Startup Voltus has grabbed 400MW worth of energy management contracts since opening its doors in June last year – spread across all major wholesale markets in the US, and a significant win for the new entrant. CEO Gregg Dixon described how Voltus had success targeting smaller entities previously underserved by its competitors. The pace at which the company has been able to attract customers should turn heads and encourage new rival offerings of a similar nature, but the big boys aren’t going to take this lying down.
Demand response is a way for the grid operators to reduce the load on the grid by incentivizing users to reduce their current usage in exchange for payment or credit, usually at peak times when a grid is near capacity. Reducing demand means that the grid operator doesn’t have to fire up expensive reserve energy resources, and companies and utilities have recognized that participating in demand response programs can earn them significant reductions in their energy bills.
This is where demand response contracts come in, and where the larger enterprises have been making the early progress. Now, Voltus is attacking a gap in the market, catering for customers that are not at the scale of the largest enterprises that can employ a dedicated member of staff to add their demand-response-capable resources to the demand response marketplace – as a way of monetizing those resources.
Energy management companies have, to date, struggled to sell to smaller commercial entities, failing to provide a simplified and tailored offering. The early market incumbents like EnerNOC, Johnson Controls and Siemens, have been focused on attracting large institutional and commercial demand response players – leaving a suitably untapped gap in the market that Voltus has been aggressively pursuing.
Now emerged from stealth-mode, Voltus has been able to make significant progress into the lower end of energy management, by simplifying and reducing the cost of energy management for its customers. Energy management systems had been previously limited to enterprises of a certain scale, with the spare resources to afford software and a trained member of staff to operate it. The Voltlet is a device that removes the need for expensive software, training and staff, by moving the software into the cloud and automating the process.
Central to the company’s strategy is the Voltlet – a $100 device that connects a customer to Voltus’s cloud-based demand management services, built from pretty standard components, and connected and controlled through Amazon Web Services.
The device then allows Voltus’s algorithms to take over the process of demand management, generating savings for the customer by reducing energy usage at peak times – allowing them to access demand response incentives, and generating revenue for customers. Customers do not make payments for the services of Voltus, instead the benefits of the relationship are spread between both parties – that is, Voltus is taking a cut of the savings.
CEO Dixon assured Riot that the Voltlet, due to the fact it took data measurements every 30 seconds, can support any type of ancillary service – such as frequency or voltage regulation on the grid. This means that Voltus customers are likely to see increased revenues from their relationship with the company, should grid operators introduce more incentives for ancillary services – as those services often benefit the utilities too.
Voltus had been winning existing demand response contracts, but the biggest share of business came from a 300 MW aggregation agreement with Midwest grid operator MISO. The agreement certifies that Voltus can enter 300MWs of resources to auction for demand response contracts during peak times on the MISO energy wholesale market.
A certified demand response resource can consist of any energy system that can curtail the grids load, and is not as sophisticated as it might sound. Dixon gave the example of how remotely turning off an AC system for a few hours could grant a Voltus customer access to demand response incentive payments. The payment from the grid operator is then split between Voltus and its customers.
Dixon explained that the demand response market stands at 80,000 MW, or 10% of the United States’ energy consumption. To date 20,000 MW of the market has already been catered for, leaving a remaining 60,000MW of demand response contracts left to win. Dixon expects Voltus to grow by 1,000MW in energy management contracts within the next few years.