Not a day goes by without news of a new start-up or one that has been flying under the radar, writes energy expert and author Fereidoon Sioshansi. In this article, he takes a closer look at three of them, which seem to have promising business models: Open Utility, OhmConnect and Off Grid Electric. Courtesy EEnergy Informer. 

Energy is a hot topic with lots of venture capital and other sorts of funding going into promising – and some not so promising – ventures to generate, store, trade or otherwise better optimize and manage its use. With so many to choose from, it is not easy to pick a winner, and in many cases, it is hard to know who the big winners may be. Three interesting businesses are briefly described below, not in any particular order or for any particular reason.

Open Utility

The first is Open Utility, a London-based start-up that has been around and growing. Its main claim to fame, as best as this editor can tell, is to bring a new level of price and cost transparency to the distribution network as well as the opportunity for generators, distribution companies and customers to trace how the power flows and when and where the network may be congested.

Regulators are increasingly interested to design more granular tariffs that accurately reflect the costs imposed on the network by different customers across the network and at different times

Such information is critical in deciding, for example, when and where electric vehicles may be charged if you are in EV charging business. Similarly, distribution companies are keen to know who is consuming or generating electricity on the network and when. Regulators are increasingly interested to design more granular tariffs that accurately reflect the costs imposed on the network by different customers across the network and at different times.

In April 2018, Open Utility announced that it had formed a partnership with Scottish and Southern Electricity Networks (SSEN) to develop a smart grid platform that would offer flexibility services. SSEN maintains the network supplying over 3.7 million homes and businesses in central and southern England and Scotland.

As distributed generation (DG), electric vehicles (EVs), demand response (DR) and energy storage begin to be introduced, giving customers access to new products and services from new providers, the need for a smarter, more flexible and more resilient distribution network rises. Distribution Network Operators (DNOs), Distribution System Operators (DSOs) or distribution companies – the acronyms vary from one place to another but the fundamentals are the same – are increasingly looking for better ways to manage the flows across increasingly congested networks

And as new types of services, such as peer-to-peer (P2P) trading and flexibility services evolve, there will be increased need for managing distributed generation and storage with variable demand at a local level. This reduces the need for upgrading the network potentially saving and/or deferring massive investments in so-called grid modernization projects.

The partnership with SSEN will trial Open Utility’s Piclo platform, allowing the parties to procure flexible capacity from distributed assets on the network such as batteries and from DR aggregators to meet the local needs of customers.

“Unlike other industries like short-term rentals and taxi services, the energy sector cannot be transformed by an online marketplace acting alone, but through meaningful partnerships with incumbents”

Piclo’s platform – like all platforms – offers a matchmaking service allowing localized trading of energy, capacity and other services among customers, generators and providers of flexibility services. Just as Airbnb’s platform brings vacationers and homeowners with spare rooms together, Piclo allows participants to register their availability and preferences, and matches them with opportunities and services offered by the DSOs. Platforms will become increasingly critical.

In principle, the platform will unlock new revenue streams for homes, businesses and communities, whilst supporting the growth of DERs on an increasingly decentralized network.

Describing its main business function, James Johnston, CEO of Open Utility, said: “Unlike other industries like short-term rentals and taxi services, the energy sector cannot be transformed by an online marketplace acting alone, but through meaningful partnerships with incumbents working towards a common goal.”

OhmConnect is in the business of encouraging and aggregating the energy saving decisions of thousands of customers, mostly residential, since individual savings are too small to matter or bother with

In this context, platforms such as Piclo will increasingly be needed to manage the evolving needs of the distribution networks of the future who will be managing two-way flows and complicated transactions.

OhmConnect

Another company that has caught this editor’s attention is OhmConnect, whose motto is “Save energy. Get paid.” The company’s business plan is that simple. Really.

Founded 4 years ago, OhmConnect is in the business of encouraging and aggregating the energy saving decisions of thousands of customers, mostly residential, since individual savings are too small to matter or bother with. The San Francisco start-up claims to have signed up 290,000 customers for its hour-long demand response or DR events. Distribution utilities pay for its services – which is aggregating the response of its entire community of customers at times of high prices.

In describing the company’s business model, Curtis Tongue, cofounder of the startup, explains that utilities have, for whatever reason, not managed to do a good job of doing what it does, except for large commercial and industrial (C&I) customers. Tongue says California’s 3 large investor owned utilities (IOUs) Pacific Gas and Electric Company (PG&E), Southern California Edison Company (SCE) and San Diego Gas & Electric Company (SDG&E) were initially skeptical about OhmConnect’s success but have changed their mind.

Like other enterprises offering similar DR services, OhmConnect monitors electricity prices on the wholesale markets and sends text messages – called OhmHour – to its members asking for energy-saving response – that is how the “Save energy. Get paid” works. Many customers can, and apparently do, respond – and get paid.

When customers sign up they agree for OhmConnect to monitor their home’s smart meter – virtually all homes in California now have smart meters. This allows the company to learn about their historical power usage patterns and establish a baseline for how and when they typically use energy.

