Environment engineering
Vivek05061
CaseStudyViridity-1.pdf
9B12M035
VIRIDITY ENERGY: THE CHALLENGE AND OPPORTUNITY OF PROMOTING CLEAN ENERGY SOLUTIONS
Chris Laszlo, Anshuman Chandrachud and Indrajeet Ghatge wrote this case solely to provide material for class discussion. The authors do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names and other identifying information to protect confidentiality. Richard Ivey School of Business Foundation prohibits any form of reproduction, storage or transmission without its written permission. Reproduction of this material is not covered under authorization by any reproduction rights organization. To order copies or request permission to reproduce materials, contact Ivey Publishing, Richard Ivey School of Business Foundation, The University of Western Ontario, London, Ontario, Canada, N6A 3K7; phone (519) 661-3208; fax (519) 661-3882; e-mail [email protected]. Copyright © 2012, Richard Ivey School of Business Foundation Version: 2014-02-07
VIRIDITY ENERGY: SMART GRID PIONEER H.G. Chissell’s office was small and spare but offered a stunning view of the St Mary Parish church across the street in Conshohocken, Pennsylvania. Joining Chissell for a mid-morning meeting in May 2011 was Evan Berger, a recent MBA graduate of Columbia University. Both were practically old timers at Viridity Energy, Inc., a private company founded three years earlier and growing vigorously (see Exhibit 1 for the firm’s employee headcount). That particular morning, the two were discussing the challenges and opportunities their business presented. Viridity was one of the new “smart grid” players. With peak electricity demand projected to grow in the next decade by 19 per cent, compared to capacity growth at six per cent, America’s electricity grid faced a precarious future. At risk was the grid’s much-vaunted goal of reliability, defined as the ability to provide power to customers at the flip of an electric switch. Nationwide, the lack of power reliability already constituted a $150 billion annual cost — about $500 per person per year. Combined with the growing national drive toward energy independence and a federal debt of more than $14 trillion, the push to energy efficiency and clean energy had become a national priority — and a market opportunity. In this situation of electricity demand outstripping supply, smart grid firms took advantage of system- wide inefficiencies to help customers reduce their energy bills. Some of the related savings stemmed from actions equivalent to turning off the lights when leaving the building, but customers could also reduce energy losses by other means, such as better insulating their buildings, switching to more efficient lighting and appliances, and installing combined heat and power units (co-generation). There was also ample opportunity to shift demand from so-called peak usage — for example, mid-afternoon in the summer, when everyone was running the air-conditioning — to off-peak hours, thereby enabling customers to generate new revenues by agreeing to optimize their energy use when wholesale electricity prices reached a certain threshold. Smart grid companies helped customers understand how to take advantage of such opportunities while improving their bottom line.
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Page 2 9B12M035 There were a number of competitors in the capacity services market. Traditional demand response providers provided participating consumers with opportunities to shed load during times of peak demand, when energy costs were the highest. Some providers also allowed consumers to shed load even when the grid was not burdened, thus allowing the consumers to earn revenues. Viridity, although small when compared to competitors such as EnerNoc (see Exhibit 2 for a description of the applications offered by EnerNoc, Viridity’s major competitor), Constellation, and Comverge, had one of the most sophisticated total-optimization solutions to offer. But the question was, would it also electrify its investors, or would it turn out to be just a momentary flash in the dark? Would consuming fewer “dirty watts”1 from fuel sources such as coal and natural gas be a sufficient objective in the future? What would rising societal expectations, tougher environment regulations, and new distributed clean energy technologies mean for the ability of smart grid companies to engage new customers and differentiate themselves in an increasingly crowded field? AN UNCERTAIN FUTURE Chissell was Viridity’s director of market and product development, and his colleague, Berger, was a senior business and market analyst. Both men were excitedly caught up in the company’s ambitious expansion plans. Viridity had recently received its second round of financing from a group of high-profile investors, and the market for the company’s services appeared to be large and growing. New customers were won continuously, and Viridity seemed poised to become an influential player in this rapidly growing industry. Smart grid energy services represented a healthy career opportunity for young professionals with the right combination of skills and motivation. Riding his commuter train to work that morning, Berger felt a certain pride in the fact that the Southeastern Pennsylvania Transportation Authority (SEPTA) was one of his company’s most notable clients. Viridity and SEPTA had recently collaborated on a $1.5 million project