OPower, peer pressure and climate change

We can solve the climate crisis with the right tools–solar panels, wind turbines, electric car batteries, No. 10 envelopes and smiley faces.

Envelopes? Smiley faces?

Yep. A startup called OPower has learned that by mailing utility customers personalized reports on their energy consumption–and then by comparing them with their neighbors–people can be persuaded to save energy, reduce emissions and help fight global warming.

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Energy hogs learn that they are most wasteful than the Joneses. Energy misers get smiley faces in the mail, and they want more.

Turns out we never escaped high school–we’re always influenced by what other people are doing.

“If I tell you that you’ve spent $1200 on heating this year, you don’t know what that means,” says Dan Yates, the company’s co-founder and CEO. “But if we tell you that you spent $500 more than your neighbor, that tells you something.”

I recently met Dan Yates at OPower’s offices in Arlington, Va., just outside of Washington. Yates is just 32, but OPower is his second startup. He sold his first, an educational software firm called Edusoft, to Houghton Mifflin for $20 million in 2004. He made enough money to spend a year traveling with his then-girlfriend, now wife, from the Artic Circle in Alaska to the southernmost tip of South Africa.

That trip turned him into an environmentalist, he says. Dan then started OPower with Alex Laskey, a friend from Harvard, who had worked in advertising and politics. Dr. Robert Cialdini, a renowned social psychologist who has spent his life studying ways to shape human behavior, is an investor in OPower and the company’s chief scientist, albeit not on a full-time basis. The company’s biggest investor is New Enterprise Associates, a venture capital firm.

How’s the company doing? So far, so good. Customers who get the peer-to-peer companies cut their energy consumption by 1.2% to 2.8%, on average, studies have found.

“Peer comparison reports can create significant net costs and carbon savings, benefiting both individual households and the environment,” said a report by  Yale Law professor Ian Ayres and two students.

A couple of percentage points may not sound like much but it’s enough to interest utility companies, who are OPower’s customers. Because regulators in about 20 states reward utilities for helping their customers become more efficient, utility companies can make money by using OPower. The company’s reports are currently being used by 24 utilities that distribute them to between 1 and 2 million customers.

“If we could get across the country, we could have the emissions impact of the entire wind and solar industry,” said Yates.

Efficiency, it’s often said, is the cheapest form of renewable power. According to Michael Sachse, OPower’s senior director of regulatory affairs and general counsel (and another Harvard man),  the company spends about 3 cents to save a kilowatt hour of electricity. Building a new coal plant to generate that same kilowatt would cost 5-6 cents, wind would cost 10-12 cents and solar can be 25 to 30 cents.

As Cialdini told David Roberts of Grist, social psychology is

the least capital-intensive way of making change…Technology costs a lot. Incentive programs cost a lot (and as soon as they are discontinued, the behavior flops back). Legislation, legal constraints, taxes, penalties of one sort or another–those are costly in terms of social capital, which organizations and governments are loathe to spend these days.

What you have with social psychology is a set of procedures that are essentially costless to enact, but product levels of change that are comparable to those other mechanisms.

While there’s nothing high-tech about sending energy usage reports to customers by mail, OPower is actually a sophisticated operation. It uses  advanced software, customer data analytics, direct-mail techniques as well as the insights of behavioral economics to persuade people to change. Executives have been hired from Amazon (whose personalized software is key to its success) and Capital One (which built a huge credit-card business through direct mail). “We’re constantly experimenting,” Dan Yates said.

Eventually, by combining OPower’s data analysis with smart grid technology, utilities will be able to help people decide whether to conserve energy and save money by replacing an inefficient refrigerator, unplugging a big-screen TV or turning the air conditioning down at night. If we understood the costs of our energy consumption habits as well as we understand the costs of buying food at the supermarket, we’d consume differently. You can listen to a podcast of my interview with Dan Yates at Greenbiz.com.

Comments

  1. ron enomoto says:

    how do I get opower or have my utility participate? I gently perused some information on opwer, but did not see any offers, cost, etc.

    thanks, ron

  2. Although inducing competition is bad, having a healthy competition is very good as this help people in being aware on the amount of energy that they consume. Opower will really help in saving our planet from the drastic climate changes that is happening right now. I just hope that many people will be open minded and support Opower in making our world a better place to live in.

  3. I would like to announce an incredible new science and technology that can revolutionize the world by supplying safe, cheap, and abundant energy for anything that uses energy: homes, factories, motor-vehicles, boats, planes, space ships, etc. It is well established fact that mass can be converted to energy. The Hot Physics has tried to duplicate the conditions of the Sun (heat and pressure) to fuse elements and release large amounts of energy. They have failed to produce any energy after sixty years of effort. However, electrochemists have found a way to strip electrons from Hydrogen in a proton and produce a nutron – thus reducing the energy required to fuse Ni+H and release a large amount of heat energy! These LENR Reactors are being manufactured today and will be available for purchase in approximately 6 – 8 months. I am busy telling the world about this wonderful new discovery, please spread the news. jdh
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Trackbacks

  1. […] education to reward consumers for greener behavior. Recyclebank is one. OPower is another. (See OPower, peer pressure and climate change.) Retailers like Walmart and Whole Foods are looking for ways nudge consumers towards better […]

  2. […] education to reward consumers for greener behavior. Recyclebank is one. OPower is another. (See OPower, peer pressure and climate change.) Retailers like Walmart and Whole Foods are looking for ways nudge consumers towards better […]

  3. […] education to reward consumers for greener behavior. Recyclebank is one. OPower is another. (See OPower, peer pressure and climate change.) Retailers like Walmart and Whole Foods are looking for ways nudge consumers towards better […]

  4. […] WatersSmart software aims to give people, first, more information about their water use and then, second, advice on how to use water more efficiently. Using billing information from water utilities, along with real estate, climate and geographic data, WaterSmart will compare a household’s water use with the neighbors in a friendly, easy-to-use format, on line and in print. It’s similar in concept to a fast-growing startup called OPower which promotes energy conservation. [See my 2010 blogpost, Opower, peer presssure and climate change.) […]

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