Top 3 Trends Transforming the Demand Response Market
In this Innosight:
What is Demand Response?
Our demand for electricity in the 21st century is ambitious, considering that the current electric grid was designed more than a hundred years ago. It’s time to enter the smart grid.
The smart grid is a modernised electrical grid which completely changes the game. It encompasses a variety of operation and energy measures. Demand response (DR) is one of them.
DR provides an opportunity to the consumer to reduce their electricity usage during peak periods and enjoy lower unit prices in exchange. This leads to great savings in energy consumption and expenses. DR programmes are being used to balance supply and demand. These programmes can lower the cost of electricity in wholesale markets consequently leading to lower retail rates.
As it is all about increasing flexibility and savings, advancements in technology are apparent. Technological advances are incorporated in both mass market and commercial & industrial (C&I) demand response programmes. While developments are happening in both, the C&I market segment contributes to the majority of the total DR capacity.
Let’s look at what the numbers say.
The DR market is still in the early development phase, but is only going to increase in popularity as we go forward.
Current Top Three Trends in Demand Response
Steady Growth in Investment
The data gathered from our pool of over 2 million companies in tech & innovation provides valuable insights, and can help predict future trends and support a better understanding of the market.
The DR market is still in the early development phase, especially in the EU, where regulations restrict the growth. However, it’s only going to increase in popularity as we go forward.
The US market, which has developed the furthest, is expected to reach $18 billion in revenue by 2022. One of the reasons for this success in the US is the Supreme Court ruling in favour of demand response.
The market growth will surely continue as long as further policies and legislations are adopted to support it. Nevertheless, the market has experienced positive growth over the last ten years and is likely to remain on the same trajectory.
Breaking Down the Energy Sector
We broke the investment profile down into industry verticals to discover more information about the market. Industry verticals denote groups of companies with a focus on the same niche or specialised market.
As the energy sector is heavily oil-focused, we decided to exclude companies operating in the oil industry. This diminishes the energy production and energy storage -verticals a great deal but also gives us a better understanding of the demand response market.
The main industry verticals can be seen below and the top three are: software, energy equipment & electrical equipment.
These three are further discussed after the graphs.
Of the three, this industry vertical gathered the most investment, had the greatest number of operating companies within it, and offered the most fascinating solutions. This should come as no surprise, as implementing such a complex system as DR requires powerful smart software for support.
A variety of different kinds of software is included, comprising real-time energy intelligence, virtual power plants, frequency controls & energy trading platforms.
DR systems rely heavily on consumers. For these systems to function properly, consumers need to have basic knowledge about the topic. To be successful on a larger scale, DR should also be easily approachable and comprehensible. This is where different software comes into play.
DR management systems are critical components for both consumers and electrical utilities. Specifically, these software are used by both parties for communication. This linkage is necessary for the required synergy between the two.
Below you can find an example called Fusebox, a company dedicated to connecting consumers with energy suppliers in order to reduce their expenses and CO2 emissions.
The second most trending subject DR is power equipment. Power equipment consist of an array of tools that are used to create, manage, and distribute energy.
Although software is obviously important, hardware is also required for DR systems to function. In this area you will find equipment such as microgrid control systems, electrical conversion systems & grid stability technology.
For DR systems to gain their full potential, consumers need to be able to conveniently control their energy usage. This is possible with the right set of tools.
For instance, Trilliant is a company that helps the energy sector to enter the energy-saving smart grid.
Although the two might sound similar, the terms power equipment and electrical equipment are not interchangeable. They might occasionally overlap but in this context, there is a difference.
The electrical equipment used in demand response include things like electronic voltage regulators, plug load control systems & electrical disturbance management.
They are an important part of the puzzle and we are likely to see advancements in the coming years.
A great example from the sector is Shifted Energy, a company that makes water heaters smart with the help of advanced machine learning and cellular IoT communications.
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