EcoFactor: Finally A Smart Way to Control Thermostats

eco-factor-logo-lgThe software that 3-year-old startup EcoFactor has developed to intelligently manage connected thermostats is one of those game-changing technologies that makes you think: Wait, the industry doesn’t already do it that way? It’s just so obvious. EcoFactor, which is officially launching and announcing its first customer (Texas utility Oncor) this morning, has developed a service based on its smart algorithms that can continuously manage a home’s connected thermostat throughout the day, tweaking the settings ever so slightly to shave off energy consumption, but maintain a comfortable temperature.

The startup’s algorithms take into account things like outside weather, the physical characteristics of the home, and manual input from the home owner, and can tweak the thermostat every minute. The idea is to cut home energy consumption from heating and cooling (the bulk of a typical energy bill) in tiny increments. Over a month EcoFactor says it can save 20-30 percent off of the heating and cooling costs on your bill and you won’t even notice.

That subtle approach is quite a contrast from the more traditional demand response, or DR, model. For traditional DR, a DR provider would ask a building owner (mostly industrial and commercial right now, but sometimes residential) to turn down their air conditioning, lighting or other appliances during a specific time on a specific day (called an event). Companies participating in the DR network often get compensated with payments just for opting into the program. The building owner could get a cheaper electricity bill, but sometimes would need to manually reduce their power, and even if the process was automated the building owner could often clearly feel the effects of the timed power reduction. EcoFactor’s CEO John Steinberg explains the difference as: traditional demand response concentrates on five days a year, while EcoFactor focuses on 365 days a year.

The interesting thing about EcoFactor is that the company isn’t even really that focused on the demand response market — Steinberg and EcoFactor’s Senior VP of Products Scott Hublou referred to that market as “easy money.” Though their first commercial customer win is in that area. Oncor customers with connected thermostats have been using EcoFactor’s service throughout this past summer and the service will continue over the next three¬† years. The deal between EcoFactor and Oncor includes a pledge that EcoFactor’s service will save the utility 3 MW of peak power — the equivalent of 2,000 air conditioning units — as part of the utility’s “Take A Load Off, Texas,” campaign.

Instead of demand response, EcoFactor would rather focus on helping consumers cut energy and save money on their energy bills (as opposed to helping utilities manage the grid better). The company thinks one of its main markets will be partnering with service providers like cable companies, telcos, DSL-providers that are interested in offering energy management to customers. Verizon (s VZ) has said it is interested in adding energy management to its fiber service, and Steinberg and Hublou say that many of the service providers are moving in this direction. EcoFactor’s service needs a home Internet connection, which is another reason why partnering with a broadband service provider could be a good move.

One drawback I see to focusing on that market is that those service providers seem to be moving very slowly, if at all. It’s easy for Verizon to say it could add energy management to its fiber rollout, but it’s another thing to have it available for a mainstream market. But as Hublou pointed out to me, those types of companies don’t necessarily know how to get into this market, or what applications to provide, which could be a sweet spot for EcoFactor.

I’ll be very interested to see how much of the company’s business comes from utilities, versus broadband service providers over the coming months and years. But one things for sure: thermostats need to be managed in a much better and intelligent way. Many homeowners just don’t program their supposedly-smart thermostats, so a service that would dynamically program your thermostat for you, could help consumers by saving that hassle. When it comes to homeowners that might not be too keen on a third party controlling their home heating, Steinberg says the service is the equivalent of cruise control for cars — you can easily override it with the touch of a button.

EcoFactor, which was a finalist in the business competition the California Cleantech Open recently, has so far been angel funded, and is currently in negotiations for its Series A round.