I'm trying to understand the problem PJM has with Demand Response generally, and with Enernoc, specifically.
Is it that Demand Response, as a capacity resource, is relatively cheap (and efficient)? Therefore, if limits are not placed on the amount of Demand Response Capacity imported into the PJM System, pricing system-wide is negatively impacted. This reduced pricing does not meet the minimum hurdles of traditional generators also bidding to supply external capacity, economically displacing them.
PJM says this is a matter of system reliability - that the economic displacement of the traditional generators lessens availble capacity resources, to a threshhold below which PJM can maintain system reliability.
Is reliabilty the root issue, or is economic displacement the root issue?
You pointed out that it's the 2017/2018 BRA that's impacted. I see that. I guess the issue is not 2017/2018 specfically, but whether the proposed revisions funamentally dilute Enernoc's business model -- not only for that year, within PJM, but generally. Is this the bigger question, and if yes, to what extent are PJM's concerns generic, a headwind to utilities' broader adoption of DR?
well those are some tough questions. i will try to give you my take on them. from what i understand and from what management has stated several times, i think PJM is not targeting EnerNoc specifically, but DR in general. but due to the ENOC's market share it seems like they are basically the target.
I agree with your second point and would add that also some utilities are trying to provide the DR services but are significantly lagging by ENOC and other DR providers who came into business first. as CFO stated during the Stephens Conf.: "Yeah, let me talk about two types of go-to-market engines because we have a utility go-to-market engine and then we have a C&I go-to-market engine. And on the utility side, it's interesting because there are three - we have open markets, right, which is where we participate in these auction prices and we bid against generators and folks that want to build power plants. We bid against them to supply capacity to an open market. Then there are vertically integrated utilities who most of the time would rather build a - the extra power plant for a few days a year, a few hours of time and earn a regulated return on that than participate in demand response, but maybe their regulatory body is encouraging them to do demand response or maybe from an environmental standpoint, it makes more sense for them to do demand response.....
So we're competing in both open markets and with vertically - and with - and we're competing for business with third party folks with vertically integrated utilities. Since we're the largest player in this space, we do pretty well when we get into a head-to-head competition with other third party providers with vertically integrated utilities because I think we're a safe bet. And we've got a lot of dispatch performance and history around what we do. But the biggest competition of all for us on the utility side is with utilities who want to try to do this themselves. That's about half the market today. I would say it's by and large not a core competency for those utilities. That third party provider market is growing faster than the utility DR market, and that's the prime reason why. So that's the go-to-market engine from a utility perspective."