to capture the electricity generated during braking. The captured power would be stored in a large battery and reused when the train accelerated, saving SEPTA upward of 1,380 megawatts per year and generating annually about half a million dollars in economic benefits to SEPTA.2 This revenue from incentives was based on a concept unique to the electric industry: the negawatt, a measure of electricity non-consumption that customers sold back into the market (see Exhibit 3 for a glossary of the energy terms used). In effect, because of grid congestion, regional operators paid customers like SEPTA to reduce electricity usage in reliable ways that contributed to maintaining grid balance. In addition to the new revenue streams, customers benefited from a lower electric bill and the right to communicate their environmental responsibility — a win-win situation from which Viridity took its own healthy cut. Other Viridity customers included industrial facilities, college campuses, federal and municipal complexes, military bases, hospitals and similar institutions with a portfolio of energy assets. While Viridity did not sell to individuals, the opportunities for optimizing electricity consumption in the institutional sector were almost endless. But the obstacles to success were also many. Non-participating customers were often unaware of smart grid services and their benefits. The sale could be complex and could involve many decision-makers in
1 The term “dirty watts” refers to electricity generated from fuels that have negative environmental impacts ranging from the emissions of CO2 and nitrogen oxides to particulate ash. Electricity generated from renewable sources such as sun and wind can be considered to be “clean watts” by comparison. 2 “Reshaping how Firms Buy, Use Electricity,” Andrew Maykuth, October 11, 2010, Philadelphia Inquirer, www.viridityenergy.com/philadelphia-inquirer%E2%80%99s-andy-maykuth-visits-viridity-energy-offices-talks-drexel-septa- and-negawatts/, accessed January 5, 2011.
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Page 3 9B12M035 the customer organization, including financial managers, facility managers and, increasingly, top executives, including the chief executive officer (CEO) and chief financial officer (CFO). Competitors both large and small were jumping into the fray. Federal, state and local regulations were changing drastically, with prospective legislation, such as cap-and-trade, representing an unknown probability of radically transforming the market. Smart grid companies also faced the so-called Marcellus Shale
3 Effect
of potentially lower natural gas prices. As Chissell and Berger reflected on the challenges ahead, they wondered how best to prepare for the future. How could Viridity strategize around developing regulations that were halfway through the gate but might or might not go into effect? For example, the negawatt had recently been valued at one-half to one-third of a watt. The chairman of the Federal Energy Regulatory Commission (FERC) had recently helped raise the value to parity, and doing so had increased the economic incentive for Viridity’s customers to participate in reducing their electricity usage, thereby leading to potential explosion in Viridity’s business. Similarly, a cap-and-trade bill or tax on carbon could have an enormous influence on demand. But would such regulations actually go through? IS VIRIDITY IN THE SUSTAINABILITY BUSINESS? Viridity faced the problem of differentiating itself in what could only be called an opaque market. With the smart grid concept still relatively new, institutional customers did not always understand the full range of choices available to them. Many remained susceptible to players who claimed smart grid services without having the true capabilities to deliver them. More than half of the commercial, industrial and government customer bases had failed to participate in the demand side of the market. How could Viridity approach these organizations, and how could it differentiate itself? Clearly, the economic benefits of Viridity’s offer were central to its customer value proposition. In addition to assessing a customer’s energy load and finding ways to reduce or shift energy usage, Viridity’s real-time forecasting allowed customers to optimize their energy assets 24/7 using a unique software platform called VPower™. A customer’s controllable resources appeared as one single entity, which could be optimized and dispatched into the electricity grid, thereby earning it valuable new revenues, reducing its costs and improving overall asset utilization. But what about the environmental benefits of Viridity’s services? After all, its business was based on enabling customers to be more energy-efficient, which offered important economic and ecological benefits. A key challenge the company faced involved finding a way to harmonize the two goals in its marketing strategy. The growing demand for environmental sustainability was driven in part by new market pressures for energy independence, less fossil fuel use, a lower carbon footprint, and fewer harmful practices, such as mountain-top removal in the case of coal mining or leakages from shale drilling (or “fracking”) in the case of natural gas. Not surprisingly, Viridity found that its sales and marketing team got a boost from being able to show customers how Viridity could help them meet their sustainability goals.
