Thursday, June 28, 2007

The looming Demand Response consolidation

Perhaps the hottest market few have heard of right now is Demand Response, which we've discussed -- often -- here (but which I find more often than not is still unfamiliar to anyone who isn't a big cleantech geek like yours truly)... Negawatts-on-demand is proving to be an important new tool for generation- and transmission-constrained utilities.

The recent successful IPOs of Comverge and EnerNOC have raised the profile of the sector a bit, and brought in a significant amount of capital available for potential acquisitions. What is less well-known, furthermore, is that two additional factors are poised to drive a wave of consolidation in the still-emerging industry:

1. While a couple of the DR companies have gotten all of the attention lately, the DR capacity aggregator segment (the companies like Comverge and EnerNOC that are contracting with utilities to provide the negawatts-on-demand) is actually a pretty crowded space, with a lot of other companies (some quite large and established with good existing utility relationships) angling to get in on the action as well.

2. While there has been a bit of a "land rush" among DR capacity aggregators lately, their actual technical ability to automate the delivery of capacity on demand has fallen behind a bit -- when the utilities call for the negawatts to be provided later this summer, there will be a lot of frantic phone calls and text messages flying around, in a very manual attempt to get each building's facility managers to go turn down thermostats or turn on backup diesel generators. [I would be remiss if I didn't mention that @Ventures has a vested interest in seeing more automation technology roll-out in the demand response space, as our portfolio company Powerit Solutions is especially well-positioned in this regard, so: "Self-promotion alert"]

Putting it all together, you've got well-capitalized players in a fast-moving space -- players who will seek to grow in terms of both scale and technical capabilities by doing acquisitions. So it's no surprise to see the wave of consolidation get started with yesterday's announcement that Comverge is acquiring Enerwise... Expect more news along the same lines over the next year or so.

In other deals announced this week:
  • Stion, a PV startup formerly known as NStructures (Michael Kanellos discusses some rumors about the technology here, and Jonathan Shieber also discussed the nanotech aspects of the company's approach in yesterday's VWire), announced a $15mm Series B led by Lightspeed Venture Partners. General Catalyst also joined the round, as did existing investors Khosla Ventures, Braemar Energy Ventures, and Moser Baer Photovoltaic. The company raised a $6.3mm Series A about a year ago, and is targeting silicon-like efficiencies without the high cost of silicon.
  • SDCmaterials, which develops alternatives to precious metals used in catalyst applications, raised a $6.3mm Series A led by Emerald Technology Ventures, and also including BASF Venture Capital and two other unnamed investors.
  • GaAs triple-junction PV cell developer QuantaSol has raised a GBP1.35mm seed round of financing from Low Carbon Accelerator, Numis Securities, Netscientific Ltd., and Sheffield University Enterprise. This type of PV cell is most appropriate for use in concentrator-based solar power systems.
  • VentureWire reported that UK-based food-waste biomass-to-energy developer Inetec has raised GBP2.5mm, led by Oxford Capital Partners, and with participation by existing investor Finance Wales and undisclosed other new investors.
  • According to today's VWire, Konarka has engaged a banker to help raise a $40mm round of financing. Meanwhile, Howard Berke has stepped aside as CEO and will be taking a Chairman role going forward -- and is additionally signing on with Good Energies to help with portfolio management.
Other news and notes: Had the pleasure of speaking on the "Carbon as Currency" panel at the Red Herring East 2007 conference yesterday; the panel was artfully moderated by Nick Parker of the Cleantech Group -- here is a write-up of Nick's plenary talk earlier in the day... The New England Energy Innovation Collaborative (NEEIC) has launched a CEO Council of regional renewable energy business leaders to help continue to build the local cleantech cluster, and to provide a common voice for the sector on regional policy issues... We mentioned Mr. Cleantech before, but now it's officially launched... A solar powered motorbike?... And finally, here's perhaps the harshest critique yet of biofuels.

SAVE THE DATE for the next REBN-East networking event:
July 19th, at Flat Top Johnny's in Kendall Square, 6:30pm.


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