EnerNOC’s mission is to unlock the full value of energy management for commercial and industrial (C&I) customers, grid operators, and utilities.
EnerNOC is a provider of energy intelligence software and services. The company operates two reportable business segments:
Timothy Healy and David Brewster were students at Dartmouth’s business school. Both had a strong interest in environmental issues. Healy grew up with his engineer father discussing clean energy issues at the dinner table. Brewster had a part-time job at Beacon Power, a renewable energy firm. One day Healy met Brewster to tell him about an idea he had for selling electricity back to a grid.
Brewster was intrigued, and the two began spending time on campus hashing out the concept. In 2001 they entered the idea in two competitions, one for venture funding and the other for entrepreneurship. They lost both, but were undeterred, and formed a company called EnerNOC LLC to develop their project. When they graduated in 2002, they focused on it full-time.
The men filed a patent for their proposed technology, which tied users back into the wholesale electricity market. Unfortunately, funding for startups had dried up following the dot com bust, leaving them with no financing. They thus went about actively seeking customers to generate cash flow. In early 2003 they signed Hannaford Brothers and the town of Fairfield, CT to five-year deals.
In summer 2003, they officially incorporated EnerNOC. They also recruited an engineer to create a meter with relay switches and a communications port. Over the next few years they suffered financial losses, but in 2007 they went public, generating the strongest IPO by percentage increase in the green sector that year. Since then, the firm has grown significantly through acquisitions.
Business model of EnerNOC
EnerNOC has a niche market business model, with a specialized customer segment. The company targets its offerings at utilities, electric power grid operators, and enterprises in six verticals: manufacturing/industrial, commercial real estate, healthcare, government, education, and food sales and storage.
EnerNOC offers four primary value propositions: accessibility, cost reduction, performance, and brand/status.
The company creates accessibility by offering a wide variety of options. Over the course of its history, it has acquired numerous other firms. These include eQuilibrium Solutions, a provider of carbon accounting systems; SmallFoot, a provider of wireless demand management systems; Global Energy Partners, a designer of energy efficiency programs; M2M Communications, a provider of energy management technology solutions; EnTech, a provider of utility bill management software; Pulse Energy, a provider of utility customer engagement software; World Energy, a provider of energy procurement software; and demand response providers Activation Energy and Entelios. These acquisitions have enabled the company to expand its capabilities, diversifying its portfolio.
The company’s solution reduces cost. Its energy procurement solution features an online auction platform that enables customers to get the best price possible for natural gas, electricity, and other resources by having energy suppliers compete for their business. The solution also provides advisory services that help enterprises develop purchasing and risk management strategies that yield structural savings. Lastly, cost reduction is also enabled through a notification service. If grid operators or utility companies experience a sudden increase in demand, the solution communicates this information with customers connected to those firms’ networks in order to reduce their energy use. They may do so by switching over to a generator, reducing lighting or air conditioning usage, or powering down equipment not being used. This can restore balance, preventing the companies from having to buy more expensive electricity.
The company has demonstrated strong performance through tangible results. High-profile examples of positive outcomes for specific clients include the following:
- General Motors used EnerNOC’s solution to manage its utility bills, enabling it to achieve over $49 million in savings since the initial deployment
- Washington REIT used EnerNOC’s solution to develop an energy purchasing strategy, enabling it to establish energy reduction goals and save $390,000 in electricity costs
- Equity Office Management used EnerNOC’s solution to monitor energy data in real-time, enabling it to identify energy efficiency measures yielding over $800,000 in annual savings
- Kell West Regional Hospital used EnerNOC’s solution to reduce its energy costs, resulting in annual payments of $10,000 and additional savings of as much as $50,000
- The University of California education system used EnerNOC’s solution to reduce system-wide energy consumption by 10%, equal to over $30 million in annual savings
The company has established a strong brand due to its performance. It serves over 4,000 clients, including Fortune 500 firms such as 3M, Staples, Kimberly-Clark, Cushman Wakefield, and Del Monte. These customers represent more than 70,000 sites that use its software and services, including commercial buildings, industrial sites, universities, and supermarkets. Lastly, it has won many honors, including the following:
- Recognition as a ENERGY STAR Partner of the Year in the Service and Product Provider category by the U.S. Environmental Protection Agency (2016)
- Best Green Practices Award in the Invention category for its EfficiencySMART Insight product by the Boston Business Journal (2011)
- Two Smart Grid Product of the Year Awards from the Technology Marketing Corporation and Intelligent Communications Partners (2009)
- Recognition as one of the Top 100 Places to Work by the Boston Globe (2009)
EnerNOC’s main channel is its sales team, which includes direct sales, channel sales, and inside sales professionals. The company promotes its offering through its social media pages, advertising, and participation in summits and conferences.
EnerNOC’s customer relationship is primarily of a self-service, automated nature. Customers utilize the service through the main platform while having limited interaction with employees. The company’s website features a section called EnerNOC University that provides webinars and online courses on the use of its software. The site also features a “Resources” section that includes white papers, case studies, data sheets, brochures, infographics, product videos, and customer videos.
Despite this orientation, there is a personal assistance component. The company provides phone and e-mail customer support on a 24x7x365 basis. It also offers custom training options such as personalized, one-on-one webinar sessions and in-person classroom training sessions with an expert. These classes can be held at the client’s facility or at the company’s Boston headquarters.
EnerNOC’s business model entails designing and developing its software and services for clients, as well as maintaining a robust cloud platform.
EnerNOC maintains the following types of partnerships:
- Software Referral Partners – Firms that resell the company’s energy intelligence software to their clients, typically large, complex enterprises
- Demand Response Referral Partners – Firms that resell the company’s demand response solutions to their clients, primarily businesses that can reduce at least 100 kilowatts of electricity demand a few times a year
- Procurement Referral Partners – Firms that provide their commercial clients with access to the company’s energy procurement platform, including its reverse auction technology
- Technology Partners – Firms that couple their complementary technologies with EnerNOC’s solutions in order to create an enhanced offering for customers; specific partners include WeSpire, SunPower, and Tesla
EnerNOC’s main resource is its proprietary software platform, which serves over 4,000 clients.
It depends on its engineering employees to maintain the platform, its research and development team to develop its solutions, its training staff to provide instruction, and its customer service staff to provide support.
It places a high priority on intellectual property, with 17 issued patents and 60 pending patents in the United States, Canada, and Australia as of December 2015. Lastly, as a startup it has relied on funding from outside parties, raising $7.8 million as of January 2005.
EnerNOC has a cost-driven structure, aiming to minimize expenses through significant automation. Its biggest cost driver is cost of revenues, a variable expense that primarily includes amounts owed to C&I customers for their participation in its demand response network. Other major drivers are in the areas of administration, sales/marketing, and research/development, all fixed costs.
EnerNOC has three revenue streams:
- Product Revenues – Revenues generated from sales of the company’s software; it is available in different packages at different price points depending on a customer’s needs
- Subscription Revenues – Revenues generated from subscription fees charged for access to the company’s software-as-a-service platform; there are four subscription plans: Basic, Standard, Professional, and Industrial
- Service Revenues – Revenues generated from fees charged for the company’s professional services, which include implementation, energy audits, recommissioning, and training