3 The Marcellus shale formation underlies much of Pennsylvania and parts of surrounding states, including western New York. It is a potentially huge source of natural gas. www.geology.com/articles/marcellus-shale.shtml, accessed January 30, 2012.
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Page 4 9B12M035 The question Chissell and Berger were discussing was: To what extent (and how) should Viridity explicitly promote sustainability benefits in its sales and marketing strategy? Were smart grids simply a more efficient way for customers to manage their energy assets? Or were they also about achieving green targets and environmental responsibility objectives? Chissell felt there was no obvious answer to this question. First of all, customers who conserved energy were likely to take credit on their own for greater environmental responsibility. If this were the case, why would Viridity need to highlight the environmental benefits of energy effectiveness? Once the economics of energy optimization became clear to the client, the environmental benefits were simply icing on the cake. However, in some cases, customers could be willing to take a second look at Viridity’s offer because sustainability pressures were driving their search for new energy solutions. A more complicated question, Chissell felt, was whether Viridity’s services were merely helping customers to be less unsustainable4. Helping customers reduce their energy consumption said nothing about the fuel source used to generate the electricity. (For example, a customer reducing its use of coal- generated electricity was still consuming dirty watts.) Did Viridity’s sales and marketing strategy need to impart clean-energy education to its customers? Would offering clean and optimized energy solutions be a way to differentiate Viridity, engage new customers and survive the competitive squeeze that was sure to come in the years ahead? COMPANY OVERVIEW Viridity Energy was founded in 2008 by Audrey Zibelman, Alain Steven, and Bruce Sher. Zibelman and Steven had been executives of PJM Interconnection, a regional transmission organization
5 ; and Sher had
held high-profile positions at top-tier energy firms such as Strategic Energy and Constellation NewEnergy. As the demand for reliable electricity had increased over the last decade, the trio realized that with technological advancements, more distributed energy assets could be made available to the grid from existing on-site generation, energy storage and building-management systems. They teamed up to assess how they might devise a strategy for the company that would effectively integrate and optimize the rapidly emerging array of distributed and renewable generation with demand management software and building automation capabilities behind the utility meter. Zibelman and PJM’s former chief technology officer, Steven, had been responsible for the software and hardware that controlled the largest integrated electric grid in the world. Together, the three principals were successful in getting the equity capital from AltEnergy for the initial two years of operations. Zibelman was Viridity’s CEO, Steven its CTO, and Sher its senior vice-president of business development. Viridity successfully met the goals established for the initial two years (2009 and 2010) and was able to attract investors for the next round. Led by Zibelman, Viridity was set to become an influential player in
4 We use the term “less unsustainable” to denote mitigating actions, such as reducing the use of coal, that reduce harm but do not provide sustainability solutions compared to “more sustainable” actions, such as clean renewable energy projects, that have the potential to be sustainable in the long run. 5 PJM Interconnection is the Regional Transmission Organization (RTO) with which Viridity Energy interacts. PJM co- ordinates the movement of electricity in all or most parts of 13 states and the District of Columbia (see Exhibit 4). An independent party operating a competitive wholesale electricity market and managing the electricity grid, PJM ensures reliability for more than 51 million people. PJM’s wholesale market is focused on entities that buy and sell electricity but do not actually consume the electricity. The retail market is focused on entities that buy electricity from the wholesale market or produce the electricity and then sell it to a customer that physically consumes it.
