Terrill Laughton of Johnson Controls discusses the impact of acquiring EnergyConnect.

Full Transcript:

Ben Lack : I’m with Terrill Laughton, the Johnson Controls’ Director of Utility Solutions. Thanks so much for being with us.
Terrill Laughton: Thank you for having me.
Ben Lack : You guys have recently put the finishing touches on acquiring a company called Energy Connect. I want to get your insight on what this means for Johnson Controls and Energy Connect customers.
Terrill Laughton Thank you. I’ll be happy to speak to that. What this basically is going to mean is that we’re going to be able to provide a better offering for our customers. We believe that bringing in a combination of demand-response and energy efficiency together will create a more optimal solution for our customers and get them the largest impact in control over their energy spend. For Johnson Controls, specifically, we feel this helps fill a gap in our offering. We currently do not have an offering within demand-response, and we want to be able to bring that to our customers. Energy Connect in their GridConnect platform really helps fill that gap.
Ben Lack : What is the value add or the competitive advantage that the Energy Connect business provides to their existing client base and what you’ll ultimately be integrating to your existing client base?
Terrill Laughton: Can you repeat the question for me? The first part I didn’t quite understand.
Ben Lack : What is the big, competitive advantage? Demand-response is a fairly generic term. What solution do they bring to the table that really enticed you guys to want to bring this in-house?
Terrill Laughton: Great. The aspects that got us excited about Energy Connect really revolve around their platform. Their platform, their Gridconnect platform is how they refer to it, when out in the market place has three main functionalities associated with it. It has a capacity program element to it, economic, and ancillary services. The economic and the ancillary services aspect of their GridConnect platform was really the item that was very attractive to us because that starts ahead in the direction that we want to move in terms of making buildings be able to respond to price signals, price response, demand-response, and then also higher value demand-response applications like ancillary services, and getting buildings to respond under a quicker time frame to stimuli or signals from the grid within 5-10 minutes or even seconds for regulations services. We felt that Energy Connect was heading down that path in developing software applications to be able to do that and perfecting that and that ties very much with some of the types of things that we want to do in terms of integrating that functionality into our building automation systems so that buildings can respond to grid stimuli on a much more regular and routine basis.
Ben Lack : I’m hopeful that you will agree with me that we’re in the very early stages of really integrating demand-response solutions into the existing U.S. infrastructure. Buildings currently really are not that smart at all and it will take some time to make these buildings really react real time with price and other pieces of equipment that are in the facility. It looks to us like an acquisition like this is to really get the expertise and the assets in play. How long do you think it’s going to take before this solution, these types of processes, these operational strategies starts become mainstream? You’re going to see this become real mainstream in five or ten years or just more the 20-year play when the markets starts to saturate?
Terrill Laughton: That’s going to be much sooner than twenty years. I think in five years, we will start to see very active participation by buildings with the grid and the grid infrastructure. The market constructs are there in many of the locations within the mid-Atlantic region of the United States. There’s great market constructs to be able to take advantage of these types of opportunities and it’s really just a question of being able to start to get building and solutions that are out there that customers can take advantage of. I expect in five years from now, we’ll have a very material amount of buildings that are doing price responsive demand and then even higher level demand-response services just like ancillary services and regulation.
Ben Lack : Fantastic. Are there certain industries or certain types of businesses that you have either experienced or felt were latched on to demand-response programs faster than other industries or businesses?
Terrill Laughton: Anybody that’s really got a large load obviously has more scale that they’re able to leverage to do demand-response and get more compensation and benefit associated with that. So, anybody that’s got a large load is certainly excited about demand-response and wants demand-response. The other aspect of it is buildings or industries that have some flexibility and how they can manage when they’re using load– and that’s the other big factor. And so, universities are generally very good candidates on the building side of things. They tend to have a lot of flexibility. But we’re also seeing a lot of interest from office building space, commercial real estate, as well, within any large industries that are using a lot of energy that’s got a process that they can have some control over is obviously very excited about doing demand-response. So, steel mills, people that are melting things using large amounts of electricity and have some latent thermal capacity in their operation– big opportunities for them.
Ben Lack : This is my final question and this is a personal question. I’m curious to know why you’re in the business. Why does this industry interest you and why are you doing what you’re doing?
Terrill Laughton: That’s actually a really funny question. I’m not sure I’ve got a very good answer, but it’s the real answer. I started working in the energy industry in the ’90s. One of the main things that excited me about the energy industry is the fact that I’ve always felt if we can decrease the cost of energy by a penny a kilo-Watt-hour, the impact that that would have on society is amazing. Just the multiplicative impact of making it cost less to operate buildings, cost less to manufacture goods. It’s a huge positive for everybody. And from a demand-response point of view, I feel the same way about that. I feel the same way about if buildings become more of an integral part of the grid. We’re basically taking that demand side of the equation and providing it a lot more flexibility. And if I’m going to steal an economic term, making that demand curve a little bit more elastic really helps lower the cost, lower the amount that we actually have to invest in T&D, in new power plants. That lowers the cost for everybody, lowers the carbon impact on society. It’s a net benefit for everybody. I wake up in the morning and I feel good about it.

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