This week I will be looking at a company called Opower, which is an industry leader in the energy information software industry. Opower, a privately-held company, partners with electric utilities to provide consumers with detailed monthly data on their electricity usage.
The Arlington, Virginia based company develops detailed analytics of individual consumer energy usage patterns and presents the information in easy to read charts and graphs showing, among other things, energy used for heating or cooling, peak usage data, and comparison benchmarking to neighbors. Opower provides value by personalizing energy saving suggestions for each consumer. Opower’s analytic engine takes in a variety of inputs such as house size, weather, peer usage statistics, usage analytics and rate analysis and what-if scenarios to create a personalized savings plan. The monthly online home energy reports allows users to compare their use to neighbors’, see which appliances are using the most energy, compare the energy plans from their utility based on their usage, and show overall usage patterns. This information allows consumers to make adjustments to their energy usage which, Opower reports, saves on average 2-4% off their utility bills. Opower is currently available to over 10 million utility customers.
To date Opower has partnered with over 70 utilities including such big names as PG&E and Baltimore Constellation Gas and Electric. In February of this year they reported saving a terawatt of power for their customers which roughly equates to the energy required to power a city of 200,000 people for one year and represents about $120 million in savings. To help put this in better perspective, this amounts to more than half the energy that was generated by the U.S. solar industry in 2011.
As a privately-held company, Opower’s financial information is not readily available. In addition to its Virginia location, Opower has offices in San Francisco and London. The list of utilities that partnered with Opower continues to grow and Opower has just recently signed on their first international customer. Based on this anecdotal information, the company seems to be prospering.
One question that comes to mind is that since Opower charges the utilities not the consumer for the service, why do the utilities see this as worthwhile expense? The answer to this question is twofold. According to a Washington Post interview with Alex Laskey, President of Opower, consumers’ expectations for more detailed and useful information from service providers offers part of the answer. Using the credit card industry as an example, card companies today provide a detailed breakdown by category of charges as well as easy access to challenge a payment and a user-friendly website that allows you to track rewards, pay bills, view transactions, post travel alerts, and even chat with a customer service rep. People expect that level of service and ease of use from utilities as they are just another form of service providers. The second reason is that utilities can save money by reducing peak load times. This is due to the fact that to satisfy peak load demands, utilities often have to bring online more costly energy sources causing their cost to rise thus it is the utilities interest to provide this information to the consumer. The reports show peak load times and thus the utilities can offer incentives for consumers to shift their energy usage patterns thus saving both the utilities and consumer money.
Another concern is why don’t the utilities simply provide this service themselves, bypassing Opower. I think the answer to that question resides in Opower’s talent and expertise, software, and benchmarking know-how to quickly and relatively cheaply create such a system for a utility. For individual utilities to take on this task would require hiring staff and develop analytical software. In other words it’s cheaper to outsource to Opower.
Opower’s ability to provide specific energy use recommendations based on detailed analysis of each consumer’s individual situation and comparison to their neighbors makes it unique. It seems to be working and catching on. I live in Arlington, Virginia and can walk to Opower headquarters but, as my local power company has not yet partnered with Opower, I am unable to use their service. Hopefully that will change soon.
Disclaimer: This article is intended to be informative and should not be construed as personalized investment personalized advice. You are responsible for your own investment decisions.