Alex Laskey: How Behavioral Science Can Lower Your Energy Bill

Posted in: Startups, Video Notes, ipo, TED, Alex Laskey, Behavioral Economics, Clean Tech, Energy, Energy Management, Notes from the Videos You Should Have Watched, Opower, OPWR, Psychology, Renewable Energy, TED Talks

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What's a proven way to lower your energy costs? It turns out: learning what your neighbor pays. Alex Laskey is the co-founder and president of Opower, and in his TED talk he shows how a quirk of human behavior can make us all better, wiser energy users with lower bills to prove it. This is a summary of his talk at the 2013 TED Conference, and it is the first part of our two part series on the developing - and incredibly exciting - energy management industry.

How Much Energy Do You use?

Have you checked your email today? What about your bank account, brokerage account, credit card statement? Do you check your finances regularly?

Now what about your energy usage?

Alex Laskey asked the audience at the 2013 TED Conference how many of them monitor their energy consumption, and only a few people raised their hands. This was a room full of people that are passionate about the future of our planet; and even they weren’t paying attention to their energy usage that is driving climate change. He then turned his attention to a photo of an elderly woman on the screen behind him - saying her name was Harriet - and that she was not an energy geek (the term he used to describe the few people that raised their hands). This is the story of how Harriet came to pay attention to her energy usage.

 

We Waste 90% of the Energy Generated from Coal

This is coal, the most common source of electricity on the planet. It has enough energy to light this bulb for more than a year.

Coal and Ligh Bulb

But by the time the energy reaches the light bulb most of it is lost to things like transmission leakage and heat. Only about 10% of the energy ends up as light. Therefore, this much coal would last about a month.

Coal vs. Bulb

If we wanted to light the bulb for an entire year; we would need this much coal:

Coal Wheelbarrow

For each unit of energy we use, we waste 9. The good news is that for each unit of energy that we save, we are saving the other 9! So the question Alex asked was:

How can we get the people in this room, and across the globe, to start paying attention to the energy we’re using and start wasting less of it?

The answer comes from a behavioral science experiment that was run in a hot summer 10 years ago in San Marcos, CA. Graduate students put signs on every door in a neighborhood asking people to conserve energy by turning off their air conditioning and turning on their fans. In a slight twist (that should have been the origin for Optimizely) the group used 4 different messages.

One quarter of the homes received a message that said: “Did you know that you can save $54 a month this summer? Turn off your air conditioning and turn on your fan.”

Another group got an environmental message...

And a third group received something about being good citizens and preventing blackouts.

Screen Shot 2014-06-09 at 1.32.09 AMWhile one would assume that the money saving message was most effective; it turns out that none of those messages worked! They had zero impact on energy consumption. It was as if the grad students hadn’t shown up at all. But there was a fourth message, which simply said:

When surveyed, 77% of your neighbors said that they turned off their air conditioning and turned on their fans. Please join them by turning off your air conditioning and turning on your fan.

And they did. Energy 4 The people receiving the fourth message showed a significant decrease in energy consumption simply by being told what their neighbors were doing! So what does this tell us?

When something is inconvenient, tactics like moral suasion or financial incentives don’t do much to move us - even if we believe in it. But social pressure? Now that's powerful. That results of that experiment also tell us that if social pressure can be harnessed correctly, it can be a powerful force for good.

Inspired by this insight, in 2007 Alex Laskey and Dan Yates started a company called Opower. The company went public on the NYSE this past April, and is considered to be the global leader of cloud-based software for the utility industry, currently working with 93 utility partners in 8 countries. Among other services, Opower analyzes energy usage data and provides consumers with personalized home energy reports that show how their consumption compares to their neighbors in similar sized homes. Just like the effective door hangers from the experiment, people can’t help but compare themselves to their neighbors, and Opower provides targeted recommendations to help them save. At first with paper reports, then on the web, and now consumers can access and manage their energy usage through the Opower mobile app. It even works with controllable thermostats!

