There’s been lots of dissecting of the slide in venture capital investments in the smart grid sector recently. According to the “Q2 2012 Smart Grid Funding and M&A” report from Mercom Capital Group, worldwide smart grid investments are weak, with just nine funding deals at $66 million. The Mercom study notes, “Funding levels continue to be extremely weak in the smart grid sector, a reflection of shifting business models as the industry continues to struggle to understand customers [sic] needs and address customer misconceptions along with security concerns among other issues.” The average deal size has diminished as well, from $25.4 million in Q2 2010 to $7.3 million in Q2 2012.
However, a closer look at the investments makes me wonder if someone forgot to tell the venture capitalists that it’s too hard to figure out these customers. Investments in consumer energy management companies Tendril, Navetas, and GreenPocket totaled $23.7 million – almost 36% of the overall investment dollars.
A single point of commonality exists in these companies’ products: the application of behavioral science. Behavioral science attempts to understand an organism’s (in this case, a human’s) activities and interactions in their natural environment in order to understand their decision processes. If the natural environment is the home, behavioral science examines the behaviors related to the human use of energy along with the activities that lead to its usage, and draws conclusions about how to help the energy consumer change their energy use.
Inducing consumers to adopt new behavior is never easy, especially when they have anxieties and worries about things like privacy and security. Many companies are trying, and some seem to be gaining traction. For the sake of this discussion, let’s consider these recent investments. What makes investors think that Tendril, Navetas, and GreenPocket have something worthy of millions of dollars?
The Power of Community
Tendril, based in the United States, picked up an $11.3 million investment in Q2. The company has developed a suite of consumer engagement programs based on its Connect platform that emphasizes an interactive web portal connected to the smart meter and in-home devices. The platform provides personalized consumer information and recommendations, goal-setting incentives, and social media that include gaming and collaboration with peers. Customers can take actions, such as choosing savings goals, and receive feedback along with personalized recommendations, expert advice, and social recognition. Using the power of the social community, the system’s recommendations can be validated and discussed through a dynamic forum.
Navetas, headquartered in the United Kingdom, took on an $8 million strategic investment from Sensus. Navetas’ product allows consumers to monitor their energy habits through a variety of devices and delivery mechanisms. The goal is to help consumers understand how their home environment uses energy and how their behavior affects this environment, by providing in-context, highly granular information about energy use in the home. The technology monitors in-home appliance activity over a period of time, and automatically disaggregates the energy consumption by the appliances in real-time. Disaggregation is especially powerful, as it enables the consumer to avoid the tedious, inconvenient (and sometimes inaccurate) process of turning their appliances on and off to identify the usage profiles of their energy loads. Navetas leverages its algorithms to fully integrate the energy management experience into the consumer’s everyday activities.
GreenPocket, based in Cologne, Germany, gained $4.4 million from a Series B funding round. GreenPocket has developed what it calls the Energy Expert Engine, which interprets and visualizes smart meter data for both residential and business consumers. Inputs into the analytical engine include weather data, purchasing information, consumption data, and household size. Energy consumers can control their chosen actuators or sensors through tablets, smartphones or a web portal. Part of the solution is an application that provides social media linkages, including “social metering” contests that are designed to motivate users to reduce their energy consumption. Instead of just providing consumption feedback, GreenPocket incorporates interpreted information that is designed to engage the consumer at a personalized level.
Without remarking on the successful likelihood of any of these ventures, I do believe that companies that care about the quality of the interactions between consumers and their understanding of energy use can deliver products that will truly engage consumers in making sustainable choices about their energy use. Energy management products that help people align their goals, beliefs, values, ideas, and desires will drive action. Behavioral science may be the bridge that closes the gap between customer intention and sustainable customer action.
Tags: Building Systems, Demand Side Management, Digital Utility Strategies, Energy Efficiency, Energy Management, Home Energy Management, Smart Grid Practice
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