Tag Archives: Schneider Electric

Saft’s defensive strategy against Johnson Controls paying early dividends

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Last May, Johnson Controls filed a petition to dissolve its joint venture with French battery-maker Saft. But Saft opposed JCI’s pressure to move the JV outside the original scope of automotive battery applications and into the energy-storage market*.Saft’s resistance appeared to be vindicated in late July, with the announcement of two grid-storage projects in France totaling nearly 6 MWh of advanced lithium-ion storage.

In the first, Saft will deploy 500 Li-ion storage units of 4 to 8 kWh for the Millener Project to smooth out energy supply generated from photovoltaic installations being rolled out across several of France’s island territories. In the second, Saft announcedits listing as first-rank partner for 2.7 MWh of energy storage in mainland France’s Nice Grid project, which covers storage applications at origination and distribution substations as well as residential storage. Though energy storage and renewables are typically more cost-effective for island applications such as the Millener Project where a region lacks a robust centralized grid, the Nice Grid project provides evidence that the time is approaching for larger mainland grid storage projects. Both projects not only offer Saft the opportunity to further test and demonstrate the effectiveness of its technology, they also allow it to cultivate relationships with the numerous other project partners, including BPL Global*, Delta Dore, Edelia, Schneider Electric,Tenesol*, the European Regional Development Fund (ERDF), Alstom Grid, and EDF.

Despite its emotionally tarnished relationship with JCI, Saft made the correct tactical move to isolate its strong position in the energy storage market from JCI’s reach into the energy storage arena, which already includes a memorandum of understanding with Hitachi and an endowment for an energy storage program at the University of Wisconsin. It is important to note that, similar to its microgrid project in San Francisco*,Saft’s projects in France are subsidized by government funds,  which indicates indicating that in many applications grid energy storage is not yet market-ready on its own. Nonetheless, if Saft succeeds with its several ongoing energy storage demonstration projects, it should remain a leader in this market over the mid- to long-term.

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The demand response market shakeout continues

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On March 3, the building controls giant Johnson Controls announced its acquisition of EnergyConnect, a demand response company, for $32 million. EnergyConnect offers a software-as-a-service energy dashboard focused on the commercial and industrial (C&I) ”price-response” demand response market, which helps customers save money by shifting consumption to times with lower electricity rates. It also offers traditional “dispatch” demand response to reduce energy consumption during periods of peak demand. 

Building on a 60% revenue growth in 2010, EnergyConnect further increased its acquisition appeal in January when it won a multi-year contract with the California State University (CSU) system, which also happens to be a customer of EnergyConnect’s competitor EnerNOC. This head-to-head competition of direct response players within one institution is indicative of the increasingly competitive C&I marketplace, and the competition will only get hotter as building management systems integrate more deeply with smart-grid systems. 

The strategic alignment of Johnson Controls with EnergyConnect furthers the ongoing consolidation in the DR industry, highlighted last year when Honeywell acquired Akuacom (see the May 17, 2010 LRGJ*). The “big four” building controls companies – JCI, Honeywell, Siemens, and Schneider Electric – all now have significant stakes in the lucrative C&I demand response market. As these diversified companies supplement their core offerings with a demand response add-on it will squeeze pure-play demand response providers like EnerNOC and Comverge by driving their margins down (see the November 17, 2010 LRPJ*).

As we reported last fall (see the September 29, 2010 LRPJ*), it is not only the building controls companies who are applying the squeeze, but also utilities (see the September 22, 2010 LRPJ*) and third-party deal-makers. As the size of the pie for C&I demand response grows, the winners will be determined not only by their ability to find new slices in uncharted territory, but also their ability to take bites out of competitors’ pieces by offering multiple DR services. Clients should divest investments in pure-play demand response companies, and look to establish partnerships in the building IT space before the best offerings are off the table (see the Lux Research report, Sifting Winners from Losers in the Building IT Acquisition Frenzy*).

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Honeywell’s entrance into demand response sends shivers through the nascent industry

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Earlier this month, Honeywell announced its acquisition of Akuacom, a Bay-area company that provides automated demand response technology and services for the smart grid. The acquisition beefs up Honeywell’s current smart-grid portfolio by enabling it to provide utilities and independent system operators (ISOs) two-way communication with energy management systems at commercial and industrial sites. This capability lets utilities and ISOs automate the delivery of price and reliability signals to these facilities and more effectively trim peak demand.

With nearly ubiquitous temperature and HVAC controls (several of which already interface with demand response software), Honeywell is already one of the “big four” building controls firms – along with Johnson Controls, Siemens, and Schneider Electric. The company is currently the largest residential demand response player in North America. It also has a presence in more than 10 million commercial buildings and thousands of industrial plants. As such, adding demand  response technology will let Honeywell leap from inside the building envelope to the utility and provide an end-to-end connection between energy provider and user to reduce peak energy demand and maintain optimum building efficiency.

The acquisition marks the beginning of industry consolidation that will see a handful of winners emerging from the demand response segment. Among them will be established early entrants like EnerNOC, and a half dozen or so alignments between large building control players and key demand response firms. There may also be one or two stranger alliances between large appliance makers and demand response firms, such as by the Tendril-GE pact. Thus, look for a few more high-profile demand response acquisitions to occur as  other stalwart control firms quickly follow suit in the wake of Honeywell’s Akuocom acquisition. Meanwhile, we also expect the vast majority of mass-produced, VC-backed demand response and building energy management firms to be frozen out of the market and fall off the map.

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