Why meters are selling like hotcakes

By Staff -- Purchasing, 10/7/1999

Information is easily the hottest segment of the energy supply market today. To buy energy competitively, experts agree that end users need detailed information about their energy usage patterns--information that can't be obtained from simply studying old bills. "The information piece," says Charles Watkins, president of DukeSolutions in Charlotte, N.C., "is your ticket to play. If you don't have solid information, you can't make good decisions."

Mark Gifford, vice president and general manager of Binghamton, N.Y.-based EnergyPoints, a provider of technology and energy-data services for multisite businesses, says, "Right now, we're seeing the yin and yang of deregulation--two steps forward in competition, one step back in predicting prices. All these fluctuations and tradeoffs certainly add to the uncertainties and risks of energy procurement. That's why it's important for energy and purchasing managers to begin focusing on what they can do now, things that are certain and can be controlled--such as energy information."

Gifford notes that, "When natural gas deregulation hit, it took most end users much longer than expected to catch on to changes. So their ability to achieve the greatest savings lagged behind the opportunity. With electricity, the stakes are even greater, and errors made will be less forgiven. Missed savings and diminished competitive opportunities will result if buyers and managers avoid or delay planning, information gathering, and follow-up actions."

Many uses for energy info

It's widely agreed that energy end users will need detailed consumption information in order to:

- Understand their exposures to market supply and price risks and to set risk tolerances.

- Understand consumption patterns, prioritize loads, and develop supply portfolios according to risk tolerances.

- Obtain competitive pricing by taking guesswork out of marketers' price-setting exercises.

- Segment and flex their demand according to market supply and price signals, leading to more favorable contract terms and conditions from suppliers.

- Identify opportunities for obtaining demand-side efficiencies.

- Evaluate potential investments in new capital equipment and energy infrastructure (in context of their overall energy management and risk strategies).

- Identify opportunities for sensible load aggregations.

- Create "virtual meters," electric power aggregations that allow end users to act as though they're operating with a single physical supply meter, allowing for portfolio management of electric demand charges.

- Create algorithms for allocating savings fairly among members to an aggregation.

- Develop market intelligence in order to raise their level of market participation. (For example, over time an end user might find itself moving from a very low-risk market position to a higher risk position as its information management becomes more sophisticated.)

The new landscape

The energy information segment involves four pieces--hardware, networks, software, and services. The hardware component comprises meters, sub-meters, building and process control systems, etc. The network component covers the act of communicating data--over physical wires or via the atmosphere--to so-called data warehouses. The software component takes data from the warehouse and converts it to information that can be used in all of the aforementioned ways. The fourth component--services--is there to help end users make use of their information for buying energy commodities and managing demand dynamically.

The understanding that energy end users need to be investing in energy information technology as a means for buying energy competitively has pumped up markets for hardware such as process and building control systems, and for integral, real-time, and sub-metering hardware. Don Millstein, president of e-mon Corporation in Langhorne, Pa., a provider of several metering and automatic meter-reading products, reports a 20% sales increase in just the first quarter of 1999. "The threat of competition has created a heightened awareness of the energy bill," Millstein says. "End users know they need to be proactive if they want to take part in the savings."

The information imperative has also launched a big technology innovation drive in the industries that support energy IT. A recent white paper from Statoil Energy in Alexandria, Va., notes that while most companies rely on standard meters to provide their usage data, "technology has been rapidly developing in the energy world. Advanced technologies can review real-time usage patterns and identify when a company is getting close to passing a pre-determined usage threshold. Instead of allowing the company to exceed the threshold, the device will automatically instruct certain, previously identified pieces of equipment to shut down for a few minutes. This 'smart meter,' or advanced control device, will also instruct the equipment to turn on again in a few minutes. It continues this monitoring constantly. It is an intelligent device that can predict when your company is approaching a threshold based on historical usage patterns, weather conditions, day of the week, time of day, and other metrics that you provide. The application of this data can result in substantial savings."

The good news is that the rise of economical Internet technology and falling costs of wireless communications has dramatically reduced the costs of gathering relevant data from many disparate sources, then communicating information back to relevant energy decision makers.

"It used to be very expensive to go out and collect detailed energy consumption data," notes John Woolard, president of Silicon Energy, Alameda, Calif.-based developer of the new Enerscape energy management software package. "Just four or five years ago, you needed a team of experienced engineers walking around with clipboards or collection devices, collecting data from remote locations." Today, Woolard notes, "both hardware and communications costs are falling, so it's becoming much less expensive to collect strategic data." (Note: Enerscape relies on secure Web technology to centralize and to provide appropriate access to energy-related information and databases.)

Sample 10-step energy plan

- Assemble an energy team from across the business to outline objectives e.g., energy procurement, management, purchasing, operations, accounting, finance.

- Assemble information on energy spending, load profiles/factors, peak/aggregate demands.

- Benchmark energy efficiency internally--facility versus facility to detect efficiency opportunities (for example, one process line may use 20% more/less energy for same activity as another line).

- Benchmark externally to compare the operation against industry standards (the company probably can't compete profitably without matching energy efficiency).

- Develop an ongoing strategy to collect, assess ever-changing energy information e.g., information supplied in time can avoid a penalty, not just verify after penalty.

- Aggregate energy loads to maximize benefits in a deregulating utility market (for example, to leverage usage information before negotiating with power suppliers).

- Strive for flexibility by combining internal and external resources (deregulation is creating a growing number of alternatives to traditional energy suppliers).

- Diversify energy solutions to strengthen tactical advantage (i.e., determine, choose re-bundled energy packages giving best market leverage).

- Compile an energy management plan that details overall strategy for knowing how to buy, what to buy, and when to buy regionally or nationally.

- Centralize energy purchases for lower administrative costs.

For a more detailed copy of a 10-step energy information management plan, contact EnergyPoints at 1-888-871-2455 or via the Internet at www.energypoints.com.