What will the demand response and energy efficiency fields look like in 2017?

That's the pressing question many companies are facing as the nation gears up to face a new presidential administration and Congress. Beyond the federal level, several states have passed legislation last year tackling standards and policies for energy efficiency, and grid operators continue to refine their market structures for demand response. 

As we prepare for a new legislative and regulatory landscape, several industry insiders offered up predictions for coming trends in the utility sector. For demand response, these trends span the spectrum of home energy management to energy efficiency standards for marijuana growers. 

1. Companies will offer energy management to the masses

James McPhail, CEO of Zen Ecosystems: Most of the market that could benefit from demand response programs and energy management systems has been ignored.

Looking at it from a building-automation contractor’s point of view, small customers don’t make sense – it’s the difference between having a chain of Walmart stores or one corner mom-and-pop coffee shop as your customer. But when you stack the independent retailers, businesses and coffee shops together, you’re adding up most businesses across the nation and a significant portion of energy usage from the grid.

Companies that develop innovative, low cost hardware and software that can participate in demand response events will begin to target this market. While there is technology available to these businesses (ranging from energy storage to sophisticated energy management systems), the cost to enable a kilowatt through them is typically anywhere from $500 on up. With a simpler, smarter device, that price could be brought down to the $50/kW range.

2. Mobile phones will take over energy management

Adrian Tuck, CEO of Tendril: Energy customers have powerful technology in the palms of their hands: their mobile phones. Through these devices they have relationships with their banks, with their airlines, with their entertainment curators—with nearly all service providers they need—and in 2017 those enhanced relationships will further extend to their electric utilities. Customers want stronger relationships with their energy providers, if, of course, those relationships translate to easier, more efficient, cost-effective energy management.

Entering 2017, utilities have access to the back-end technology resources they need to facilitate digital relationships that peak customers’ engagement and start to bring the vision of the connected home to life. Utilities can deliver the data customers want about their home energy consumption, and they can relay this data in ways that show customers clearly how to better optimize their energy use.

As utilities move toward more proactive digital communications, they will continue to put their customers at the heart of their initiatives. They’ll better position themselves to succeed in our “on demand” culture by moving their business models away from program-centric approaches to customer-centric methods, whether they’re looking at energy efficiency, customer satisfaction or demand management initiatives.

Utilities that adopt data-enhanced, digital communications methods will retain these customers in increasingly competitive markets and will remain the trusted partner in energy management. The technology is there, ready and waiting to help utilities cement these strong relationships in the year ahead.

3. Consumer demand will spur more DR and efficiency offerings from utilities

Will Greene, product management, energy and safety services at Nest: As 2017 unfolds, customers will be the central force that shapes the evolution of the power sector.

It is no secret that distributed energy resources (DERs) have seen explosive growth over the past year. The availability of these resources is intensifying competition among electricity service providers (ESPs) and pressuring utilities to change their “business as usual” approach. To adapt to the changing market landscape, we predict that utilities and energy companies will continue to reorient their businesses around consumers, who are fast outgrowing their narrow historical definition as “ratepayers” and evolving into important partners.

To effectively achieve this transition, utilities will need to collaborate with third parties that are pioneering new ways of engaging residential customers. Utilities will increasingly tap cutting-edge technologies as the anchor to communicate with customers and enable their participation in efficiency and demand response (DR) programs.

At the same time, consumers’ value as contributors to dynamic load management will continue to grow, warranting greater investment from energy companies in the form of incentives for enrollment in such programs. In other words, investment in virtual power plants (VPPs) built on residential DERs will start to become a reality.

This past year saw some major all-source requests for offers (RFOs) from leading utilities such as Consolidated Edison in an attempt to supplant investment in “brick and mortar” power plants and legacy infrastructure. Southern California Edison also took a new approach to address power shortages from reduced natural gas supply – smart thermostat DR programs. As utilities become more comfortable investing in DERs, we anticipate more customer-centric technologies, such as smart thermostats, finding their way into long-term utility resource planning.

The transition to embrace consumers will drive the evolution of the grid for years to come, and 2017 will mark the cornerstone of this new mode of operation in the power sector.  

4. EVs will proliferate, as will marijuana efficiency programs 

CLEAResult: Tesla received nearly 400,000 preorders for its new Model 3 sedan. Safe to say, the EV market is heating up. Time-of-use (TOU) rate schedules for customers with EVs will continue to gain traction among utilities, as it not only creates price signals that encourage charging at times when demand for energy is low, but also allows utilities to separately meter the charging station.

This provides valuable insight into the charging behavior and use of EVs across a utility’s service territory. Also, 2017 will see the first part of $2 billion in spending on EVs and EV infrastructure as part of the VW settlement. An additional $2.7 billion will be spent to offset emissions, some of which could also be spent on EVs and related infrastructure.

In the 2016 elections, eight states approved new cannabis measures, including California, Massachusetts, North Dakota and Florida. Indoor grow operations for cannabis are nearly as energy-intensive as data centers, so as more and more states move forward on the measures approved for cannabis use, there may be more concerted efforts to target efficiency programs for marijuana businesses.

5. 2017 will be the year of "storage-as-a-service"

John Carrington, CEO of Stem:  On the heels of a transformational 2016, the market for intelligent, behind-the- meter (BTM) energy storage is set to dramatically scale in the year to come.

2017 will mark the year commercial-scale storage expands beyond early-adopter trials in California and Hawaii to at least 10 U.S. states and to new global markets. Commercial and industrial customers are demanding software-driven energy storage services to enable control over their energy decisions, just as regulators and utilities across the country increasingly recognize the unique capabilities of these distributed resources.

Why will 2017 be the year to scale? Storage services are moving beyond pilots to markets. In 2016, top storage service providers and forward-thinking utilities and grid operators proved that aggregated customer adoption of software-driven storage can alleviate grid constraint issues quickly and reliably while avoiding major investments in distribution infrastructure. For example, the vendors selected by Southern California Edison in its 2014 all-source Local Capacity Requirements solicitation are already connecting BTM storage customers for its backup capacity needs. Hawaiian Electric Company is finishing tests next month that demonstrate how it can call on its customers directly through innovative storage-based Demand Response.

Utilities across the country are watching this and exploring additional benefits, for example Con Edison’s 2016 BQDM project will rely on aggregated storage assets to defer a $1.2 billion substation.

Utilities also recognize that their customers’ demand for energy storage will take that growth across the country. Businesses and institutions are drawn to onsite storage as an effective means to take more control of their energy decisions and tackle both economic and environmental goals, from automated demand charge mitigation to participation in regional grid support programs. Smart project financing and dropping costs will only accelerate this pull, adding “storage-as- a-service” to the lexicons of building managers across the country. Expect to see significant adoption of BTM storage among Fortune 500s and household brand names in the coming year.

The rapid expansion of customer-sited storage is on track to outpace that of the early rooftop solar years—and we’ve only scratched the surface of what this software-driven technology can do. The Rocky Mountain Institute outlines 13 value streams offered by BTM storage to customers, utilities and ISOs, outperforming traditional transmission and distribution assets. It’s no wonder FERC, utilities, regulators, and grid operators are taking notice.

Intelligent customer-sited storage is ready to take off. It’s looking like 2017 will be a year for the record books.