Xenergy Distrib Power Study

Xenergy, Inc., the consulting firm, is offering UFTO subscribers a special discount price for their Distributed Generation study, which was done as a companion to their ongoing Retail Energy Management (REM) multiclient program.

The deliverables include a report issued Nov 99, and two databases, which will continue to be updated. Excerpts from the report’s Executive Summary appear at the end of this note.

— The DP Competitor Database is an assembly of information on the competitors in the DP marketplace. This database highlights the activities of the utilities and ESPs which are selling products and services to the DP marketplace (generation that is sited at a customer location and driven by the needs of the onsite energy user). Data sources for the Competitor Database include corporate filings and financial data, product/service literature, personal communications, and other market data.

— The State Regulatory Database highlights regulatory conditions in nine key states that will likely have a strong positive (or negative) impact on the growth of DG capacity.

The two databases are both contained in a single Microsoft Access 97 database file.

The price, ordinarily $10,000, is reduced to $8,000 for UFTO companies. One or the other of the two databases can be purchased separately.

Rebecca MacGillivray, 781-273-5700, x502 rmacgillivray@xenergy.com

Here is a portion of the press release which announced the study:
XENERGY Study Identifies Strategies in Distributed Power Market (11/08/99)

A new study from XENERGY identifies 12 strategies for energy companies eager to enter the newly emerging Distributed Power (DP) market — from technology acquisition to product distributor to retail energy service provider — and profiles market player success stories to date. According to the report, while the market remains in its infancy, opportunities exist for competitors to establish a stake.

According to XENERGY’s Francis Cummings, who headed up the study, many companies are keenly aware of the potential for explosive growth in this market. Said Cummings, “We constructed the study and corresponding DP Market database with market entry strategies in mind. Based on our regulatory and competitor analysis, the study helps clients to identify the Distributed Power strategy that best fits with their business plan.”

Six U.S. electric utilities or their affiliates – Avista, DTE, Duquesne, Edison International, GPU and Idacorp — have adopted a New Technology strategy (#3) by testing and acquiring rights to new advanced technologies, primarily fuel cells, through joint ventures and investments. DTE Energy Technologies, for example, purchased a stake in Plug Power, which is developing and manufacturing fuel cells, a promising generation technology for automotive and residential markets. Plug Power recently launched its IPO, and expects commercial sales to commence in 2000.

A low-cost, low-risk strategy is Demand-Side DP Bundling (#1) — Equitable Resources, an integrated energy company, is adding or expanding DG technologies as part of a package of demand-side energy services through its existing performance contracting unit, NORESCO. In contrast, PSEG Energy Technologies is pursuing Strategy #1 but as part of a broader “Integrated Soup-to-Nuts” strategy (#7) as a competitive supplier of commodity grid power, as well as serving as distributor for AlliedSignal’s new microturbine.

Distributed Generation (DG), or onsite power generation by end-users, has been in use for years, but recent announcements of small scale microturbines and fuel cells could dramatically increase the Distributed Power (DP) market size for applications less than 100 kW, called “micro-DG.”

Sponsors of the study will have access to XENERGY’s new DP Market database with embedded Internet links, which provides quick, flexible access to data on 50 companies currently involved in the DP market. Featured DP competitors include 27 electric utilities and their affiliates and 19 companies manufacturing distributed generating equipment. The database also includes data on key regulatory issues affecting the feasibility of distributed generation, organized on a state-by-state basis.

The newly released study is a companion to a larger XENERGY study, REM ’99, which is a comprehensive analysis of retail energy markets in New Jersey, Illinois and Pennsylvania. Results are confidential and limited to the study’s sponsors.

This study focuses on the market for small generation that is sited at a customer location and driven by the needs of the onsite energy user. The primary emphasis of the study is micro distributed generation projects, those less than 100 kW, that are driven by the onsite customer’s need for power quality, reliability and/or cost savings and those driven by the existence of a thermal load. We focused on distributed generation in the context of existing and potential retail power markets, such as those in California, Pennsylvania, New Jersey, Maryland, New York, Massachusetts, Connecticut, Illinois and Texas.


To assess the status of this market, we first developed a database with information on companies active in the DP industry and on regulations affecting DG projects in states with retail electric markets. This “DP Market Database” accompanies this report as a free-standing product, providing a unique directory and market assessment tool covering the major players in the DP industry, their products and services, and the rules under which they operate. The classifications of DP competitors in the database are based on the portion or portions of the company which were the focus of this study. In some cases this covers a family of affiliated companies, and in other cases, we drill down to a single DP company. The database is also designed to serve as a “portal” to the internet web sites for each of the companies and to web sites with resources on key DG-related regulations.

There are a number of key unresolved regulatory issues that will have strong positive or negative effects on the growth of the DP industry, but these issues are just beginning to be addressed. Early market participants often invest significant time addressing these regulatory drivers in order to take full advantage of the emerging DP market. The DP Regulatory Database provides a summary and comparison of key regulatory drivers of the DP market in states with retail access.

With the current increased availability of these technologies, customer demand for products and services offering enhanced power quality and reliability as well as independence from the grid is rising. In industries where short outage periods mean significant losses, the demand is especially likely to increase. The ability to generate cost savings as well as an increased focus on the environmental attributes in markets where there is customer choice are also key factors driving customer demand. Strain on utility transmission and distribution systems is also driving the “distributed utility” concept and increasing utility demand for DG technologies. While we did not develop an independent estimate for this study of the potential size of the DP market, estimates of the market have ranged as high as 20% of new additions to generating capacity over the next 20 years, which would amount to 35 GW.

This review of the present status of the DP industry and its regulatory context leads us to conclude that significant opportunities remain for energy companies to enter the competitive distributed power market and establish strong positions as innovators and leaders in these early stages of market development. These opportunities stem from the following factors:

* While many companies in the electric industry are assessing market opportunities, there are few that are actively marketing distributed power products in the regulated or deregulated gas and electric markets. * Product offerings of the firms that have entered the distributed power market are in early stages of development. Companies are still learning how to effectively market and price DP products and services. * While the supply of many distributed generation (DG) technologies remains low, many manufacturers are currently moving to commercial production and are planning to rapidly ramp up production.

We have developed twelve models of market entry strategies through which new entrants approach the DP market. These models are based on the examples of companies in the database, and on XENERGY’s discussions with representatives of these companies and with end-users and others familiar with the DP mark et.

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