Not surprisingly, OhmConnect has found that many customers – currently around 20% and rising – prefer to automate their response to the OhmHour signals – it is not worth the bother for most to monitor and manually respond given the meager savings. For example, those with smart thermostats such as Nest, can allow OhmConnect to remotely adjust the setting for an hour, the usual duration of an OhmHour.

The same could apply to those with electric vehicles (EVs), with the signal warning them not to charge when prices are high, and/or the local network is congested – features that can become far more valuable as more customers invest in such devices.

“Most people are not aware in California that a company like OhmConnect actually pays out for saving energy. But we do see a lot of the market shifting to an energy sharing model instead of demand response on the commercial side”

The company takes a cut on the amount the utilities save – reportedly around 20%. The challenge, of course, is how to grow the customer base from 290,000 to millions – that’s where the big payoff is. But, as one would expect, expanding the customer base has not been easy.

According to several articles that have appeared in the press, the company is becoming more sophisticated in identifying customers who are likely to join and –more important – likely to save by participating in the scheme. An important factor is that when customers sign up they agree to participate unless they opt-out. When an OhmHour alert arrives, customers have to decline otherwise, it is assumed that they wish to participate.

This means that some savings can be eked out of virtually all – and all receive at least a token reward for staying in the scheme. Apparently, customers get hooked to the rewards, even if they are not substantial.

Who doesn’t like to get something for doing virtually nothing?

Looking for a bigger customer base, the company is looking beyond California. The DR market is potentially huge – Grand View Research says it could be worth $36 billion by 2025. In an article about the company in FastCompany.com, Tongue admitted that, “Consumer awareness is a significant headwind,” adding, “Most people are not aware in California that a company like OhmConnect actually pays out for saving energy. But we do see a lot of the market shifting to an energy sharing model instead of demand response on the commercial side.”

If one strategy doesn’t pan out, switch to one that does. That is how start-ups fine tune their business plans.

Off Grid Electric

The final “interesting” start-up is another San Francisco-based company called Off Grid Electric. As the name suggests, it offers off-grid solar electricity service as a solution to an unreliable or non-existent grid, mostly in remote and rural areas with little or no existing service. For many of the customers this is the first time they’ve been able to turn the lights on in their homes. As everyone knows, the first few kWhs of electricity – say to charge your mobile phone – are the most valuable. This typically starts a chain reaction that enables people to achieve other aspirations such as education, access to information, and more productive evenings.

“Just as mobile phones bypassed landlines in developing countries, off-grid solar and battery systems are viewed a way to provide power to more than 600 million people in sub-Saharan Africa”

After starting its service in Tanzania, the company has successfully raised additional funding to expand into other countries. Its backers include a number of impressive brands such as Tesla, Total, Helios Investment Partners, GE Ventures and Electricite de France (EDF).

With around 600 million people in Sub-Saharan Africa currently without power – over a billion globally – the off-grid solar market is a booming industry ripe with opportunity. Moreover, the founders of the company are not solely motivated to make money, but to uplift millions of people out of poverty by offering a highly valued service at an affordable price. Their services are aimed to serve the energy needs and income of their clients – they appeal and are affordable to almost any budget.

As described in an article on Bloomberg, “Just as mobile phones bypassed landlines in developing countries, off-grid solar and battery systems are viewed a way to provide power to more than 600 million people in sub-Saharan Africa. The declining price of panels has allowed startups including Off Grid to offer consumers pay-as-you go leasing options that compete in price with traditional kerosene lamps and diesel generators.”

According to Xavier Helgesen, co-founder and CEO of Off Grid, “The fundamental economics drive this all,” adding, “I keep telling people that an electron from a solar panel is the cheapest electron you are going to find pretty much anywhere in the world.”

Off Grid Electric’s business model, called pay-as-you-go, is to lease sturdy, stand-alone systems that include solar panels, batteries, lights, mobile phone chargers and selected appliances. The lease model works since most customers cannot afford to buy the units outright. Customers make payments with mobile phones – and are cut off if they don’t, which tends to encourage regular payments. In most cases, they own the units after 2-3 years of making payments. There is no metering, customers can use as little or as much as their small system provides and they can use it when they want since the battery offers service during nighttime.

Thus far, Off Grid serves more than 150,000 homes and businesses in Tanzania, Rwanda, Ivory Coast and Ghana.

According to Bloomberg New Energy Finance (BNEF), the number of pay-as-you-go home solar systems worldwide has more than doubled from 2015 to about 1.5 million homes in October 2017 with more than $200 million in investments in 2016.

Itamar Orlandi, an analyst with BNEF said, “Solar and storage kits are playing a transformational role in areas where power is either very unreliable or not available at all, which is the case in vast parts of Africa.”

If there is a single common theme among the 3 companies featured in this article it is that in all cases clever entrepreneurs have found a viable business model built on delivering solid value in most obvious places where others had missed or did not realize any value existed. They deserve to succeed and prosper, in one form or another.

Editor’s Note

Fereidoon Sioshansi is president of Menlo Energy Economics, a consultancy based in San Francisco, CA and editor/publisher of EEnergy Informer, a monthly newsletter with international circulation. This article was first published in the June 2018 edition of EEnergy Informer and is republished here with permission.

[adrotate banner=”78″]