EnerNOC Eyes Business Beyond Demand Response

EnerNOC (s ENOC) is a big name in the world of demand response — that is, turning down buildings’ energy use to help utilities shave peak power demands. But it’s also been making its way — and buying its way — into energy efficiency, carbon management and energy supply chain services, and on Wednesday it launched its integrated platform for customers to integrate with their own web services.
It’s all part of EnerNOC’s plan to expand from its core demand response business, which now accounts for more than 3.5 gigawatts of power that customers have pledged to turn down in an emergency in exchange for cash. That kind of work requires controls and sensors that lend themselves naturally to so-called building commissioning, or that is, auditing and improving building energy efficiency.

EnerNOC has had its own building efficiency system on offer for some time, and in December it bought building energy management company Cogent Energy, acquiring its technology and some 200 customers in the deal (financial terms weren’t disclosed). Energy and carbon accounting, once again, would appear to be natural next steps to take, and EnerNOC bought carbon management software startup eQuilibrium Solutions in June to help round out that side of its portfolio. Earlier acquisitions include South River Consulting and MDEnergy, two energy procurement services providers.
EnerNOC would seem to be finding new ways to get its demand response customers excited about spending money to save energy outside of those rare times they’re called upon to shave peak usage. CEO Tim Healy said in a release this morning that the new product showed how “EnerNOC’s smart grid leadership goes far beyond demand response.”
But when it comes to smart grid leadership, EnerNOC’s set of offerings are in some ways being made independently of the smart grid’s main end node to date — the smart meter. To be sure, EnerNOC is working on technologies that can ride on pre-existing smart meter or other smart grid networks, such as its PowerTalk, a version of instant messaging that could be used to send automated demand response messages and price signals. Demand response aggregators now do what they do using everything from modern digital networks to old-fashioned phone calls and text messages.
Smart meters could be a new network to link up utility programs and building energy management systems. Comverge (s COMV), another publicly traded demand response aggregator that has some 3 gigawatts of power under management, is working on a new platform, dubbed Apollo, to link with both smart meter and broadband smart grid networks of the future.
But Healy has consistently downplayed smart meters’ potential to supplant the traditional demand response business model. One reason is that EnerNOC, unlike Comverge, doesn’t target residential customers. Healy believes the low-hanging fruit for energy saving lies in commercial and industrial customers with the know-how and motivation to invest up-front in systems that save money over the long term.
In the meantime, EnerNOC’s moves into building energy management put it up against a whole new group of potential competitors. German engineering giant Siemens has might in both smart grid and building automation, and San Jose, Calif.-based Echelon makes both smart meters and building automation network technology. Cisco has a building energy management product and lots of smart grid contracts, though details on just what it’s doing remain scarce. Then there are energy services companies (ESCOs) like Honeywell (s HON), Johnson Controls (s JCI) and Schneider Electric to contend with, as well as the plethora of carbon and energy accounting startups out there.
EnerNOC said in November that Northwest Community Hospital in Illinois was its first customer to buy into all four of its business offerings. Users of its building energy management system include Morgan Stanley (s MS). Still, EnerNOC got about 97 percent of its revenues from demand response last year, with its other services just starting to get traction and bring in money, Pacific Crest Securities analyst Ben Schuman said in a December note. But with the demand response market growing increasingly competitive, EnerNOC’s other offerings do help it make more money from the same customer base, he noted.
Expanding business lines and acquiring startups isn’t cheap. EnerNOC reported a net loss of $6.8 million for 2009, compared to a $36.6 million loss in 2008. It reported its first-ever profitable quarter in the third quarter of last year, but still hasn’t racked up an annual profit since it went public in 2007.