Why the Line Between Smart Grid & Demand Response Is Blurring

There’s a few things to know about the demand response (DR) industry, where third parties reduce utility customers’ electricity demand at critical times to help avoid blackouts: it’s largely a service industry, demand response players like EnerNOC (s ENOC) and Comverge (s COMV) are essentially middlemen between building owners and utilities, and it’s a sector that is increasingly facing consolidation and potential disruption by new technologies. The resulting ecosystem is causing demand response firms to move further out into other smart grid sectors, and vice versa, smart grid firms are starting to tread into demand response.

As I wrote in my weekly article for GigaOM Pro (subscription required), the line is really blurring between these sectors, and EnerNOC is a prime example of this shift. One of the earliest demand response companies around, EnerNOC has responded to the market by acquiring a series of businesses including sustainability and carbon accounting, building energy efficiency software and wireless controls. Comverge, another old school demand response player, seems to be looking to add on services often times found in the “smart grid” column, such as home energy management interfaces and networking. These are all markets potentially much bigger than demand response.

The shift is working in the other direction, too. Companies like Lockheed Martin, Cooper Power and UISOL have launched Demand Response Management Service products aimed at giving utilities the ability to manage demand response on their own terms. The companies that make building management system like Siemens (s SI), Honeywell (s HON), Johnson Controls (s JCI) and Schneider Electric are also making moves into demand response, with Johnson Controls working with IBM and Honeywell recently acquiring Akuacom. And then there’s Cisco, which is eying demand response as one application of its smart grid networking push on the utility side and its EnergyWise system and Building Mediator product in buildings.

At the end of the day the demand response industry was one of the earliest to try to sell grid management services to utilities — call them the pre-smart grid players. But the early days of the demand response industry were based on largely manual processes like phone calls to coordinate turning down demand. So now that smart grid entrepreneurs, investors, and companies (many from the IT world) have emerged to build the next-generation of utility smart grid networks, they’re finding ways to more easily automate the demand response process and fold it into bigger businesses. Once the pioneers of remaking the grid, the older demand response companies are now looking in the face of competition from across the smart grid, and hoping to survive by breaking out of it.

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Image courtesy of brdwatchr1.