Since 2007, tech entrepreneurs Daniel Yates and Alex Laskey have been peddling software that uses data analytics and behavioral science to help utility companies reduce the amount of energy their customers use.
Based in Arlington, Yates and Laskey’s start-up Opower creates personal energy profiles and sends them to customers, showing, for instance, when homeowners use the most natural gas, how they compare with neighbors and how they can use less. Six years after its founding and 400 employees later, it has gained more than 90 energy utility clients, reaching 22 million homes in the United States and the United Kingdom and saving customers more than $350 million to date.
Its system is a work in progress, though, said Ogi Kavazovic, vice president of marketing and strategy. Opower constantly tweaks the software and its marketing materials, testing new iterations on small samples of customers. And utility clients, who pay for Opower on a monthly per-customer basis, are still learning to integrate it with more traditional efficiency incentives, such as rebates and refunds.
Opower relies on large volumes of customer data provided by its utility clients, analyzing it against demographic information, weather and other factors. A moderately wasteful household’s report might say, “you used 41% MORE energy than your efficient neighbors. This costs you about $608 EXTRA per year.” If a large chunk of a household’s energy use can be traced to a clothes dryer, Opower might suggest hang-drying instead to save $20 a year. A very efficient customer’s report might include two smiley faces, while a more wasteful one might not get any.
Over the past few years, the team has noticed that subtle changes in wording can have a significant impact on customer behavior. Comparing their energy use to their more efficient neighbors can cause customers to emulate them, because “the human tendency is ‘I want to be normal; I’m going to change my behavior,’ ” Kavazovic said.
The reverse, though, can also be true. Being told they are being more efficient than their neighbors can lead some to splurge on their energy use, offsetting any savings that might be gained by getting others to be more efficient, he added.
To combat this regression, Opower started using smiling and frowning emoticons to accompany the words, finding that, on average, efficient customers remained efficient if they received an encouraging smiley face or two.
The problem was frowning faces didn’t have a significant impact on wasteful customers — instead, recipients were often offended, leading to a decline in customer satisfaction, Kavazovic said. Opower is no longer issuing frowning faces.
In another instance, Opower found that telling a customer they could “save $200” by becoming more efficient, instead of telling them that not being efficient “costs $200” extra on their bills, is a less-effective motivator, Kavazovic said.
For many clients, Opower is one of several simultaneous energy efficiency programs run each year. Pepco has been using it for about a year, funded by the Maryland Energy Administration, in addition to home energy assessment programs and appliance rebates. Between January and the end of June, Pepco has saved 2.427 megawatts of electricity in total through such efforts, enough to power more than 2,000 homes for an hour, according to the company.
Val Jensen, head of customer operations at Chicago utilities company ComEd, has been using Opower for about two years and credits it for about 2 percent of its annual energy savings. ComEd is required by Illinois state law to reduce customer consumption by about 2 percent and spends about $160 million each year on efficiency programs, including Opower.
Managing customer response to Opower reports can be challenging, Jensen said. “Often, if customers aren’t comparing well relative to their neighbors, they take minor offense, saying, ‘You’re not doing repairs,’ ” accusing the utility company of inefficiency instead of correcting their own behavior. He noted that very few ask to be taken off the service.
Reducing customer consumption becomes more difficult each year, Jensen added, especially because some state laws raise annual efficiency goals each year. “We’re all struggling with what’s that next technology, whether it’s a hard, bricks-and-mortar technology or whether it’s” software. Data-driven solutions such as Opower will likely remain just one piece of ComEd’s annual efficiency strategy, he said.