August 2008

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EMAIL INTERVIEW  Gene Ameduri & Ken Sinclair

Gene Ameduri, President and co-founder of EnergyConnect

Gene Ameduri is president and co-founder of EnergyConnect, Inc. Gene’s background extends across the energy management and building automation industry, having been responsible for implementing marketing, sales and project design, management and commissioning for computerized building control systems on both a local and national scale for a wide range of industries. His extensive experience in conducting economic analysis, costing, measurement and verification of demand response programs throughout the various ISO regions contributes to his perspective on the opportunity that demand response presents to customers and energy providers alike.

Growing Interest and Participation in Demand Response

Increased involvement in voluntary, market driven demand response programs reflects the growing interest on the part of consumers in adopting new ways to regain control of their electricity budgets and more and more customers are seeing the value of participating.

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Sinclair:  What factors do you see as contributing to the growing interest and increased participation in demand response?

Ameduri:  Well, rising energy prices are clearly a frontrunner. Oil continues to set record highs and with coal and natural gas – which is at its highest level since Hurricane Katrina - tracking close behind, we are seeing an overall upswing in costs. This is further compounded by speculation in the market and the pace of demand continuing to outpace supply both at home and abroad. Even while we are becoming more energy efficient, new generation is simply not keeping current with the pace of demand and the resulting rise in electricity prices is becoming increasingly burdensome to consumers.

I encounter consumers every day who are looking to get control of their energy costs and manage their risk against rising prices. Demand response represents a significant opportunity to do both and the financial reward is immediate. For example, if you happened to be an EnergyConnect participant located in the Philadelphia market this June and were able to drop 1 Megawatt (MW) by either curtailing or shifting load during the peak afternoon hours of noon to 5:00 p.m., the opportunity to generate new revenue was substantial. Participants who had purchased energy at $30 per MW hour were able to sell that same load back onto the wholesale market at well over an average of $130 per MW hour for most of the month of June. Fundamentally, we are enabling our participants to buy power at one rate and get compensated at a significantly higher rate for reducing that same power at times of peak demand – all at the touch of a keyboard.

Sinclair:  I understand you had an active first quarter in the PJM region.

Ameduri:  We did indeed. And it speaks to the fact that although rising wholesale and retail energy prices are becoming increasingly burdensome to many large commercial and industrial electricity consumers, it is not a foregone conclusion that things need to work this way. Companies that utilize our next generation demand response platform are generating significant revenue from becoming actively engaged in the wholesale electricity market. In fact, during the first quarter of 2008, we processed over 50 percent of the economic real-time and day-ahead demand response settlements for customers in the PJM region who curtailed or shifted their electricity usage, freeing up load to sell back into the marketplace. These settlements reflected participation on the part of consumers in the voluntary, market driven demand response programs, which differ from the traditional ISO and utility driven programs in which participants are asked to drop load on demand and with little forewarning.

Increased involvement in voluntary, market driven demand response programs reflects the growing interest on the part of consumers in adopting new ways to regain control of their electricity budgets and more and more customers are seeing the value of participating.

Sinclair:  What kind of price fluctuations are we talking about?

Ameduri:  The wholesale electricity market is incredibly volatile and experiences price swings in the neighborhood of 1000 percent over the course of one day! What might be selling at $20 in the early morning can be selling at $340 at 4:00 p.m. in the afternoon when demand is at its highest.

Through our platform, we are streaming this price information right into a facility where energy and facilities managers can receive and respond to it by bidding load into the market when prices are high and shifting operations and use around when prices are low.

One way to think about the potential of demand response to drive changes in electricity usage is to see how consumers are responding to the steady rise in gasoline prices. With prices cresting above four dollars per gallon, we’re seeing consumers turning away from SUVs.