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Page 5 9B12M035 the smart-grid power industry as a next generation Curtailment Service Provider (also known as a demand response
6 provider company). By enhancing energy efficiency, shrinking energy costs and generating
new revenue streams for its customers, Viridity hoped to exploit a huge and growing market opportunity. Exhibit 4 shows the geographical spread of smart -grid users in the United States As the company’s website proudly proclaimed, its unique software platform, VPower™, made it easy for customers to manage complex multi-variable energy portfolios via one centralized, user-friendly platform. The managers of large energy consuming institutions could shift and balance their load by integrating distributed generation, smart building technology and energy storage devices into a sustainable virtual power generation program7. VIRIDITY’S VALUE PYRAMID Viridity’s value pyramid could be related to the seven layers in computer networks. Exhibit 5 shows the smart grid architecture divided into different layers. The base layer is the physical power layer which involved transmission and distribution of electricity. The base of the pyramid consists of the equipment involved in grids and power lines. Next was the DG resource: Distributed generation was a way of generating electricity from several small energy sources. In Viridity’s case, this was equivalent to generating electricity from its customers like universities and hospitals. The third layer was the communication layer. This layer corresponded to data transport and control. This was the layer that was responsible for the smart handling of the electric grid. It used telecommunications technology to digitize data and enable smart-monitoring. This led to increased reliability of the grid. On top of the communication layer was an application layer consisting of SCADA, EMS and BMS. SCADA (Supervisory Control and Data Acquisition) and EMS (Energy Management System): These were tools which facilitated the collection of critical information and the management of energy assets that contributed to reliable exchange of information on generation, transmission and distribution. They were mainly used to control and monitor processes in real time. They collected data from various sensors in a transmission line and reported it to a central computer location. BMS (Building Management System): This tool controlled and monitored a building’s mechanical and electrical equipment, such as lighting, ventilation, power systems, fire systems and security systems. The application layer consisted of the VPower™ system itself. This sat on the SCADA/EMS/BMS. The unique attributes of this system included its capability in forecasting loads, generation and prices. While the VPower™ also did resource optimization and the helped in efficient operation of a customer’s distributed resources and load, its main benefit lay in enabling clients to participate in energy markets that
6 To give us an understanding of how demand response works in a real scenario, consider the example of Viridity’s customer, Drexel University. Drexel University had a demand response agreement with PJM, the RTO that operates the grid where the school is located. On a particular peak demand day, Drexel gets a call from PJM asking it to curtail its usage by one megawatt within two hours. A one megawatt represents about 10 per cent of the university’s usage on a peak power demand day. A team sets out to manually reduce usage by switching off lights, and increasing the temperature of the air conditioner in 37 of the university buildings. However, three buildings are controlled by smart grids operated by Viridity Energy. Here, the cutback is automatic, thus optimizing energy usage and costs. Exhibit 8 shows the graph for the effect of a reduced load usage due to a two-degree decrease in the temperature. 7 www.viridityenergy.com/services/vpower, accessed January 30, 2012.
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Page 6 9B12M035 allowed them to generate revenues. It allowed the clients’ controllable resources to appear as a single entity that could be optimized and dispatched into the energy market. In all these ways, Viridity enabled customers to transform from passive energy consumers to energy producers who could sell electricity back to the grid. As Viridity’s CEO put it, “Instead of consumers being passive consumers, they become active participants in the energy markets. It is a bit like the difference between YouTube and watching TV, except that customers can make money in addition to their savings from greater energy efficiency.” The electricity market had always been inelastic. The demand for electricity does not increase or decrease in proportion to changes in its price. “Viridity was motivated to change this model by giving end users of electricity the means to understand price fluctuations in energy costs and correspondingly adjust the usage8,” With the VPower™ platform, consumers could optimize their energy use by conserving energy and going off-grid when prices were high and shifting their heavy loads to off-peak hours when prices were low. Viridity’s goal was to use its smart technologies to create a consumer market in which commercial customers could act as active participants to optimize energy use not only for themselves but for the electric grid as a whole, thereby providing benefits to all parties. CEO Zibelman best summarized the company’s objective as,
We’re moving from an [energy] industry dominated by large-scale generation where customers are passive to one where customers are active in what they consume, and what they produce. First, there were personal computers. Now we’re going to personal energy. We plan to work as a ‘technology agnostic, market enabler.’
