Opower aiming for revolution in energy efficiency

The Gunther Report

Opower aiming for revolution in energy efficiency

One of the great, overlooked stories of recent decades is the vast improvement in the productivity of American agriculture. Farmers grow more crops on less land, lowering the cost of food–and giving all of us more money to spend on other things.

A similar opportunity awaits in energy. If we could heat and cool our homes and run our appliances while using less electricity, the economy would be more productive–and money that’s now being wasted to be better spent.

So says Alex Laskey, the president and founder of OPower, a fast-growing company whose purpose is to help consumers save energy.

“Look at agriculture in this country,” Alex told me when we met at OPower’s offices in Arlington, Va. “From 1950 to 2000, on the average acre that was being cultivated, productivity grew by 291%. At the same time, the average amount of household income that was spent on  food went from 20 to 9 percent. It dropped in half.”

“Energy is a similarly scarce resource,” he went on. “There ought to be a similar effort into improving energy productivity. There’s no reason why we can’t triple energy productivity over the next 50 years.”

That’s an ambitious goal, but one worth pursuing because energy productivity drives competitiveness and job creation. [See my recent blogpost, Electric cars are sexy. Energy efficiency, not so much, for an explanation of why efficiency is the best source of green jobs.] OPower has developed tools to help people save energy and save money, and in the process help utility companies–its real customers–avoid building costly new power-generation facilities.

I’ve been following OPower, which was launched in 2007, for more than two years. [See my 2010 blogpost, OPower, peer pressure and climate change] The company was started by Alex (at right) and Dan Yates, who were friends at Harvard and are now in their mid-30s. Alex came out of politics, working briefly in the Clinton White House and on Al Gore’s presidential campaign, while Dan started a successful educational software company.

“Starting this company was a way to have an impact on the environment,” Alex told me, but what’s surprised him is how much he’s enjoyed being an entrepreneur. Although OPower, which has about 250 employees, is young and small, Alex and Dan have put a lot of thought into how they hire, and how to build a company culture.

Opower is doing well. The company has more than 70 utility companies — including 8 of the 10 largest in the US — as its customers. Through those utilities, the company reaches about 14 million homes, about one in eight of US homes. A privately-held, venture-backed firm, OPower doesn’t disclose its revenues or profits.

Utilities pay OPower to communicate with their customers about their electricity usage, using technology that’s as simple as a letter comparing their usage to that of their neighbors and as complex as a Facebook app inviting people to compete with friends. In some states, the utilities are able to pass the costs of these energy-saving programs, plus a profit, onto their customers in the form of higher electricity rates. This makes sense–since a utility company can raise its rates to build a new power plant, why shouldn’t it be able to raise rates to promote energy savings that avoid the need for capital outlays?

Utilities also figure that OPower can help them get closer to customers and avoid being disintermediated by rivals or potential rivals (Microsoft, Verizon, Comcast, Google) who offer energy management services. “Keeping the lights on is no longer enough,” Alex says. “Utilities need to provide better services to their customers, better information, better control.”

For their part, consumers get insight into their home energy usage costs, as well as advice on how to curb them. They typically respond by reducing their bills by 2.5 to 4% a month, Alex says. That’s not a whole lot, but the savings add up when you’re talking about millions of customers. Recently, OPower said it had saved one terrawatt of energy–enough to power a city of 250,000 people for a year. [By comparison, the entire solar industry in the US produced 1.7 terrawatts of energy last year.]

And Opower is just getting started. As utilities roll out the so-called smart grid, and smart meters, we’re moving closer to a world in which homeowners have real-time data on their electricity usage, insight on how to save power and technology, like remote-controlled thermostats, that make it easier to do so. We’ll still enjoy hot showers and cold beer (as Amory Lovins likes to say) but we’ll use less energy and spend less money for them.

That’s a win for business, consumers and the planet.