For the last 5 years we’ve been running the largest behavioral science experiment in the world.

The Experiment Is Working.

In January 2013, Opower issued a press release announcing that they’ve saved more than 2 terawatt-hours (TWh) of energy worldwide. In the accompanying blog post they added some context for what 2 TWh (2 billion kilowatt-hours) of energy savings really means. When Alex brought up the memorable milestone in the TED Talk, he provided some more interesting equivalencies.

2 TWh of electricity is:

  • More than enough energy to power every home in St. Louis and Salt Lake City combined for more than a year
  • Roughly half of what the U.S. solar industry produced in 2012
  • Equivalent to burning 34 wheelbarrows filled with coal, every minute, around the clock, every day, for an entire year (i.e. 34 x 60 x 24 x 365 = 17,870,400 wheelbarrows full of coal)

As of February 2013 (the time of the talk) ordinary homeowners and renters have saved more than $250 million on their energy bills.

250MILLION

If you take a quick glance at the bottom of www.opower.com there’s a running meter of what Opower has saved. Now, one can imagine that global warming deniers must be thinking... Vanity Metrics they say! Had they known the term. But by any reasonable standard; Opower has blown right past the standards they have set themselves! As of June 9th, 2014 Opower customers have:

Saved-Abated-Saved Shadow

Opower is not burning anything. They’re just motivating people to pay attention and change their behavior.

20% of the Electricity We Use Is Wasted

This is all just scratching the surface. According to Alex:

20% of the electricity in homes is wasted.

The 20% of wasted energy doesn’t mean that people are using inefficient light bulbs (although they may). It means that people are leaving the lights on in empty rooms or leaving the air conditioning on when nobody is home. In the U.S. alone, that is $40 billion a year wasted on electricity that doesn’t contribute to our well being. It does however contribute to climate change.

Thankfully, the best material scientists in the world are developing sustainable alternatives for replacing coal, which Alex says is both fantastic and essential, before adding that the most overlooked resource to get us to a sustainable energy future is not a technology that has yet to be developed: it’s us. Our current energy consumption habits. We can harness this resource without any new technologies simply by applying behavioral science. We can do it today, we know it works, and it will save us money right away.

What Are We Waiting For?

Well, in most places utility regulation hasn't changed much since Thomas Edison:

Utilities are still rewarded when their customers waste energy. They ought to be rewarded for helping their customers save it.

Reducing our carbon emissions and saving energy is about much more than household energy use.

Take a look at the Prius:

Prius

The Prius is efficient not only because Toyota invested in material science, but because they invested in behavioral science. The dashboard shows drivers how much energy they’re saving in real-time. “It makes former speed demon drive more like cautious grandmothers.” (Alex)

Which brings us back to Harriet...

Harriet

Alex tells the story:

We met her on our first family vacation. She came over to meet my young daughter and was tickled to learn that my daughter’s name is also Harriet. She asked me what I did for a living, and I told her that “I work with utilities to help people save energy.” It was then that her eyes lit up. She looked at me, and she said “you’re exactly the person I need to talk to! You see 2 weeks ago my husband and I got a letter in the mail from our utility - it told us we were using twice as much energy as our neighbors! [audience laughs]. For the last 2 weeks all we can think about, talk about, and even argue about is what we should be doing to save energy. We did everything that letter told us to do, and still I know there must be more. Now I am here with a genuine expert - so tell me - what should I do to save energy?

Alex finishes the TED Talk by saying “there are many experts who can help answer Harriet’s question. My goal is to make sure we are all asking it.


By the end of the decade we will all be asking it - and Opower is leading the charge.

We put together a DataFox watchlist of this increasingly competitive industry. Make sure you're logged in (or sign up) for a DataFox account, and you can access it here.

We'll take a closer look at the energy management industry and the 30 companies on the watchlist in Part 2 of the series, but for now, here's a quick preview:

 

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