Viridity was willing to work with any technology on the customer side of the electric meter, so Viridity was open to working with energy management systems that belonged to all companies such as Siemens, Johnson Controls, Honeywell, or any other. This open-architecture approach was expected to give Viridity an advantage over competitors working with proprietary systems. THE ELECTRICITY GRID The century-old power grid in the United States offered an example of one of the finest engineering achievements of the 20th century. It was the largest interconnected such system on Earth having more than “9,200 electric generating units. These units had more than 1,000,000 megawatts of generating capacity and were connected to more than 300,000 miles of transmission lines .”9 The grid was designed with one primary mission in mind — to provide electricity reliably. Although the existing electricity grid was 99.9710 reliable, it still experienced outages and interruptions. Over the last few years, due to increasing domestic and industrial power demand, the burden placed on this grid became increasingly evident. Out of five blackouts in the last 40 years, three of them occurred in the past
8 www.indeed.com/cmp/Viridity-Energy-Inc.; more information available on www.viridityenergy.com/services/vpower/, and www.viridityenergy.com/fa/, accessed January 30, 2012. 9 Litos Strategic Communication, U.S. Department of Energy (2008), The Smart Grid: An introduction, 2, 5, http://energy.gov/sites/prod/files/oeprod/DocumentsandMedia/DOE_SG_Book_Single_Pages(1).pdf, accessed April 18, 2012. 10 Ibid, 5.
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Page 7 9B12M035 nine years.11 In the current economy, which was heavily dependent on electronics for its functioning, a blackout would have severe consequences. A few consequences as a result of the blackout in 200312 are listed in Exhibit 6 Emerging concerns such as environmental impact and new customer choices posed tough questions for the existing grid. One important issue involved the forecasted large increase in renewable but intermittent power from solar and wind resources, which were intrinsically difficult to estimate and control. A five per cent increase in the energy efficiency of the grid would be equivalent to permanently removing fuel and greenhouse gas emissions from an approximate 53 million cars. Clearly there was much room for improvement and also great opportunity. An underperforming grid would lead to increasing costs, which would be borne by consumers, society and the environment. Expiry of long-term contracts of the utilities with the coal producers contributed to these costs every day. The United States produced a quarter of the world’s greenhouse gas emissions with only four per cent of the world’s population.13 The main source of these emissions came from burning coal, the major producer of electricity in the United States. The environmental impact of the grid was huge. While the growth in peak demand of electricity had outpaced transmission growth by almost 25 per cent14 every year since 1982, the investment on research and development (R&D) in this area had been the lowest amongst all industries. Exhibit 715 shows historic R&D investments as a percentage of revenue. Future demand was also projected to outstrip infrastructure investments. Therefore, the need for a cleaner, greener, reliable, resilient and sustainable, cost-efficient power grid was growing exponentially. The solution to this problem was a smarter grid that ultimately offered sustainability in terms not only of cost and reliability but also in terms of environmental responsibility. THE SMART GRID Existing electrical grids comprised networks of different technologies that delivered electricity from power-generating plants to consumers in their homes and places of work. A smart grid was built on this concept. It exploited the power of two-way flows of information for more efficient usage of the power generated and transmitted, and it integrated new and improved technologies into grid operations. Smart grids also allowed consumers to interact with the grid. The advantages of a smart grid included improved responses to power demand, more intelligent management of outages, better integration of distributed forms of energy, and the storage of electricity. With its distributed computing and communications, the balance of electricity supply and demand was almost instantaneous. So how did a smart grid work?
The smart grid generated billions of data points from thousands of system devices and hundreds of thousands of consumers. What made the grid “smart” was its ability to sense, monitor, and, in some cases, control (automatically or remotely) the manner in which the system operated or behaved under a given set of conditions. In its most basic form, implementation of a smarter grid
11 Ibid, 3, 5, 7. 12Ibid, 3, 8. 13 www.worldbank.org/depweb/beyond/beyondbw/begbw_14.pdf, p. 79, accessed January 30, 2012. 14 Ibid, 3, 6. 15 Ibid, 3 ,6, 7.
