What progress will utilities make on energy management and distributed generation in 2012? During today's OnPoint, Gary Fromer, senior vice president of demand response at Constellation Energy, discusses areas of potential growth for the industry, despite legislative uncertainty. Fromer talks about the challenges utilities face in diversifying their energy portfolios and bringing new technologies to consumers.
Monica Trauzzi: Hello and welcome to OnPoint. I'm Monica Trauzzi. Joining me today is Gary Fromer, senior vice president of demand response at Constellation Energy. Gary, thanks for coming on the show.
Gary Fromer: It's a pleasure, Monica.
Monica Trauzzi: Gary, with little action on energy policy in 2011, what are your expectations for smart grid and clean energy in this new year? Has any potential growth been stymied by the lack of action and the uncertainty that we have on the legislative front?
Gary Fromer: I think we have some opportunities for growth and I think we're going to see the beginnings of a new period of time in 2012. And there are certain areas where even independent or without strong support from the federal government that we can see some action developing. Even state governments right now are also struggling with budgets, so our ability to rely on government to drive our business is something that we simply can't look for.
Monica Trauzzi: What are those critical areas of growth?
Gary Fromer: So, I think first of all you're going to start to see energy purchasing meeting energy use. So, where a company might have an operations person responsible for use of the building and how a building operates or how an industrial plant operates and someone across the country doing energy procurement for that particular building or facility. Those people are now sitting down in rooms together with companies like Constellation and starting to fashion strategies that start to map how they buy energy and how they use energy and saving them money. I mean that ultimately is what it's about for those companies. So, I think that's one trend that we're definitely going to see in this coming year. I think a second trend we're definitely going to see is the cost of distributed generation is headed down. There's been a lot of efforts, some of it federally supported with grants, but some of it happening in any case. Certainly, it's true of solar in terms of the cost reductions that we're seeing, in terms of solar installations, but it's also true of cogeneration, storage, even forms of backup generation and micro generation that are becoming economic to deploy. And I think we're going to see that accelerate in 2012 for lots of different reasons. And I think a third thing that we're going to see has to do with using the basic technologies that exist today. So, we have been, in our industry, fascinated with deployment of new technology and no doubt in Constellation we have products and solutions that we use, including our VirtuWatt product for demand response. It's very helpful for customers, but there are opportunities for customers to save money and make money using existing technology, using e-mail, using text, using infrastructure that exists in their building, including their own automation systems that exist. And I think we'll see an acceleration of people using basic technologies that already exist very inexpensively to save money.
Monica Trauzzi: Have customers been reluctant to take on some of these new ideas and technologies? Is it kind of hard to drive the point home that there could be savings if they use those technologies?
Gary Fromer: I think the problem that we have across our industry is that most company's energy and energy savings is not their primary responsibility in business. So, when you're going through a difficult economy your focus as a business is how do I make my business succeed? How do I keep growing? Those are the questions we all ask ourselves. How do I survive? And generally, with some exceptions, energy and energy management is not at the top of your list. It's not something that you expose to your own customers, so it's not your top focus area. My focus area is how am I going to keep selling my product? How am I going to keep competing? So, we have to communicate and we have to make sure that we make it -- help customers make it a priority without it being a burden on their somewhat limited resources in surviving, in surviving in a difficult environment.
Monica Trauzzi: You mentioned solar. I'd like to talk about that a little more, because Constellation is building Maryland's largest solar farm. It's a $60 million project. The solar industry faced some challenges last year. Do you think that that impacts the outlook and the likelihood that investments could continue to rise and potential growth in that sector?
Gary Fromer: So, as we all know, solar today is very dependent on the regulatory structure that exists and our willingness from a societal perspective to pay for solar energy versus other what are today in the short run cheaper forms of energy. I think over the long run solar is going to be a very strong play and the long run being time periods that are measured more like in 5 to 10 year increments. So when we look at any given year, in the near-term, certainly regulatory support is critical and what prices are forward of SREX and the like become absolutely critical in terms of financing any kind of major solar installations. But over the course of time, as we see reductions in the cost of solar, those become less and less necessary and, hopefully, solar will get to a point within the next I would say 3 to 5 years, where does stand on its own and companies like ours can help customers get solar deployed where it's the right application.
Monica Trauzzi: Is the future of smart grid in question at all because stimulus funding is about to run out and everybody seems to be looking for new sources of funding?
Gary Fromer: I don't think so. I think the stimulus funding is what it is supposed to be, it is stimulus funding. It's supposed to stimulate something that might have taken longer to happen and make it happen sooner and I think that did happen in some cases. I think after a stimulus you always get a period of time of digestion and that's a period of time we're in right now. So, we are deploying a lot of smart meters around the country. We don't exactly have a lot of great applications across the board to use against the data that we're getting and to use against that. So, part of this is digesting what we're getting and being able to create smart applications that help customers, without burdening them, use the information that they're getting. And that's a developmental stage that actually will take some time.
Monica Trauzzi: All right, we'll end it there. Thank you for coming on the show, nice to see you.
Gary Fromer: It's been a pleasure, thank you.
Monica Trauzzi: And thanks for watching. We'll see you back here tomorrow.
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