One of the dubious characters in Joseph Heller's satirical novel Catch-22 makes a fortune out of not growing crops, taking advantage of the U.S. government's farm subsidy program. ConsumerPowerline, a four-year-old company based in New York City's Wall Street district, is doing something similar: the firm is showing its clients how to make money, and quite a lot of it, by not using electricity.
The company's founding executives would seem to have an idea that will take them laughing all the way to the bank--but what's even better, their idea not only makes money for them and their customers, it truly serves the public interest.
ConsumerPowerline's business got its start from a ruling in January 2001 by the U.S. Federal Energy Regulatory Commission (FERC). The order recommended that the organizations set up to manage deregulated and restructured grids establish procedures for consumers to sell saved electricity to the power system at times of shortage. During a declared crunch, consumers would be paid for electricity they did not use just as if they were generating electricity. Many consumers can cut use of appliances such as air conditioners at times of peak load, enabling system operators to keep the lights on without having to impose rolling blackouts or brownouts. Alternatively, consumers can generate electricity locally and get credit for grid power saved.
A number of companies around the country have seen the potential in FERC's mandate, but ConsumerPowerline was among those to grasp it earliest and move the fastest. Occupying the 17th floor of a medium-size skyscraper overlooking New York's harbor, the company happens to be upstairs from Pearl Street, where Thomas Edison installed the world's first complete electricity-distribution system more than a century ago.
ConsumerPowerline's executives exude a quiet confidence, as well they might. They appear to have a surefire business plan, and in the process of implementing it, they are showing that even in the old, somewhat stodgy, world of electric power, there are still some new things under the sun.
Michael B. Gordon, the company's president and principal, and Vinay Gupta, its chief operating officer, are electric power specialists with finance and business credentials from Harvard University and the University of Pennsylvania's Wharton School, respectively.
Here's how their system works. Say you are the owner of a medium-size office building in New York City, much like the one their company is located in. They approach you and tell you how you can save energy and make money, taking advantage of the New York Independent System Operator's Emergency Demand Response Program (EDRP). If you're interested, they'll get you to allow them to tap into your account with Con Edison. Then they estimate precisely how much you stand to gain, based on your typical electricity usage, and how much electricity you can get along without for short periods. (The data analysis is done at a center they've established in New Delhi.)
If you're convinced, they come in and install some special meters at the interface between your building and the grid, similar to the equipment they have set up in the basement of the building they occupy [see photographs, " "]. They do all this without charging you a penny up front. ConsumerPowerline gets reimbursed for its efforts only when you start to make money by not using electricity, when it takes its cut. You have nothing to lose and plenty to gain.
What's in it for the inhabitants of New York City? Besides making the grid more reliable, to the extent that electricity users sign up for the demand-response program, local utilities do not have to build extra generators just to cover the highest peak loads for a few hours on the hottest days of the year.
In all, ConsumerPowerline manages about 400 energy accounts for about 40 clients, making up about 450 megawatts of load. Roughly 10 percent of that load can be curtailed on demand. New York City's total load amounts to 11 000 gigawatts, and the state's total is about 30 000 GW. Ultimately, says Reena Russell, ConsumerPowerline's head of market development, as much as 10 percent of the state's load could be curtailed on demand. So there's a lot in this for New York ratepayers and taxpayers--and there's a good deal in it for the potential buyers of demand-response services.
Robert Gisolfi, energy director of Federated Department stores, is in charge of electricity for the 100 Macy's stores in the northeastern United States. Speaking in his office at the main Macy's store in Manhattan's Herald Square, Gisolfi said he first heard about ConsumerPowerline when he was working for Starwood Hotels & Resorts Worldwide, which owns seven or eight properties in town. A company approached him offering the kind of service ConsumerPowerline provides under the demand-response program. He systematically checked out the competition and liked ConsumerPowerline best.
"They were going to come in and install meters and everything we needed to go forward with this project," Gisolfi recalls. "They were going to do it for free, they were going to evaluate our properties, and...look not only at what we could bid into this program," in terms of electricity saved or locally generated, "but also at what might help our properties [use energy better] in general in the future."
The program ended up making the hotel chain about $70 000 or $80 000 a year. So when Gisolfi joined Macy's, he decided to bring ConsumerPowerline along.
Does cutting electricity usage during summer peaks mean that Macy's customers, already fighting crowds, will be sweltering as air conditioners go off? Fear not; Gisolfi is thinking about it. "You want to take the load off the grid, but you also don't want to hurt your business," he muses. "What takes time is working with your control system to be able to curtail" power without unduly discomforting customers.
Time will tell--as companies like ConsumerPowerline sign customers up, first in New York City and then around the country--whether the customers' tenants notice anything amiss and start to complain. If the Emergency Demand Response Program is as successful as it promises to be, there may soon be a day when sweating office workers are heard saying, "Darn, it must one of those EDRP days again...."