Apogee Interactive CEO: Demand response trading still embryonic but viable business

ATLANTA, Ga., Nov. 8, 2001 – Even after 150,000 MWh of peak load reductions this past year, Apogee Interactive’s CEO Joel Gilbert says the price-responsive demand business is still embryonic.

Citing the fact that today’s regulated retail electricity markets interact only occasionally with the competitive wholesale markets, “Trading demand response doesn’t get included until market inefficiencies reach drastic proportions like we saw with $600 and higher MWh prices in the Northeast this year.”

Keynoting today’s National Association of Energy Service Companies’ (NAESCO) 18th annual conference, Gilbert reported that while energy companies are rethinking traditional load management approaches and moving towards traded agreement designs, “The current belief that adequate generation reserves are back again has many believing the power crisis may be over. This is a dangerous trend since it ignores the reality of inadequate transmission resources that can bottleneck systems and cause zonal shortages,” he said.

Gilbert acknowledged that demand response, like all other commodities when first traded, currently fails to have standardized and efficient market clearing mechanisms. However he foresees a new market where customer demand response capabilities will be aggregated and traded as full competitive alternatives to power supply, complete with open protocols for measurement, verification and settlement of the transactions. This will enable NAESCO members to provide a multitude of valuable services. He applauded the energy service companies’ commitment to advancing the energy efficiency of customer facilities.

Gilbert cautioned against regulatory promises to open energy markets while guaranteeing customers savings from day one. “Guaranteeing a discount to customers simply insulates them from the price signals necessary to create open, efficient market responses,” Gilbert maintains. “The value chain can only be enabled by free market forces, which will eventually provide customers with a spectrum of price-risk differentiated products and services. These will range from direct load control, distributed generation, and load management strategies to long-term efficiency investments made in response to market prices and risks.”

Apogee Interactive (www.apogee.net) introduced one of the first Internet-based demand response trading platforms in the US back in 1998, called The Demand Exchange®. Today, it operates the largest demand response aggregation system in use in the US with almost 3,000 MW of resource and about 1,000 customers.

The company was also the first to implement “demand bidding” this summer in California, where customers initiate load reduction offers rather than utilities. Apogee has now expanded The Demand Exchange to provide a single, unifying interface where clients can manage voluntary load reduction programs, demand bidding, real-time pricing tariffs, interruptible end-users, and direct load control strategies.

For 18 years, NAESCO (www.naesco.org) has represented the energy services industry and has led efforts to devise innovative policies in a changing regulatory environment and ensure sound policies that promote cost-effective delivery of comprehensive energy services to customers.

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