EnerNOC: Demand Response IPO
Lunch with an Efficiency Expert
Yesterday, I had lunch with Howard Geller, Ph.D., one of our nation's leading experts in energy efficiency and energy policy. Howard is the director of the Southwest Energy Efficiency Project (SWEEP), former Executive Director of ACEEE, and has a Doctorate in Energy Policy from the University of Sao Paulo in Brazil.
My first question for industry experts is which companies are doing good things in their feilds, and I was especially interested in Howard's answers because energy efficiency is so much more difficult to pin down than most other types of renewable energy. If you want to invest in wind power, you can choose from a list of over a hundred companies. Investing in energy efficiency is much trickier: it is possible to buy manufacturers of more efficient products, such as LEDs or hybrid vehicles, but the greatest gains in efficiency come from better system design. If you want to invest in hybrids, you might buy Toyota (NYSE: TM), but you might also consider investing in batteries, or efficient electric motors. And a hybrid car is an extremely simple system when compared to efficient buildings.
EnerNOC and Demand Response
We talked about several public companies, but for most of them, energy efficiency is only a small part of their operations. There's no Vestas of energy efficiency. An then he mentioned a company I had not yet heard of, because they are not yet public. EnerNOC specializes in demand response and energy management, which basically means making better use of the generation capacity we already have. If we are going to avoid building more coal plants and make better use of intermittent power from renewable sources such and wind and solar, we can invest in expensive electricity storage, or we can shift our use of electricity to times when it is easier to supply. This is exactly what demand response technologies enable.
In addition, Demand Response allows utilities to delay the construction of new transmission by reducing peak loads, and helps to prevent power outages. Large cities such as New York are particularly good prospects for demand response, because they have the added constraint that additional transmission is particularly hard to add in densely populated areas.
EnerNOC recently filed with the SEC for an IPO. The lead underwriters are Credit Suisse Securities (USA) LLC and Morgan Stanley & Co., whom you can contact for a prospectus. I just did so myself, and will review it to determine if I will recommend that any of my clients participate. Note that this article shall not constitute an offer to sell or the solicitation of an offer to buy; that can only be done through the prospectus when it becomes available.
Market and Competition
I expect the market for Demand Response services and enabling technology to grow rapidly over the next few years. TXU will likely be a big customer for demand response services as a way to meet rising peak demand without building 8 of its 11 planned new coal plants. Demand response is also likely to be an enabling technology to get more intermittent resources on the electrical grid, allowing people to use power when it's being generated for free by the sun or wind, and to use less when it has to be drawn from limited or expensive power storage or generated with dirty and increasingly expensive fossil fuels.
EnerNOC does not have the space to itself. In addition to private competitors like Energy Curtailment Specialists, Inc., ConsumerPowerLine, and Comverge which are also busy inking deals with utilities. One public (but not pure-play) competitor is Energy Connect, a subsidiary of Microfield Group, Inc. (OTCBB:MICG). But given the potential rapid growth of the industry, there should be room for many companies to participate and thrive.
Tom Konrad, Ph.D. is an independent investment adviser registered in the state of Colorado who helps people reach their investment goals while protecting the environment.
DISCLOSURE: Neither Tom Konrad nor any of his clients hold positions in EnerNOC.
DISCLAIMER: The information and trades provided here are for informational purposes only and are not a solicitation to buy or sell any of these securities. Investing involves substantial risk and you should evaluate your own risk levels before you make any investment. Past results are not an indication of future performance. Please take the time to read the full disclaimer here.
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