07/05/2010 05:12 am ET Updated May 25, 2011

The Smart Grid Is a Happening Thing

Crossposted with

Smart folks like David Brewster of EnerNOC are not waiting to make the grid smart.

It's easy for people like me to get discouraged about the future when it comes to climate and energy. The nation's political leaders, indeed much of the world's political leadership seem unable or unwilling to set the policies in place to leave behind our inefficient, fossil-fuel based energy infrastructure for one that's modern, efficient, and low-carbon.

On the other hand there are others that are more sanguine. Amory Lovins comes to mind. Lovins believes that savvy entrepreneurs and companies will make the energy transition for one simple reason: it's good business. He believes, because he sees it's happening.

'Transforming the Way the World Uses Energy'

Yesterday I visited with David Brewster, a Duke University Nicholas School alum, who is busy proving Lovins right. David graduated from the Nicholas School in 1998 with a Master of Environmental Management (MEM) and a commitment to make a difference in the nexus between energy and environment. After adding a master's of business administration from Dartmouth's Tuck School of
Business to his C.V., he forayed into the private sector. He hooked up with fellow entrepreneur Tim Healy to hatch EnerNOC, short for Energy Network Operations Center, an energy company dedicated to "transforming the way the world uses energy." Pretty ambitious.

Here's how they're going about doing it -- it's all about selling "negawatts" instead of megawatts.

The Problem: Peak-Demand

Most utilities are able to generate more than enough electricity to meet demand the vast majority of the time. Their main problem is meeting demand during those relatively rare times when demand is so high it outstrips supply and/or overtaxes the system -- for example during a heat wave when everyone blasts his or her air conditioner to keep cool. The inability to meet demand during those events is what drives power companies to insist on building new power plants, which raise consumer bills and increase greenhouse gas emissions, despite the fact that that extra capacity may be used as little as 10 percent of the time.

The Solution: Lower Demand by Conserving Nonessential Electricity

But what if consumer demand could be cut during peak-demand times? Then the problem goes away and there's no need for new power plants, right? But how do you lower demand when everyone wants more electricity? Enter the Boston-based EnerNOC.

EnerNOC calls it DemandSmart, a comprehensive demand-response system. Here's how it works:

  1. First EnerNOC approaches a power company like Pacific Gas & Electric (PG&E), and offers the following deal: EnerNOC will guarantee to cut PG&E's demand by a given percent whenever the power company faces a peak-demand event. In return, the power company pays EnerNOC a fee.
  2. Then, EnerNOC finds "clients" -- major power consumers in the region (e.g., manufacturing companies, warehouses, hospitals) -- who agree to cut their electricity use for nonessential operations (identified by the clients) whenever EnerNOC asks. Why should a company agree to do that? Simple. Because EnerNOC uses some of the money it gets from the power companies to pay them. 
  3. EnerNOC installs meters, Internet connections, switches, and such in the clients' facility that enable EnerNOC to cut the users' electricity usage as needed.
  4. EnerNOC establishes a Network Operating Center (NOC) that monitors the system's flow of electrons as well as indicators like weather that might affect electricity usage. Whenever a power company calls an event, NOC operators hit the switches, so to speak, to lower electricity delivery to their clients.

The NOC is a pretty amazing place with huge screens on the wall and teams of mostly young men and women huddled around computers in quiet discussion. One row of customer service reps work the phones; next to them is the IT department; then there's an operations team in charge of overseeing the events; and in the last row are the folks responsible for the technology installed at the client's facility. The impression: a team that is assured and competent and having fun -- an air that they know they are doing something new and important.

EnerNOC's Power Transformers: A Winning Strategy on So Many Levels

By all appearances, EnerNOC is thriving. In addition to DemandSmart, it now has energy-efficiency services -- SupplySmart and SiteSmart -- as well as a carbon-management service -- CarbonSmart. Reportedly working with more than 100 utilities in North America, EnerNOC has a growing business in the U.K.

In addition, the company is increasingly being recognized for its groundbreaking work with utilities (see here and here). Last year, the company won two awards for business growth from the Climate Change Business Journal, a business research publication formed in 2007 to put the spotlight on companies in the climate change industry.

The cool part of EnerNOC's story is that it's a winning proposition on so many levels.

It works for EnerNOC's clients because they are paid by EnerNOC to lower electricity usage and they get lower electric bills since they use less electricity.

It's good for the utilities because they get to forgo having to raise the huge capital needed for new power plants.

It's great for consumers because they get a grid that's more stable and don't have to deal with rate hikes to pay for new plant construction.

It's also a huge positive for the environment. Instead of power companies burning more fossil fuels to meet demand, Brewster and Healy have lowered demand so that power companies can burn less fossil fuel.

And by the way, it looks to be a pretty good business proposition for EnerNOC, which is now a profitable, publicly traded company.

And how have Brewster and Healy done it? By using existing technologies to make the grid smart. This, folks, is the nascent smart grid everyone keeps talking about, growing up before our eyes. And the applications would almost certainly go well beyond demand-response. For example, EnerNOC's technology could be used to balance out demand relative to intermittent power generation from wind.

And it all started with a graduate student who wanted to make a difference for the environment.