In fact, just last week the New York Times announced that Toyota is poised to end GM’s 70-year reign as the world’s largest automaker. This is credited in part to Toyota’s being better positioned to take advantage of the growing consumer demand for more compact, fuel efficient vehicles while GM’s focus on larger trucks and SUVs has left it slower to adapt to the changing market. The gas pump is where most people get their day-to-day information about energy prices and access to this information is driving - no pun intended - changes in their purchasing behavior, which are in turn changing markets.

We’re providing similar real time information to energy and facilities managers and they are using this information to change how they leverage the systems in their facilities. We are seeing more and more regions adopt price-responsive market-driven demand response as part of their load profile alongside traditional generation, energy efficiency and conservation. Financially rewarding customers to reduce energy usage is helping drive a shift in behavior, and while it will not be felt immediately, given the size of the market, it is gaining momentum.

[an error occurred while processing this directive] Sinclair:  What do you consider to be the most important criteria for customers evaluating whether to get involved with demand response?

Ameduri:  We work with a wide variety of facilities including manufacturing, municipal and government institutions, universities, hospitals, commercial buildings, malls and retail chains. Across the board they are indicating a need to rein in control of escalating energy costs. They recognize the opportunity that demand response programs offer but they want to stay in control of their facilities and reduce non-essential consumption when and how they like.

The traditional approach to demand response in which a facility receives a request to shed a pre-determined amount of load for a specified amount of time simply does not offer the flexibility that our customers need. Folks want more choice and control over when and how much load they drop. They are also looking to stay in control and curtail or shift loads voluntarily, on their terms and without the risk of penalties for non-performance that accompany traditional emergency curtailment programs.

Our web-based platform enables participants to remain in control of how they participate. They can work with us to fully automate a portion or all of the load that they want to make available to the market while having the ability to override the strategy at anytime, directly from their desktop. What we’re finding is that participants become increasingly more aggressive as they gain more experience and learn more about where the flexible loads exist.

For some, this includes everything from reducing non-essential consumption like lighting and air conditioning, to leveraging increasingly more sophisticated systems within a building, including entire production lines. For our larger manufacturers, such as steel manufacturing facilities in the Ohio Valley, the decision may be to completely shift the largest electricity loads by running furnaces at night during off-peak hours when energy costs are lower and utilizing less energy-intensive systems and equipment during the day when demand is typically high.

Sinclair:  So, what you’re saying is that facilities can begin participating at whatever level they like and become increasingly more active as the opportunities present themselves?

Ameduri:  Exactly. And this is where the BAS industry has a significant role. We partner closely with several industry leaders and system integrators including Johnson Controls, Suez Energy North America, Roth Bros., and SourceOne to integrate our demand response platform with their products and services.

As the trusted advisors who have put a wide variety of building systems in place and integrated them onto one comprehensive platform, they know better than anyone the systems that are already in place, where the electricity load is, and how to best leverage it to take advantage of changes in the wholesale electricity market.

Integrating EnergyConnect’s market information onto these same platforms links up the building with the energy market, enabling customers to get even more return from their building systems. In this way, demand response represents a sound business opportunity for BAS providers by increasing the value of the systems they have to offer or have already introduced into a building and strengthening their role as a long term energy partner.

Sinclair:  How do you see involvement continuing to grow?

Ameduri:  Rising energy prices are becoming increasingly important to businesses. Volatility in the wholesale electricity market is unlike any other market and is not about to ease up anytime soon. While we are in need of a comprehensive approach to address our rising energy needs, facilities are also in need of proven energy cost management strategies that provide more control over energy budgets.

From our perspective, volatility in the marketplace is an opportunity for participants to generate a new revenue stream with little upfront investment or additional risk. Utilities need to turn somewhere to purchase more electricity for the grid during times of peak demand and they are increasingly willing to purchase it from customers who are able to shift or curtail their electricity load and sell it back onto the spot market. This is a win-win for the customers who participate and the grid operators and utilities that are working to maintain the electric system. Our experience shows that putting consumers in control of their energy management not only supports their bottom line but also supports the development of a more efficient, reliable and sustainable electricity grid. This will translate into long term savings for all of us.


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