A few years back I was offered some annual cash from the local electric utility to allow them to cycle my air conditioner during peak loads in the summer. I instead opted to install an attic fan and just not run my air conditioner in the summer. Now for those of you who know me, I obviously do not live in Houston. Not running the air conditioner in Houston is NOT an option. I live in the Mile High City of Denver where an attic fan is a legitimate alternative to typical demand response programs in the summer. My local electric utility uses Opower to send customers reports on how they are performing usage-wise month-to-month. My attic fan catapulted me into the Rockstar status of beating the neighborhood on usage. “Mission accomplished” and in the process, helped my local utility with those peak periods without them having to “pay” me.

Oracle announced last May that it would be acquiring Opower for approximately $532 million, positioning the acquisition as enabling Oracle and Opower to become the largest provider of mission-critical cloud services to the utilities industry. Now, Opower is not just a “cloud provider” of services. Instead, it specializes in collecting meter reads from utility end customers to provide analysis on usage and compare that usage to a geographical area, say a neighborhood or zip code. It started as a paper-based solution by adding its analysis into a current bill or sent as a separate paper document. A utility did not have to have AMI for the solution to work and be effective. Over the years, it became apparent that it needed to provide digital solutions in addition to its paper-based solutions. Hence, the drive to cloud-based services and the obvious strategic link with Oracle.

One year later, Itron announces it is acquiring demand response provider, Comverge, for $100 million. Comverge, like Opower, did not start as a cloud solution. Instead, it started as a “hardware oriented” demand response provider. In recent years, it has changed its model to focus on software and services. One of its more popular services is the “Bring-Your-Own-Device” program where the customer provides its own device, such as a smart thermostat, to interact with Comverge software providing demand response services. PNM and Entergy Arkansas recently signed up for programs that offer “Bring-Your-Own-Device” features. Itron plans to use the acquisition of Comverge to enable utilities to better integrate distributed energy resources and optimize grid performance and reliability.

So what does this mean for Demand Response/Energy Efficiency markets? A couple of things. First, it appears that the market leaders are getting acquired by other market players looking to expand offerings into Demand Response/Energy Efficiency. Oracle and Itron have taken out two of the arguably top leaders in the space. Secondly, the markets are heading into a “Cloud” or “As-A-Service” direction. Instead of doing hard-copy reports or installing specific hardware and managing that hardware, we are beginning to see cloud solutions emerge that enable end consumers the ability to shed load or operate more efficiently. Regulators in some states are beginning to recognize the value of cloud-based solutions and are beginning to entertain allowing return on those services. Historically, the utility had to capitalize via investing in an asset to allow for recovery. Energy Efficiency poses a problem in this equation as it is many times being provided as a service and not as an invested capital asset. It also encourages less use of the product that utilities are selling. I would expect to see more acquisitions of Demand Response/Energy Efficiency companies and expect to see them transition to a cloud-based service offering as opposed to the traditional hardware required offering. Also, for those who are interested in utility customer service, I hope to see you next week in Ft. Worth at CS Week 41.