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Opt-Out: The Biggest Little Words in Home Energy Management

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What if the most successful home energy-saving technology ends up being the one people have to opt out of? Unlike companies using phone service, broadband, home entertainment, security systems and other commercial inroads into the home to promote energy management technology, utilities can sign customers up for programs automatically, unless they actively choose not to join. Startups and green IT giants alike targeting the home energy management space should remember this powerful tool.

Take OPOWER (formerly Positive Energy). The Arlington, Va.-based home energy software startup crunches household and neighborhood energy use and other information to deliver personalized energy-saving tips. It has an online portal, like many in the home energy space. But its primary connection with the consumer is a monthly energy efficiency report that arrives in a utility-addressed envelope — and, critically, customers automatically get this report, unless they tell the utility they don’t want it.

“I think that’s fundamental,” OPOWER’s Ogi Kavazovic told me earlier this month. Only 5 percent or so of utility customers tend to actively engage in home energy management pilots, he said. But opt-out can yield a 98 percent participation rate, since it requires a conscious effort to reject the chance to save on power bills. Starting from this far broader, if potentially far less engaged, customer base, OPOWER can get people to cut energy use by 2 percent or so. That’s low, compared to the 10 to 15 percent energy reductions promised by more high-tech systems — but those higher numbers haven’t really been proven yet in commercial deployments.

Utilities also like opt-out’s increased control — an important factor when customers can’t be relied on to predictably lower their energy use. A recent survey by Honeywell (s HON) showed two-thirds of customers chose comfort (i.e. air conditioning) over saving money during this summer’s heat wave. Smart meters and home energy platforms can help, but only if they’re hands-off. One such pilot, the PowerCentsDC program, found that customers prefer plans with up-front savings and narrow “critical peak” price windows, rather than those asking them to monitor energy use every day.

Redwood City, Calif.-based EcoFactor is taking this fact into account. The startup has software that balances home comfort and power savings without homeowner involvement, and is teaming up with Texas utility Oncor to cut AC loads during hot summer afternoons, much like Comverge (s COMV) and others residential demand response providers do. Those programs are all opt-in, however — whether technology can make the process invisible enough for opt-out remains to be seen.

In the home energy networking space, startups Consert and Sequentric are aimed at giving utilities direct control over household energy loads. Consert recently raised money from General Electric (s GE), Qualcomm (s QCOM) and Verizon (s VZ), suggesting potential strategic partnerships. Sequentric is working with Itron (s ITRI) and several utility projects, including Duke Energy’s Charlotte, N.C. “virtual power plant” project to directly manage household loads — though both companies have declined to comment on the relationship.

CEO Jim Rogers has said that Duke wants to “own every piece” of its smart grid, including systems in customers’ homes, though some “consumer-first” comments from CTO David Mohler somewhat contradict that. Duke is also working with Cisco (s CSCO), which launched its Home Energy Controller this summer. It will be interesting to see if Duke chooses to use an opt-out model to deploy it.

To read the rest of my report on the home energy management market and all my daily takes and news on Green IT check out GigaOM Pro (subscription required):

Is the Opt-Out Model the Future of Home Energy Management