Some pundits see energy efficiency as a killer application for cleantech. With the recent $50 million equity raises for OPOWER (see Company Insight Report, subscription required) and C3, it would be hard to disagree. But the venture capitalist in me says that the common form of energy efficiency isn’t an application; it’s a feature of a product. Whether it’s a Prius or a Macbook, consumers buy a product for its applications (Prius: transportation, Macbook: laptop computing), with efficiency as a desired feature but a feature nonetheless.
Unfortunately for grid operators and purveyors of McKinsey charts, energy efficiency for industrial, commercial and residential premises isn’t likely to buck the trend. People buy a thermostat or HVAC system for its heating and cooling applications, not for its efficiency accolades. Particularly in the residential market, consumers are unlikely to spend time looking at an energy management dashboard when they have Facebook, baseball season and Glee as distractions. This is where California-based EcoFactor comes in. EcoFactor claims up to 30 percent of a residential home’s HVAC bill can be reduced without the consumer changing behavior or looking at a digital dashboard or billing insert.
How does it work? EcoFactor is a cloud-based service that works with “off-the-shelf” two-way programmable thermostats. The company constantly pings the thermostat for the ambient temperature inside the premise while simultaneously tracking the external temperature (by zip code). Over time, EcoFactor’s software measures the different deltas between the two temperatures, creating a dynamic thermal signature of the home. With an established dynamic thermal signature, EcoFactor can estimate the optimal energy required to heat or cool a home. For example, EcoFactor can pre-cool a home with a Time-of-Use pricing structure to avoid paying the higher tariff because EcoFactor can model how the external temperature later in the afternoon will impact the home. EcoFactor can also help detect degradations in the home’s HVAC system, saving operational costs from faulty equipment. Because EcoFactor uses the homeowner’s existing Internet connection, smart meter integration is helpful, but not required. As EcoFactor automatically adjusts the thermostat based upon internal and external conditions, active engagement from the homeowner is welcome (the system learns from and adapts to user inputs), but isn’t required, either. At any time, a home owner can override EcoFactor’s settings. Ultimately, its value proposition is simple: It maintains comfort but at reduced energy use and cost without asking customers to actively manage their thermostat.
The company is currently working through a variety of channel partners including broadband service providers and HVAC service providers. Both broadband and HVAC service partners see EcoFactor as a differentiator in their core product offering. In addition, HVAC service providers can utilize EcoFactor’s diagnostics as lead generation. Right now, the homeowner procures a two-way thermostat through their channel partners if they do not have one already. While this is a small hurdle, the company predicts that the channel partners will have different pricing schemes to encourage this hardware adoption. EcoFactor already has early customers in Texas with Oncor’s Take a Load Off Texas program. The company estimates by the end of 2010, they will have signed up “tens of thousands” of homes. EcoFactor’s service does not require a utility partner, although there are clear synergies. The company’s load shedding capabilities and its ability to document delivered energy savings should appeal to utilities, demand response aggregators and regulators.
Is a dynamic automated energy management service like EcoFactor a feature or an application? We may be asking the wrong question. Rather, the question we should ask: What is the value of the service? It’s clear that the secret sauce to energy efficiency is maximum output for minimum user engagement. This is why the value proposition of a service like EcoFactor has real traction. In the commercial side, companies like Scientific Conservation (see Company Insight Report, subscription required), BuildingIQ, Serious Energy, Cimetrics, etc. (along with some of the large building management system vendors) are offering a similar value proposition, which they call autonomous continuous commissioning.
EcoFactor is currently raising a Series B round to finance growth. Existing investors include RockPort Capital Partners and Claremont Creek Ventures.
David Cheng is a senior analyst at Cleantech Group.
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