Global Vendors To Account for a Growing Share of the Demand Response Market Over the Next Five Years
April 17, 2012
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The concept of demand response (DR) harkens back to the 1970s, when it was first implemented in the United States as a component of demand-side management (DSM) programs, which were triggered by the Arab Oil Embargo of 1973 and the Iranian Revolution in 1979. Recent years have seen strong and growing demand for DR services across the globe, driven by increasing demand for electricity (which threatens to jeopardize the reliability of the grid), the need for greater energy efficiency and cost savings, and the introduction of new technologies, including advanced metering infrastructure and smart metering, virtual power plants, microgrids, and renewable resources. While DR has traditionally been offered primarily by utilities and grid operators, recent developments have opened up opportunities for a growing and diverse number of vendors in this marketplace.
According to a recent repport from Pike Research, large and global players including power product, equipment, and enterprise energy management vendors like ABB, Honeywell, Itron, Johnson Controls, Schneider Electric, and Siemens, energy services companies (ESCOs) like Constellation Energy, and major curtailment service providers (CSPs) like EnerNOC will play an increasing role, and gain increasing market share, in this dynamic sector over the next several years. They will be competing in a rapidly growing market: Global revenues for demand response services are projected to climb from just less than $1.3 billion in 2011 to more than $6.1 billion by 2016.
While curtailment services are expected to remain the largest component of the overall DR market, according to the research firm, systems integration/consulting services and outsourcing will experience strong growth as well. All of the world regions offer good demand response services prospects, but North America is currently the leading region and is projected to represent the biggest market opportunity over the next five years. Europe, which is the second-largest market, is forecast to reach a DR services market size of $156 million by the end of 2011. Asia Pacific will likely account for a relatively small share of the market, at slightly over 5%. But prospects in this part of the world are expected to double to almost a 10% share of the total market in 2016 with a market size of $6.2 billion.
"While the DR market is expanding in terms of revenues, there are now signs that the competitive landscape is starting to contract as a result of a slew of acquisitions that took place in 2011 and will continue over the next few years," says senior analyst Marianne Hedin. "Sizable vendors are trying to make further inroads into the burgeoning DR market and shore up their portfolios by acquiring smaller players with niche expertise in the DR space."
Examples of a few acquisitions in 2011 were:
As the market continues to mature, Pike expects more acquisitions by these and other
leading players in the future. There are many different ways of winning in this maturing
market, but the firm cites the following important competitive success factors:
- EnerNOC's acquisitions of M2M Communications, a wireless technology solutions
provider of energy management and DR, and Global Energy Partners, a leader in
designing and implementing utility energy efficiency and DR programs
- French-based Alstom's acquisition of Utility Integration Solutions (UISOL), a systems
integration specialist with a leading a software platform, DRBIZNet, for DR
- Johnson Controls' purchase of DR specialist EnergyConnect
- Schneider Electric's acquisition of the large Spanish-based IT software and services
company Telvent, which has a DR software portfolio
- A complete solution that addresses a larger enterprise-wide issue, such as energy
management, the deployment of smart meters, and the integration of renewables and
EVs, by embedding DR solutions with these offerings
- Ability to articulate the business case for DR and how investments in related technology
and service offerings can result in a win-win for both utilities and their customers
- Thorough understanding of the end-user preferences and customer behavior issues with
respect to load management to help utilities design and deliver effective DR programs
Source: Demand Response: Curtailment Services, Systems Integration and Consulting Services, and Outsourcing Services for Commercial, Industrial, and Residential Markets: Global Market Analysis and Forecasts by Pike Research. Excerpts reprinted with permission.
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