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Page 8 9B12M035
was akin to adding intelligence to all areas of the electric power system to optimize our use of electricity.16
A smart grid revolutionized the way the electricity industry worked and changed its relationships with all stakeholders including utilities, regulators and consumers. In order for the smart grid to benefit the industry, the utilities would have to play a big role by investing in them. According to the Brattle group report, a huge investment of $1.5 trillion would be required in the next couple of decades for the additional infrastructure required to develop the smart grids. However, these enhancements in the grid would also reduce congestion and send about 50 per cent to 300 per cent more electricity through existing energy corridors. Since smart grids provided a two-way information flow, consumers were able to reduce demand during peak hours to lessen the burden on the grid. In return, the consumers were offered incentives from the regional transmission operators. Using real-time pricing signals, consumers would also have the opportunity to see what price they were paying. This information served as a big motivator for consumers to manage their energy costs by efficiently using power and reducing usage during peak hours. Viridity was at the forefront of moving from a traditional demand response provider to non-stop virtual power generation. Viridity’s VPowerTM evaluated customers’ “overall energy load and optimized their energy usage on a continuous basis, helping large energy customers reduce their overall consumption and saving them substantial money, all while providing them with an additional source of revenue,”17 Exhibit 9 shows a price duration curve18 that clearly indicates how Viridity’s software platform helps in the generation of power in a much more effective manner than is possible in the services offered by traditional demand service providers. ENVIRONMENTAL SUSTAINABILITY AS A FACTOR OF COMPETITIVE DIFFERENTIATION It was becoming increasingly difficult for grid operators to anticipate and keep pace with peak demand. To meet demand and to ensure the reliability of the grid, grid operators and utilities had to bring in generation assets called peaker power plants. These peaker plants were expensive to operate and were typically among the dirtiest sources of energy, adding disproportionately to greenhouse gas emissions. The smart grid approach paid additional environmental dividends. Smart grid technology helped in sensing system overloads and accordingly rerouted power to minimize the need for the dirtiest sources of energy. It was also highly efficient since it could meet increased demand without the need to add additional infrastructure. Smart grids could also be integrated with clean energy solutions, such as wind and solar energy, and also with new technologies like energy-storage solutions. Further, smart grids offered increased security against natural disasters and terrorist attacks. They offered the potential of transforming the largest interconnected network in the world into an energy-efficient grid while simultaneously creating a positive environmental impact and reducing energy costs for consumers.
16 FADRS,LLC (2010). What is the Smart Grid [Electronic version], www.fadrs.com/index.php?option=com_content&view=article&id=133&Itemid=182, accessed Jan 10, 2011. 17 www.viridityenergy.com/fa/, accessed January 30, 2012. 18 A load duration curve (LDC) is used in electric power generation to illustrate the relationship between generating capacity requirements and capacity utilization. A price duration curve shows the proportion of time for which the price exceeded a certain value. Together, the price duration curve and load duration curve enable the analyst to understand the behavior of the electricity market, for example, the likelihood of peaking plant to be required for service, and the impact that this might have on price See for example www.rmi.org/RFGraph-load_duration_curve, accessed April 16, 2012.
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Page 9 9B12M035 The energy grid needed to go further in terms of environmental performance. There was little dispute that overdependence on fossil fuel energy sources was unsustainable, including natural gas, for which the environmental and health impacts of using fracking technology were not fully understood. In order to break this addiction to fossil fuels, new sources of clean and renewable energy had to be employed, and profitable ways of optimizing clean energy usage had to be developed. FUTURE DEVELOPMENTS Chissell and Berger agreed that Viridity’s business model embedded environmental and social sustainability. The pair also observed that institutional customers such as universities, corporations and the military increasingly demanded sustainability from their own operations as well as from their supply chains. These customers expected to use metrics that measured sustainable performance. Should Viridity draw further attention to the sustainability benefits that resulted from the environmentally responsible green services in its sales and marketing strategy? Should Viridity propose a combined strategy of total energy efficiency and clean energy effectiveness? How should Viridity educate potential customers on this new approach to sustainability that goes beyond doing less harm (i.e., beyond energy conservation or a smaller carbon footprint) to providing a clean- energy solution that offers economic, environmental and social benefits? What role will promoting clean energy play? Should Viridity go further into the business of promoting green solutions that help customers make the transition from dirty watts to clean watts? The two men were not completely sure, but one thing was clear: Chissell needed to get back on the phone to close his new client contracts before lunch.
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Page 10 9B12M035
Exhibit 1
EMPLOYEE HEADCOUNT
January 2009: 3 December 2009 : 12 December 2010: 25 December 2011: 58
Source: Company document.
