Despite all the new high tech ways to help us curb our energy consumption, only about a quarter of us are expected to be interested in using home energy management dashboards and online energy management websites, says Ogi Kavazovic, Senior Director, Marketing & Strategy, for energy software startup Positive Energy, which this morning rebranded itself as Opower. That leaves a good three quarters of utility customers that will need something decidedly more low-tech . . . . like the paper-mailed energy-efficiency reports that Opower develops in addition to its software tools. Well, that’s the company’s pitch and utilities seem to be responding — Opower also said this morning that it’s signed up more than 20 utility customers for its energy efficiency tools, which can lower consumer’s energy consumption by as much as 3.5 percent.
Kavazovic says the company’s current utility customers represent about 5 million households, including customers of Xcel Energy (s XEL), Seattle City Light, Commonwealth Edison and Dominion (s D). The 2-year-old company has also been working with Sacramento utility Sacramento Municipal Utility District (SMUD) and Puget Sound Energy over the past 16 months and Summit Blue recently verified that Opower’s technology indeed saved as much energy as expected. Kavazovic says that its deal with SMUD was extended beyond the 38,000-customer pilot program to a three year project with even more customers.
While 3.5 percent might not seem like a lot of savings, companies building energy dashboards and online energy management tools are shooting for the same type of savings of between 3 to 7 percent. And, here’s the savvy business case: it costs a whole lot less for a utility to offer paper-mailed reports than it is for a utility to supply home energy dashboards to its customers. Kavazovic says it costs around $10 per customer per year to supply and send its paper reports, compared to potentially hundreds of dollars per customer to buy and install a home energy management display.
The business model apparently sounded good to New Enterprise Associates. In December, Opower announced that it raised a $14 million round from NEA, and Kavazovic says the company isn’t looking for any more money in the near future. As we noted back then, a $14 million investment will go very far in the world of software development, statisticians and envelope stuffing.
Basically, the company thinks that its reports are both the most effective way to reach a mainstream U.S. population and are the cheapest option, too. The company’s paper reports give customer’s detailed information about their home energy consumption and make recommendations about ways to cut consumption, like turning down the air conditioner by a couple degrees. In test and control groups, Opower’s seen a drop in energy consumption literally days after customers receive such reports, with an engagement rate of 85 percent. The feedback generated from such high engagement levels can help utilities prove to public utility commissions that the energy efficiency programs are working.
Opower’s Kavazovic was very clear that in most cases he sees the company’s paper reports as a more efficient and cheaper version of an energy management website or dashboard. “It’s direct competition,” he said. But I could also envision a world where utilities want to offer a variety of products like paper reports, online tools, and energy dashboards for the more tech-savvy home-owner. Opower wants to grab a significant piece of the online software market, too, despite the fact that the company doesn’t think it’s too large just yet. Opower currently does offer online energy tools and has a team of developers working on others.
Becoming the defacto energy efficiency utility solution won’t be easy, despite the company’s strong showing. Companies like Efficiency 2.0 are taking a similar approach, but skipping the emphasis on paper reports and adding on more social networking tools. Here’s a big ol’ list of startups working on a variety of software, hardware and online options.
The barrier to entry in this market also isn’t that large — software development, knowledge of what tips/recommendations make people respond, and utility relationships — so Opower needs to move quickly. But it’s a good time to rebrand and market their tools, as the energy efficiency and smart grid stimulus funds have forced every U.S. utility to think about how they are going to reduce energy consumption of their customers.