BOULDER, Colo. — Demand response (DR) continues to evolve as the smart grid’s “killer application,” leveraging technology to deliver measurable value to utilities, grid operators, and customers alike, notes Pike Research. The demand response market encompasses hardware, software, and services, but it is the services sector that is defining the future direction of the business. The DR services market is segmented into three main areas: curtailment services, systems integration/consulting services, and outsourcing services. According to a new report from Pike Research, global revenues for demand response services will experience strong growth over the next five years, increasing from just less than $1.3 billion in 2011 to more than $6.1 billion by 2016. The firm forecasts that the curtailment services segment will continue to be the largest of the three key segments, representing approximately two-thirds of the total market through 2016.

“Market forces driving demand response growth include increasing demand for electricity in every region over the long term, growing constraints on new generation, the need for greater energy efficiency and energy cost savings, and the introduction of new technologies,” said senior analyst Marianne Hedin. “Smart meters, virtual power plant systems, microgrids, and the integration of renewable energy resources will all increasingly rely on DR to operate effectively and unlock the potential of their technological capabilities.”

Hedin added that, in the midst of this market expansion, the competitive landscape for DR is now consolidating, evidenced by a number of acquisitions in 2010 and 2011. The global players in this market include power product, equipment, and enterprise energy management vendors like ABB, Honeywell, Itron, Johnson Controls, Schneider Electric, and Siemens; energy services companies (ESCOs) like Constellation Energy, and major curtailment service providers such as EnerNOC and Comverge. As the market continues to mature, Hedin expects to see more acquisitions by these and other leading players in the future.