Exhibit 2
COMPETITOR PROFILE: ENERNOC AND ITS APPLICATIONS EnerNoc helped commercial, institutional and industrial organizations to use energy efficiently, pay less and generate revenues through energy efficiency and smart-grid applications. EnerNoc also had a presence in Canada and the United Kingdom. EnerNoc catered to the capacity service market with its various applications such as:
Source: www.enernoc.com/for-businesses, accessed January 30, 2012.
DemandSMART: A demand response application that enabled customers to participate in the demand response market
EfficiencySMART: An energy efficient application and service that optimized performance and contributed towards energy savings
SupplySMART: An energy price, risk‐management application and service that assessed a customer's energy‐purchasing options and the risks associated with those choices
CarbonSMART: An enterprise carbon management application and service that supported the measurement, tracking, and management of greenhouse gases across the enterprise
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Page 11 9B12M035
Exhibit 3
GLOSSARY OF ENERGY-RELATED TERMS
Source:www1.eere.energy.gov/site_administration/glossary.html, accessed January 30, 2012.
CSP – or a curtailment service provider or a demand response provider is a company authorized to act as an interface party between the independent system operator and end-use customers to deliver demand response capacity.
RTO – Regional transmission organization is an independent organization that co- ordinates, controls, and monitors the operation of the electrical power system and supply in a particular geographic area; similar to independent system operator ( ISO)
FERC- Federal Energy Regulatory Commission is an independent agency that regulates the interstate transmission of natural gas, oil, and electricity.
NOPR – Notice of proposed rulemaking
Negawatt – is a negative megawatt. It is a megawatt of power that was not required to be produced or used.
Prosumers – An electric consumer who proactively produces maximum economic and environmental benefits by using information, technology, distributed generation, and storage resources to successfully reduce and reshape energy demand on the grid.
Peak shaving- Shifting of usage of electricity from peak demand (noon) to a time with a lower demand (night), thus shaving off peak demand.
Load shifting – is similar to peak demand. It aims at moving demand from peak hours to off-peak hours of a day.
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Page 12 9B12M035
Exhibit 4
GEOGRAPHICAL SPREAD OF SMART GRID CUSTOMERS IN THE UNITED STATES
Source: Smart Grid, Smart Buildings, H.G.Chissell, Smart Consumers, Viridity Energy Inc.
Exhibit 5
VIRIDITY’S VALUE PYRAMID
Source: Viridity Energy Inc.
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Page 13 9B12M035
Exhibit 6
ECONOMIC CONSEQUENCES OF A BLACKOUT
A Rolling blackout against Silicon Valley totaled $75 million in losses
In 2000, the one hour outage that hit the Chicago Board of Trade resulted in $20 trillion in trades delayed
Sun Microsystems estimates that a blackout costs the company $1million every minute
The Northeast blackout of 2003 resulted in $6 billion economic loss to the region
Note: All figures in U.S. dollars. Source: Litos Strategic Communication, U.S. Department of Energy (2008), The Smart Grid: An Introduction [Electronic Version], 3, 8, http://energy.gov/sites/prod/files/oeprod/DocumentsandMedia/DOE_SG_Book_Single_Pages (1).pdf, accessed April 16, 2012.
Exhibit 7
HISTORIC RESEARCH AND DEVELOPMENT INVESTMENTS
(AS A PERCENTAGE OF REVENUES/SALES)
Source: Litos Strategic Communication, U.S. Department of Energy (2008), The Smart Grid: An introduction [Electronic version], 3, 6, http://energy.gov/sites/prod/files/oeprod/documentsandmedia/DOE_SG_Book_Single_Pages (1).pdf, accessed: April 16, 2012.
0 2 4 6 8 10 12 14
Electric Utilities Agriculture
Printing Stone, Clay & Glass
Retail Aircraft & Missiles
Durable Goods
Healthcare Office Mech
Energy & Management Services
R&D as a percentage of Revenue
R&D as a percentage of Revenue
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Page 14 9B12M035
Exhibit 8
EFFECT OF A REDUCED LOAD USAGE DUE TO A TWO-DEGREE DECREASE IN THE TEMPERATURE
Source: Smart Grid, Smart Buildings, H.G.Chissell, Smart Consumers, Viridity Energy Inc.
Exhibit 9
PRICE DURATION CURVE
Source: Smart Grid, Smart Buildings, H.G.Chissell, Smart Consumers, Viridity Energy Inc.
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