There’s no shortage of apps and smart thermostats out there to help you figure out your energy use and cut wasteful consumption. But what if you can do that and raise money for a good cause? That’s part of the sales pitch from a San Francisco-based startup, OhmConnect,
which signs up Californians who agree to reduce their electricity use
periodically and sells the unused energy to the operator of the state’s
electric grid, the California Independent System Operator.
OhmConnect’s customers would get an email or text that asks them to
cut back energy use by, say, turning down the air conditioning or
lights, for the next hour. The timing depends on whether the price paid
by the grid operator is attractive enough, said Curtis Tongue, the
startup’s co-founder and chief marketing officer. Prices set by the grid
operator vary and depend on how much energy it needs to balance supply
and demand.
The startup keeps 20% of the revenue and gives the remaining 80% to its customers via PayPal . OhmConnect launched in February 2014, first in the territory of the Pacific Gas and Electric . It’s now signing up customers of the state’s two other big electricity utilities as well, Southern California Edison and San Diego Gas & Electric. The startup’s customers can earn $50 to $150 per year, Tongue said.
“Our product is a pretty novel concept for the average consumer,”
Tongue said. “Finding organizations that are interested in offering our
service to their supporters is a strong path for growth.”
Tongue and co-founder Matt Duesterberg, who is the company’s CEO and
once worked as energy trader in the California’s wholesale energy
market, met and came up with the idea for OhmConnect during a hackathon
in Oakland, across the bay from San Francisco, in November 2013. They
later won first place for its “killer idea” app at an energy data competition by the U.S. Department of Energy.
OhmConnect pitches its service as a good way for consumers to
conserve energy and make some money. The two founders realized that they
could market their service as a fundraising mechanism by accident. They
noticed that a group of their customers in Menlo Park were directing
their earnings to the same PayPal account and at first thought some
people were scamming the company by duplicating accounts. It turned out
that they were funneling money to the same account set up for their
elementary school.
The idea of dialing back energy use to make money isn’t new. The concept is called “demand response”
and is usually a service offered by utilities as a way to manage demand
and supply. You can sign up and agree to allow your utility to lower
your home or business’s energy use for several hours during a number of
times each year, and in exchange you get credits on your bills. Those
events usually happen during hours of peak demand, such as a hot summer
day. The utility wouldn’t need to pay high prices for extra power to
meet the peak demand if it could get some of its customers to lower
their use.
What’s interesting about OhmConnect’s business model is that it sells
the aggregated energy reduction into the wholesale market. The demand
response program run by the California Independent System Operator (ISO)
is small because it’s pretty new, and rules for are still be drafted to
make it more accessible, said Steven Greenlee, a spokesman for the ISO.
Only seven companies have collectively registered 37 megawatts for the
program, which started to see the companies bidding their aggregated
energy into the wholesale market in 2014.
Currently, the demand response programs run by the three big
utilities are mostly for managing their own supply and demand, not for
selling the bundled energy savings into the wholesale market. To sell into the wholesale market for demand response, the minimum
bid is 100 kilowatts, though ISO pays for the hours of energy delivered.
Prices usually start around $30 per megawatt-hour. OhmConnect, the
price needs to go above $250 per megawatt-hour to worth its effort,
Tongue said.
The startup’s customers participate in the energy reduction sale in
real time, so some of them could miss out on cutting back their
electricity use if they didn’t see the text or email from OhmConnect in
time.
If the customers have a wireless thermostat or other devices that
allow them to remotely control the electricity use of their heating,
cooling or other appliances, then they could give OhmConnect the log-in
and password to automatically reduce energy use during that particular
hour. Otherwise the customers will have to do it manually. The customers
can also opt out any time.
So far, OhmConnect calls on its customers to cut energy use only once
or twice a week. It could do more, but it’s concerned about
overwhelming them with energy reduction requests. The company has thousands of customers, though Tongue declined to
provide a firm number. Since the company is aggregating residential
energy reduction for only an hour at a time, it needs to line up a lot
of customers for its business to generate good revenues.
http://www.forbes.com/sites/uciliawang/2015/03/27/an-energy-app-startups-unusual-bid-to-make-money-from-californias-wholesale-electricity-market/3/?ss=energy
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