Venture Capitalists Look for Investments in Energy Efficiency—but Where?

Residential market for Smart Grid services could be challenging, however.

Mar. 10, 2010 — by .(JavaScript must be enabled to view this email address)

Venture capitalists at the GoingGreen East conference in Boston this week are high on energy efficiency companies, as also reported in a recent survey. But that doesn’t necessarily mean a ton of money will flow into companies producing energy efficient technologies in the home.

“There are massive opportunities for technologies to drive efficiency,” said Joe Dews, director and head of CleanTech Banking at ThinkEquity.

“There are tons of low-hanging fruit,” concurred Samuel Newell, principal of the Brattle Group, financial and economic consultancy.

Great news for green home technologies? Er … not so fast, say some other speakers at the conference. The real low-hanging fruit is in the commercial and industrial sectors.

Residences in the United States use about 40 percent of our electricity, while the commercial and industrial sectors collectively uses 60 percent, reminded Tim Healy, CEO, EnerNOC, in a panel discussion on the smart grid.

The residential market is going to be more difficult to tap for energy efficiency, especially from the utility side, because of legacy equipment like old meters and other factors such as customers living in outlying areas that are hard to reach, said Stephen Doroff, director of Smart Grid Initiatives at the large financial advisor KPMG. “And how do we get residential customers to look at the data and know what to do with that?”

“We’re expecting the [smart meter] story is about sending price signals, and we expect people’s behavior to change,” says Healy. “Yet I think we have to temper our expectations.”

“I don’t think residential customers will want to interact [with smart grid initiatives] on a regular basis,” adds Doroff. “We’re going to have to be smart in how we set it up and work with them on it.”

We agree on that last point. Setting up an energy monitoring system in the home should not be as simple as tapping into the electrical panel or receiving a radio frequency signal from an electric meter. The tools we provide homeowners and the way we show them to interact with the systems can help them save more energy and save more money.

Jeff Ross, in Business Development with smart grid technology developer GridPoint, cited a partnership between his company and Xcel Energy, in which some Xcel customers are provided with a home energy management tool that allows them to see their energy consumption, analytics on what that means, and suggestions on how they can save energy in their homes.

Other Obstacles?

Ross sees “ratepayer backlash” taking place in some areas as rates rise, before residential customers even see smart grid initiatives arrive. This can be perceived as an obstacle to selling energy efficiency technologies in the home, but it’s really an opportunity. Ross agreed that the rise in prices, over time, will inspire homeowners to be more energy efficient.

Healy cited a study done by the Shelton Group, in which consumers said they would spend an additional $129 a month on energy before they take measures to improve their efficiencies. It’s staggering that even in this economy, people will willingly waste $1,500 a year or $4 a day. But as the Shelton’s group Suzanne Shelton says in her blog:

They didn’t come right out and tell us they were willing to waste $4/day – that’s just how the math works out. We think most consumers would likely feel pretty financially irresponsible/stupid if informed of the numbers above – after all, $1,500 is nothing to sneeze at, even if you make $100,000 a year.

In other words, tell them that they’re wasting $4 a day or $1,500 a year, and you’ll likely see consumers want to eliminate that waste. It’s all in the way the “waste” is phrased.

“I think people will [become more energy conscious],” Ross said. “It will take some time.”

And remember what you are selling, if you’re in the consumer electronics space. In an in-depth interview with GreenTech Advocates, Shelton calls consumer electronics like energy-saving LED TVs and control systems “the sparkly green” stuff that is much sexier than insulation, which people generally don’t want to deal with.

“Selling a big-screen TV that is super energy-efficient—well there’s a home run, because I want a big screen TV anyway because it’s sexy,” says Shelton in our interview. “You satisfy my desire for aesthetics and sexiness and give me rational reason to justify my very emotional purchase.”

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