (For more on those sides of World Energy’s operations, see our May 2008 and July 2009 features.) “We’re sticking to our knitting, but … Next Page »

Wade Roush is a contributing editor at Xconomy. Follow @wroush

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