Max Gladwell

Editor’s note: We’re pleased to welcome Arun Mathur of Smart Grid Citizen as a new guest blogger. This is an exciting space with tremendous opportunities for entrepreneurs. Thousands of smart meters are being installed and activated every day. We’ll see plenty of innovative approaches to utilizing them in the coming years.

In the 20^th century the goal was to electrify America.  Electricity was to be made widely available, reliable, and cheap.  Today, as we approach the limits of our current power generation and distribution infrastructure, the focus has shifted to making our energy ecosystem greener and more efficient.  Welcome to the smart grid.

With 40% of total energy consumption coming from the residential market, getting consumers to reduce their consumption, particularly during peak times, is an important part of the energy efficiency equation.

In What’s in Store for Consumers, I presented a long list of home energy management (HEM) solutions.  The mechanisms used to influence our energy consumption behavior vary with each solution, however they all fundamentally start by giving us better information that we can hopefully act upon.  And, that’s a good thing.  Consumers cannot consistently conserve energy without a better understanding of their current energy consumption profile.

The effectiveness of these solutions will be measured on many levels, but I posed two critical questions for which all of these solutions will eventually require verifiable answers:

1. How effectively can the solution meet a desired cost/benefit value proposition?
2. For how long can the solution sustain its positive influence over our energy consumption behavior?

Thus far, amidst a bevy of players touting their high-tech wizardry, OPOWER may be the only company holding a pair of aces.  And, they’re succeeding in engaging consumers in a distinctly low-tech way.

O, How ingenious

OPOWER’s breakthrough is a remodeling of the standard monthly utility bill into customized energy efficiency reports.  These new electric utility bills engage customers to make better choices about their energy consumption using neighbor comparisons and personalized, targeted energy-saving recommendations.

OPOWER’s Neighbor Comparison reporting is an important component of the bill, and has become the sweetheart topic of the press.  In spite of maintaining the privacy and personal information of its customers, OPOWER has still been successful at changing consumers’ energy consumption behavior.   You can find various examples of the signature story line in a long list of prestigious journals including The New York Times, Wall Street Journal, Business Week, Time, USA Today, The Boston Globe, Los Angeles Times, and The Washington Post.

Actually, ‘peer proof’ tactics and experiments in social science are nothing new.  What’s rather unique however, is that OPOWER has proven that it can cost effectively scale its model to tens of millions of customers with consistent results: 2 – 3.5% savings, 85% customer engagement, and with sustainable impact (their longest running program is still delivering consistent and improved results after two years).

Compared to all other home energy management and control solutions available, nothing has come close to delivering the same results.  Consider the following chart that compares the current standing of OPOWER with most every other Home Energy Management solution:

Low Tech vs. High Tech

To be fair, the chart above can also be viewed as a low tech vs. high tech approach to engaging customers in more energy efficient behavior.  In many respects, a low-tech, paper-based approach would naturally engage a greater number of people because they’re already accustomed to receiving monthly utility bills.  Conversely, all new capital intensive technologies face challenges in establishing a compelling value proposition.  Moreover, these high-tech solutions are all subject to the innovation adoption curve (see Rogers Technology Adoption Lifecycle model).

In truth, there exists great potential for the high-tech camp to deliver substantially more savings for consumers.  Unfortunately, in the highly regulated utility industry, the challenges of establishing a compelling value proposition and accelerating consumer adoption are made even more acute.  Consequently, it’s unlikely that we’ll see a successful, scalable model established for the high-techs anytime soon.

O, So powerful

For now, the question is not whether there will be a place for more robust home energy management systems with in-home displays, or whether or not high-tech HEM providers can work alongside OPOWER.  The question is whether HEM solution providers can establish a compelling value proposition before OPOWER has the same capabilities.  As it stands, OPOWER has significantly more credible, geo-coded peer data then any other provider.  Their customers include 6 of the 10 largest utilities in the country plus 19 others.  They have an online energy and community portal that rivals the best in the market.  Additionally, their home energy management reports are already being extended to digital in-home displays.  Finally, with each new customer, their system becomes more intelligent and powerful.

In the months ahead, OPOWER will be expanding its paper-based model in even greater numbers while dozens of other companies test and refine their high-tech platforms in small pilot programs.  Over time, this situation has the potential to marginalize other solutions that do not offer something unique and impactful.  In my previous post, I also mentioned that integrated solutions offering more than just home energy management, and automated solutions such as EcoFactor will have a better chance of weathering the competition and establishing partnerships.

No bag of simple mind tricks

I recently had a chance to speak with OPOWER’s Senior Director of Marketing and Strategy, Ogi Kavazovic.  I was intrigued to learn that the application of behavior based energy efficiency is actually a small part of what they do.  You certainly would not get that impression from reviewing their management team.  They’ve hired Dr. Robert Cialdini to work exclusively with OPOWER as their Chief Scientist.  Dr. Cialdini is widely regarded as an expert in the fields of persuasion, compliance, and negotiation.  If you’d like to better understand the reasons why people comply with requests, add his bestseller to your reading list:  Influence: Science and Practice.

To Mr. Kavazovic’s point, the simplicity of the smiley faces and charts that appear on OPOWER’s paper-based energy reports are very much a part of the solution’s beauty.  At the same time, the magic is in the engine that’s used to create them.  No two energy efficiency reports will look the same.  Aside from providing specific energy consumption data, OPOWER’s data engine crunches your usage stats, provides customized tips, and delivers highly relevant cross-reference comparisons with other households of similar size, energy profile, and demographics.

Grid CRM

Mr. Kavazovic also described OPOWER’s ability to fulfill the need for an enterprise class Customer Relationship Management (CRM) solution specific to the utility industry – a “Grid CRM” platform that can be used to successfully engage with all customer segments, regardless of income, age, educational level, or access to technology.  This is a critically important observation.  For the last 50 years, utility companies have not been in the business of developing relationships with their customers, educating them, or engaging in meaningful dialogue.  In the utility industry, customers are often referred to as rate-payers.

Now, with energy efficiency mandates (20 states have adopted Energy Efficiency Resource Standards), utilities need a majority of their customers to act more conservatively with their energy consumption.  OPOWER provides an effective way for them to do this.

Utility companies will also need to engage with customers and effectively communicate the introduction of many new smart grid developments including smart meters, time-of-use (TOU) rates, demand response (DR) programs, and more.  Having a proven engagement platform to communicate these changes will be essential.  Moreover, OPOWER can deliver this functionality with the benefit of a customized-household approach.

Obama’s praise

On March 5^th, President Obama stopped by OPOWER’s headquarters in Arlington, VA to deliver a televised speech on Energy, Jobs, and the Economy.  President Obama commended the company on its achievements in energy efficiency and their ability to generate new jobs in the clean energy sector.  You can watch the video of President Obama’s speech and view the entire transcript here.

To date, OPOWER has saved over 90 million kilowatt hours.  This translates to an excess of $10 million in savings for consumers and an abatement of over 130 million pounds of CO2 from the atmosphere.  These are indeed fantastic sums that deserve hearty praise.  And, while the smart grid sector remains no less competitive, OPOWER’s success should give inspiration to other leaders needed in the 21^st century energy economy.  And who knows, the President just might stop by to thank you if you’re among them.

In this article we depicted OPOWER as a superhero of sorts.  While you could draw analogies that OPOWER is the guy to beat, the reality is that this superhero will need more Superfriends to combat the numerous challenges we face in climate change, energy independence, and creating a cleaner, greener world for the future.  Who’s your superhero? Send in your vote and we’ll work on illustrating a team.

Illustration by Damir K. for Smart Grid Citizen

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