Contracts are structured based on what they refer to as 'splits' (Basically shared percentage of revenue received from DR programs). Using basic math - lasts years' clearing price was $59 and it jumped up to $120 this year so doubling. Assuming they secured the same amount of DR as last year (about 4 GW), we should see about $280 Million in revenues announced come Tuesday morning. The drop-off in DR amounts in this year's auction I find interesting. I suspect this is due to consolidation in the industry and small time players not being able to compete with the big boys anymore as well as the increased regulatory scrutiny and requirements for DR. Unsure what the impact of the court ruling on FERC exactly means - its clearly not good for DR and DR aggregators but I believe this story broke during the day while the markets were open so market reaction appears to already have been baked in at this point.
JP – Nice encapsulation. I’d like to add some surprising upsides in the short run that have not been mentioned on this board at all. One is the story in the NYISO where revenue for DR is set to double and expand. Go to Greentech Media and search New York Demand Response and you’ll see what I’m talking about. This will be an immediate benefit to EnerNOC’s numbers in 2014 and I believe could be a catalyst for increasing their revenue numbers.
Another potential other catalyst I believe in recent highs is the Supreme Court’s decision to uphold the decision to regulate smog generated from coal plants that cross state lines – this will create additional pressure on the coal industry and increase the attractiveness of renewable energy and demand response.
Regarding The EIS SAAS solution – EnerNOC is right on the money that this is a huge market but here are the biggest hurdles: Customer education, customer adoption AND differentiated markets. A customer in the PJM marketplace is going to have different EIS challenges than a customer in the PG&E marketplace. This is not a straightforward cookie-cutter, one-size-fits-all application that is needed. Throw on top of that the varying challenges on how the customer needs the EIS to work and you have a very complex system that needs to be created. I’m not saying it’s a pipe dream, but I believe they are just in the process of laying the groundwork of getting there at this point and are still 2 years out from the holy grail.