Behavioral efficiency startup Opower, which Utility Dive named as one of the eight disruptive companies that utilities should watch in 2014, has confidentially filed for an initial public offering (IPO).
But how did Opower, whose mission is "to motivate everyone on earth to save energy," ascend to the top of the energy efficiency space? What's next for the company? And perhaps more importantly, what does it all mean for the rest of the clean energy sector?
Utility Dive takes a closer look.
Opower: From startup to IPO
After selling his first company, an exam assessment startup called Edusoft, to Houghton Mifflin for $20 million, Dan Yates and his wife drove from Alaska to Tierra del Fuego to experience the lush, untouched vegetation and wildlife. Instead, he witnessed "environmental degradation,” Yates told Utility Dive in a recent interview. He came back from his trip "convinced that it's now or never on the environment."
Dan Yates and Alex Laskey founded the company in 2007. Opower set out with a simple goal -- “What if we could make a better utility bill?” -- but its mission has since become more ambitious.
Although common sense may indicate otherwise, Opower discovered early on that the best way to motivate consumers to save energy was not financial savings or doing environmental good -- it was comparing their consumption with their neighbors.
Opower's platform marries behavioral science and energy efficiency, engaging utility customers with personalized energy reports that show them how much they’re using and provide feedback on how to cut back.
The company raised $65 million from venture capitalists to take that idea and run with it. Opower's IPO represents the culmination of that investment.
What does the future hold for Opower?
Today, Opower is widely viewed as one of the top dogs in the residential energy efficiency space.
The stats appear to back that up. Opower currently counts eight of the 10 biggest U.S. electric utilities as clients. Its offerings reach over 22 million utility customers worldwide. They have saved 3.7 billion kWh overall and lowered carbon emissions by 5.7 billion pounds. Although Opower's financials are being kept under wraps, the company's revenue has grown 10,000% since 2009, according to Deloitte.
Opower plans to use the IPO to pay back investors and raise funds for further expansion. There has already been action on that front as Opower has recently taken behavioral demand response to scale with Baltimore Gas & Electric, expanded its efficiency platform to small-to-medium businesses (a notoriously hard to reach segment), and is working on a smart thermostat with Honeywell. In all, Opower believes there is a $2.2 billion opportunity for behavioral efficiency in the U.S. alone.
"With automation, you know what you're going to get. But the challenge is those models typically only get about 20% of the addressable market within a utility's service territory," Bud Vos, COO of Opower competitor Simple Energy, recently told Utility Dive. "The behavior-based programs go after the other 80%."
As the grid transitions from a centralized, one-way system to a decentralized, two-way system, home energy management will be at the critical nexus of energy and the customer. These types of services could disintermediate utilities and their customers, though many utilities will look to partner with providers -- another massive opportunity for companies like Opower.
A source told Greentech Media (GTM) that Opower's "internal management is constantly worried about competition and is sensitive to any new market entrants that gain traction." Google's recent acquisition of Nest "presumably" had that effect, GTM's Stephen Lacey noted.
Despite the increased competition, the future looks bright for Opower.
What about the rest of the clean energy sector?
Opower’s IPO is yet another sign that the clean energy space is starting to mature.
"Amidst a lot of negativity around the sector, we're still seeing companies growing and succeeding," said Rob Day, a partner at Black Coral Capital, according to GTM. "We're going to see more of these -- it's a taste of what's to come."
Stuart Bernstein, global head of Goldman Sachs' Clean Technology and Renewables Group, expects between "half a dozen to a dozen" cleantech companies to IPO this year, noting that some have already registered IPOs confidentially as Opower just did, according to the Wall Street Journal.
Energy efficiency and demand response have a very promising future. They are increasingly becoming the first fuel as utilities and regulators look for new supply resources -- or to mitigate the need for them.
As the world shifts to a clean and sustainable energy economy, companies are finding new and innovative ways to accelerate this transition. Opower's IPO is further proof there is a big market for these services, and it's going to grow.