In its April 4 initial public offering (IPO), cloud-based energy software provider Opower raised about $116 million, resulting in a market cap of approximately $1.2 billion. The successful IPO culminates a 7-year march for Opower, which has built a solid reputation with dozens of utilities that are being driven by regulators to encourage residential customers to use electricity more efficiently.
Opower’s technology analyzes utility meter data and then sends residential customers regular reports showing how their energy use compares to their neighbors. Typically, Opower has delivered residential savings in the 2% to 3.5% range. Last year, the company rolled out a behavioral demand response (DR) program now used by Baltimore utility, Baltimore Gas and Electric (BGE). Despite its growth, Opower is still not profitable. In 2013, it generated nearly $89 million in revenue, up from almost $52 million in 2012, but lost a little more than $14 million, greater than its 2012 loss of $12.3 million.
Still Seeking Profits
Other companies in the same energy management arena as Opower have found traction, if not yet profits. EcoFactor offers a software-as-a-service (SaaS) platform that Nevada utility NV Energy uses to help its residential customers become more energy efficient. Using EcoFactor’s cloud-based platform and smart thermostats, NV Energy customers who participate in DR events have been able to reduce their air conditioning use by up to 12% and whole-house electric consumption by 6% for a full year. EcoFactor also has a significant deal with cable operator Comcast, under which its platform powers a service that discovers the heating and cooling patterns of a home and makes automatic adjustments to a smart thermostat based on occupant temperature settings, real-time weather data, and the house’s thermal characteristics.
Similarly, thermostat maker Energate and networking platform provider Silver Spring Networks were chosen by OGE for its home energy management (HEM) strategy. By deploying Energate’s thermostats and utilizing Silver Spring’s DR capabilities, OGE has successfully launched a service that enables participating residential customers to reduce electricity consumption and save an average of $191 during a summer cooling season.
Slow But Steady
Google energized the HEM space in January 2014 when it announced its acquisition of Nest Labs, maker of the popular, though pricey, learning thermostat. The $3.2 billion deal, now complete, signaled that Google was ready to get back into HEM (Google dabbled in energy management with its PowerMeter project but shut it down in September 2011 when it failed to attract enough users). This move helps validate the HEM market.
Despite the slow adoption of HEM programs, these recent market developments portend at least steady market growth in the near- to mid-term, as noted in Navigant Research’s recent report, Home Energy Management. To gain more insight about this trend, you can view the replay of our webinar, Home Energy Management – New Players, Technology Update, and Market Outlook. To see it, click here.