Demand Energy re-energizes

Following receivership, company hits Big Apple

By Linn Parish
Spokane Business Journal

April 9th, 2015 – Having emerged from receivership and paid the last of its old debts, Liberty Lake-based energy storage company Demand Energy Networks Inc. is pursuing what it says is a New York City market that has arrived finally.

The company last month landed a contract to deploy a one-megawatt distributed energy storage system for a company called Glenwood, which owns a number of luxury rental properties in New York City, specifically Manhattan. The storage system will be installed in a number of that company’s buildings.

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Construction of the system started last month, and it’s expected to be operational by summer. Glenwood had installed its first Demand Energy system in a New York City building two years ago.

Gregg Patterson, president and CEO of Demand Energy, says that in simplest terms, Demand Energy’s system stores energy on batteries during periods of low usage and distributes it during peak usage. In the industry, that approach is referred to as “flattening the load,” he says.

In markets in which electricity is the most expensive—New York City, California, and Hawaii—many utilities charge more for energy during peak periods of the day or for spikes in usage. With the Demand Energy system, a building owner typically can save enough money in reduced energy costs to pay for a system over a number of years.

“Our ability to provide a three- to five-year payback is growing for a greater number of users,” Patterson says.

Doug Staker, Demand Energy’s vice president of global sales, says the Glenwood system that’s being installed is an example of a larger opportunity in New York for Demand Energy. Consolidated Edison Inc., the power company that serves most of New York City, recently has put in place a rebate incentive for property owners that install energy-storage systems. Staker says the incentive improves the return on investment when a property owner installs a system—and thereby makes it an easier sell.

All told, he says, the company sees New York as a $200 million market currently.

Demand Energy executives decline to disclose the company’s revenue but say a typical system is priced at $500,000—$350,000 to build and $150,000 to install.

Staker asserts that Demand Energy was the first company certified to install energy-storage systems in New York and that it had proposals in place to put in systems that would provide seven megawatts of storage in a number of structures. Dave Curry, board chairman and co-founder of Demand Energy, says a typical unit stores one kilowatt, so it would take 70 of the company’s typical systems to store seven megawatts of power.

Generally speaking, a megawatt is enough electricity to power roughly 1,000 homes at a given time.

Staker says the incentive is in place to ease demand on the power grid in New York. He says energy-storage systems can help a utility substantially during peak usage, or times of peak power loads, by using the power in reserve rather pulling from the grid.

“Compelling issues drive a utility,” Staker says. “What really is driving our business in New York City is compelling issues with energy supply.”

Patterson says Demand Energy currently has 17 employees, with one in New York, one in Oregon, and the rest at its 6,000-square-foot office on the Meadowwood Technology Campus, at 24001 E. Mission. While the company only has one employee in New York now, it usually has one to three people there from the Liberty Lake office at any given time.

As the company ramps up, Patterson says, it likely will add more employees, but not many because it’s no longer handling its own manufacturing—it has a strategic partnership with EnerSys, the Reading, Pa.-based battery manufacturer that bought Spokane Valley-based Purcell Systems Inc. in 2013. Through the partnership, Enersys handles the manufacturing, and Demand Energy focuses on software and analytics.

“This strategy doesn’t require a lot of heads,” Patterson says. “It requires the right heads.”

Demand Energy has targeted the New York City market since its early days. In 2011, three years after its inception, the Liberty Lake-based company had deployed some of its first units to the Big Apple and was calling for exponential growth. At that time, one executive said it was possible that the company would be operating in the black at some point in 2013.

Curry, who was serving as president and CEO of Demand Energy at that time, says now that the company underestimated how long it would take for the energy-storage market to mature.

“We, like a lot of others, struggled to maintain capital,” Curry says.

The company shuffled its executive team a couple of years ago and brought in Patterson, who previously had served as president of Advanced Energy’s solar business unit in Oregon after that company acquired a commercial solar power inverter company that Patterson had led.

While the company’s investors—including many of its executives—continued to put money into the company, it went into receivership in October 2013. Curry says, however, the company continued to do business despite its financial woes, and in March 2014, it bought its assets out of receivership. Through an arrangement with creditors, it had one year to pay off lingering debts, and it made its last payments last month.

As the New York market appears to be emerging, Staker says the California market arguably is the most mature for the energy-storage market. The company hopes to pursue that market in the near future.

The dynamic of the California market is different, Staker says, in that the challenge isn’t capacity, but rather sudden fluctuations in solar energy, which is prevalent there.