C3, the energy management software firm, announced on May 1 that it is acquiring Efficiency 2.0, a software company whose software-as-a-service (SaaS) product focuses on improving the efficiency of residential and small business customers.  This move rounds out C3’s portfolio of utility energy management services, which has until now focused on large commercial and industrial customers.

If you’re familiar with OPOWER, then you’ve seen the role that some energy management software firms are looking to play in helping utilities meet their demand-side management (DSM) goals for energy efficiency.  Efficiency 2.0 aims to aggregate residential and small commercial sites – some of the hardest-to-reach customers in energy efficiency programs – and document the results in a way that helps utilities comply with efficiency mandates and qualify for incentives from their state public utility commissions.

C3 has been very busy since it formally opened its doors to the public last August, as I covered on our blog, with both its utility and corporate customers.  The firm is already working with Pacific Gas & Electric, for whom it provides a white-labeled version of its software to help PG&E’s account managers identify and implement energy conservation measures with PG&E’s largest commercial and industrial customers.  The acquisition of Efficiency 2.0 rounds out C3’s offering for utilities by helping it address a full range of customer types, ranging from individual homeowners to facilities with peak loads in the hundreds of kilowatts.  Through the acquisition, C3 and Efficiency 2.0 now boast a combined customer base of fourteen utilities, in addition to many other corporate customers.

Many firms in the energy management world have been eyeing utilities as potential customers.  For example, Pulse Energy, the Vancouver-based software firm, has retooled its entire strategy to focus on utility customers rather than building owners.  The business model for energy management is considerably different for utilities, as utilities benefit less from energy cost reductions (as building owners do) and more from increased visibility into and control over customers’ energy consumption as well as from compliance with energy efficiency mandates.  Through this acquisition, C3 is one of the few (if not the only) vendors that can address a utility’s entire customer base using a single platform.

The news of yet another acquisition in the energy management space also takes the era of the energy management startup, which has been gestating over the last few years, one step closer to its natural conclusion, when virtually all startups will either be acquired or close their doors.  C3’s executives, many of whom were previously in executive roles at Siebel Systems, the software firm that Oracle acquired in 2005 for $5.8 billion, know that as well as anyone.  Demand for energy management solutions for utilities will continue to mature over the next few years, and, as it does, companies like C3 will be well-positioned to help utilities improve their customers’ energy efficiency.