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Article - September 2001
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Business and household consumers will pay for performance but not for a commodity. 

Energy E-Comm.com Research Memo Issue 3, Summer, 2001

Kathy O. McGrath
Business Manager

www.energyecomm.com


contemporary Business and household consumers will pay for performance but not for a commodity. This has been repeatedly shown in the financial services, telecommunications, travel, entertainment, information, and food and beverage industries. It is also true in the energy and utilities (E&U) industry. 

The money in natural gas and electricity, the commodities, is in production, trading and movement but not in marketing or reselling, where money can only be made via customer facing applications which deliver tangible and repeat performance.

Perhaps the most powerful set of applications that are poised to come to market is known as technology driven efficiency (TDE). The confluence of customer drivers and the convergence of in-premise energy management technologies with internet/broadband (IB) based software is getting ready to turn TDE into a major customer facing e-business opportunity for both incumbent and non-regulated retailers and marketers in the E&U space, as well as for technology vendors, system integrators and providers of bandwidth. 

What Is TDE?

TDE is the third generation of energy conservation at the point of use. It is continual or even continuous adaptation, making conservation a dynamic and integrated aspect of business, institutional and personal life. It takes a whole view of the user and of use and relies on a suite of integrated applications to do the job. It also acknowledges and embraces the truth that people will not pay for incremental hardware or appliance replacements, but will pay for specific, application driven financial or lifestyle or business results such as tangible savings, enhanced quality, greater peace of mind, more convenience and greater control over decisions.

TDE Technological Foundation

Based on analysis and case studied by consultants, Revenue Growth Solutions, Inc. (www.revenuegrowthsolutions.com) and supplemented by over a dozen interviews with vendors and operating companies we find that TDE integrates four technologies that are already in or close to being in the market. These are: 

  1. Residential and business gateways 
  2. In-premise embedded intelligence 
  3. Presence monitoring and analysis 
  4. User notification and permission based response 

This technological foundation delivers five powerful functionalities to strategic marketers in the E&U space: 

        (i) Greater and faster control 
   
     (ii) Higher quality
        (iii) Device or appliance specific accounting and operational adjustments 
   
     (iv) Distance management 
        (v) Event specific rapid response 

These functionalities, in turn, become the basis of customized applications that use knowledge about the energy use patterns and preferences of each user to offer high value performance. Improvements in efficiency are a collateral consequence of this valued, customized, performance or result. 

The customer thus obtains both superior performance and increased unit efficiency and pays for tangible applications relevant to that user's business, institutional or domestic life, rather than for hardware, software or commodities.

contemporary The value proposition of TDE for users is that they get more of what they want (greater control and higher performance) for less cost (less money, lower environmental emissions, reduced stress). The value proposition of TDE for providers is that it is a huge emergent space that decouples margins from the commodity and shifts the users' attention to what is desirable (performance) from what is, at best, a concern (energy commodity cost and risk).

Digital Infrastructure and Interface 

To deliver the desired performance the TDE applications require a digital communications and control infrastructure; a digital user interface; and software, including learning algorithms. Some combination of Internet/Broadband infrastructure, wired and/or wireless links, bandwidth, appliance/device interface modules and consumer and business form factors (such as hand held remotes, PCs, PDAs, cell phones) is needed to install, activate and execute the applications cycle from sense and respond to account and pay. The actual combination will depend on the automation architecture and environment of the home, business or institutional customer, user priorities and marketer resources and offerings. Whatever the specific infrastructure and tools, the overall application and performance milieu is digital. As such, digital commerce or e-business is intimately involved in the delivery of TDE results. It turns out that TDE, not commodity retailing, is the major e-business opportunity in the customer facing E&U space. In the next three years we expect to see hundreds of vendors and system integrators enter the space to support scores of large and small E&U players (both incumbent and attacker) with configuring, installing and monitoring TDE applications in every segment of the business, institutional and consumer market for energy services. The continued growth in the last mile IB infrastructure will provide further impetus to the spread of TDE applications.

About Energy E-Comm.com (www.energyecomm.com)
Energy E-Comm.com develops business intelligence and topical knowledge organization software for executives and professionals in the E&U space. Energy E-Comm.com's digital databank and advanced knowledge management software, EnerFindsm is available on either a per use or site license basis.


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