Looks like hard-core behavioral analysis and the good ol’ U.S. mail has won one of the bigger cleantech cash prizes of the year. Opower has landed a $50 million investment from Kleiner Perkins, Accel Partners and New Energy Associates, more than tripling the $14 million it raised from NEA in late 2008 as it scales up to quadruple its customer base and launch some new products in 2011.
Arlington, Va.-based Opower crunches property, weather, demographic and utility data to figure out how individual homes can save energy, then delivers that information via mailed reports, text messages and Web interfaces. So far it has about 2 million homes involved, with some 48 utility customers including AEP, Sacramento Municipal Utility District, Puget Sound Energy and Connexus Energy.
Unlike most of the VC-funded home energy management startups out there, Opower doesn’t rely on a piece of hardware like a visual display or plug-in device to deliver its average 2 percent to 3 percent energy reductions.
“We have no hardware. It’s all analytics and messaging,” CEO Daniel Yates said in an interview Monday. That is, Opower’s strength lies in its data analysis and its marketing, built on some of the behavioral analysis work of co-founder Dr. Robert Cialdini, a prominent energy efficiency booster who has made Grist magazine’s “40 people who are redefining green” list.
Opower has also focused on an opt-out model — utility customers automatically get its mailed reports. Sure, some folks may choose to throw them out with the rest of the paper that isn’t part of the monthly power bill. Still, Opower gets to start with a customer penetration rate in the high-90 percent range, as compared to the 10 percent or so typical of early deployments of opt-in web tools like Microsoft’s Hohm or Google’s PowerMeter that require active participation.
“Utilities don’t have to ask for permission for an address or email to send you something,” Yates said. “You’re already their customer.” Utilities are also under a mandate to treat all their customers fairly, which means they’re bound by law to connect their low-income or elderly homeowners with the same energy-saving opportunities provided to those who can afford the latest energy-saving technology.
While Opower’s biggest competition seems like it would come from the kind of utility energy-awareness mail we’re used to not reading at home, a host of home energy startups are also trying different models to engage homeowners. EMeter has yielded verifiable energy savings with its home energy management web platform in Washington, D.C.’s PowerCents program. Household-wide power monitoring, smart appliances and thermostats and other home energy systems could automate energy savings, surpassing the customer-driven gains Opower has to offer.
Yates said that OPOWER intended to double its current 2-3 percent per-capita impact on energy savings over the coming year, though he wouldn’t specify whether it would come through better data analysis, behavioral psychology or market research, or a combination of the three.
Opower was also named one of 15 startups to land an Ecomagination investment from General Electric and its VC partners last month, and Yates said the startup was working with GE, though he wouldn’t say just how. Nor would he comment on whether Opower may soon add California utility Pacific Gas & Electric to its list of customers.