Investors Cheer PJM’s Validation of Future of Power Demand Response Management
Shares of power demand response managers EnerNOC, Inc. (NASDAQ: ENOC) (market cap $588 million) and Comverge, Inc. (NASDAQ: COMV) (market cap $106 million) were trading up 27% and 7% respectively at midday on news released Friday by grid operator PJM Interconnection that demand response services would be an important part of its capacity in the June 2014 through May 2015 period.
PJM Interconnection, which runs the grid and energy market serving 54 million people from New Jersey to Illinois, released the results of its recently completed Reliability Pricing Model (RPM) capacity auction. The RPM auction ensures that electricity providers have enough capacity (power to be drawn from when needed) to reliably serve customers in the PJM region.
PJM said the RPM auction procured 149,974 megawatts (MW) of capacity resources for the 2014/2015 period including 14,118 MW of demand response (a 52-percent increase compared to last year’s auction results), 822 MW of energy efficiency, 695 MW of wind power and 45.6 MW of solar power.
Because wind and solar are intermittent, only part of their output is counted on for reliable power supplies. The wind clearing the auction represents 5,349 MW of wind offered, and the solar power represents 120 MW of solar energy. More than 757 MW of new generation was located in transmission- constrained areas. The installed capacity represents a 19.6 percent reserve margin for PJM.
Demand response is a voluntary, temporary reduction in the use of electricity. A key feature of the RPM is the ability of demand response and energy efficiency to compete with and to be paid the same as generation. Energy efficiency represents conservation and other means to permanently reduce electricity usage by generally large industrial or commercial customers.
EnerNoc said today that based on PJM’s auction, it now expects over $275 million of PJM demand response revenue in 2014. EnerNoc had 2010 revenues of $280 million, approximately 35% of which came from demand response contracts with PJM.
Comverge said today it had secured more than $61.2 million in future potential revenues in 2014/2015 in the PJM RPM auction. Comverge had 2010 revenues of $219 million.
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