Warming up to climate control tech

"Clean technology" companies find that people are willing to give up control of their thermostats in exchange for a little savings.

Michael Kanellos Staff Writer, CNET News.com
Michael Kanellos is editor at large at CNET News.com, where he covers hardware, research and development, start-ups and the tech industry overseas.
Michael Kanellos
5 min read
Would you give up control of your thermostat in exchange for cash? A couple of companies focused on "clean technology" are finding out that for some people, the answer is yes.

During peak periods, when electricity costs the most and can be harder to come by, these providers reduce energy consumption via a command, sent to a computer on your power meter, that slightly throttles air conditioners or other select appliances.

"Central air conditioners, hot water and pools can account for 75 percent to 80 percent of your utility bills," said Robert Chiste, CEO of Hanover, N.J.-based Comverge, which promotes technology for automatically curbing energy consumption.


What's new:
A small but growing number of companies are focusing on advancing so-called clean technology, which maximizes nature's resources in a variety of ways, including climate control.

Bottom line:
They might be shivering a little more than they would if they could control their thermostats themselves, but some customers clearly think automated temperature controls are worth the knockoff on their monthly bills.

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Comverge and Boston's EnerNoc have emerged as two of the potential breakout companies in the small but growing market for clean technology, a broad field that encompasses new types of solar panels, water purification systems, fuel cells and more. All of the companies revolve somehow around trying to profit from maximizing nature's resources.

Comverge focuses largely on residences, while EnerNoc seeks to control energy consumption in commercial buildings, but the overall idea is the same. A module attached to a power meter in a building regularly communicates with the utility or other organization providing power over the Internet, radio channels or a cellular network.

The attention span of U.S. consumers and businesses for energy matters ebbs and flows--these days it's on the rise again. Oil isn't cheap, as many noted in their higher heating bills over the winter and in gasoline prices now ranging between $2 and $3 a gallon. With the dog days of summer not too far off, the specter of brownouts and blackouts casts a shadow. Environmental consciousness is also a factor.

But it's the bills that hit closest to home. Depending on the climate control program consumers choose, they can get a monthly rebate or experience an overall reduction of around 15 percent to 25 percent.

The utilities, meanwhile, benefit by not having to build extra power plants or buy energy at peak prices on the open market. In Salt Lake City, a utility is installing Comverge control units in 90,000 homes. Since each unit can throttle about a kilowatt of energy consumption, the units will effectively perform the same job as a 90-megawatt plant, which can cost a few hundred thousand dollars to build.

So far, the company has signed contracts for 225 megawatts of virtual peak capacity in different parts of the country and has seen annual revenue grow to around $25 million.

Chilling out
EnerNoc has installed systems in New England, California and New York. Altogether, EnerNoc can deliver 125 megawatts of power fairly rapidly, and that translates to about 500 megawatts of load, or capacity, said CEO Tim Healy.

Utilities and grid operators pay a monthly fee to participate in one of EnerNoc's regional demand response programs. "We are essentially an insurance provider to the grid," Healy said. "They will pay us whether we get called or not."

When the call comes, the company can deliver multiple megawatts to a region facing a potential blackout--an increasing danger in areas such as Southern Connecticut, where the infrastructure is wobbly--in less than half an hour.

Grocery stores, office buildings and other end users participating in a demand response program, however, benefit too. Their power bills might go down; additionally, EnerNoc has developed algorithms that determine the value of the electricity they contribute to the grid while throttling back.

"All of a sudden they are getting a check from the (energy) provider for something that wasn't that tough to do," Healy said.

Companies such as Honeywell have been selling "smart" thermostats for years that can automatically throttle. The spread of the Internet and cellular networks, however, is now allowing these new companies to connect remote sites

into e-commerce systems so that energy consumption can be connected, in real time, to the price of electricity, Healy said.

The people who have to pay for the systems are also finally receptive.

"The difference now is that they've learned to talk to utilities," said Nicholas Parker, CEO of the Cleantech Venture Network, which publishes reports and organizes conferences in the energy sector. "Most VCs will run a mile from a deal involving selling to utilities."

In Utah, a $25 knockoff
Although started in 1992, Comverge has signed most of its large contracts for dynamic power management within the last two years. The company has raised around $32 million in venture capital.

The hardware produced by the companies varies by feature (unidirectional or bidirectional, cellular or radio), but typically contains a processor, embedded software and some sort of standard connectivity.

The scope of programs vary by utility. In Utah, a utility is offering eligible customers a $25 monthly rebate. In exchange, consumers have to let the utility throttle back 50 percent of the power consumed through temperature control for about 40 hours a season.

Generally, the utility throttles back consumption during peak hours between 4 p.m. and 8 p.m. "The temperature might go up by a degree and a half, but the fan (on the air conditioner) is still running," said Chiste of Comverge, who, among other jobs, was one of the key figures in the independent power group at Enron from 1980 to 1986.

Gulf Power, a utility in Florida and a client of Comverge, charges its customers about $60 a year to participate in the program, which controls air conditioners and pools. These customers see about a 15 percent to 25 percent reduction in their bills, according to Chiste.

While direct cost comparisons are difficult to make, Chiste roughly estimated that installing one of the company's units might cost $150 to $175, depending on installation and customer acquisition costs. Building power plants to provide the same amount of energy saved through cycling back might cost $250 per household.

In a number of situations, Comverge owns and maintains the equipment, and charges the utility a fee, sort of like an outsourcing specialist.

EnerNoc, by contrast, started in 2001 and has raised $10 million so far from, among others, venture capital firm Draper, Fisher, Jurvetson. Revenues are in the several-million-dollar range and will likely climb because it's working on a recurring revenue model. The vast majority of its contacts requiring monthly fee payments are three to five years long, said Healy.

So far, EnerNoc has focused on landing clients in the United States but has just formed an international business development group.

Proponents admit that the technology isn't likely to inspire a generation of kids to enter engineering programs. But climbing and unpredictable energy costs--just try to decipher the numbers on the back of any utility bill--are prompting demand.

"You don't know what the wholesale rates for power will be at peak rates" because of deregulation, said Tim Woodward, a partner at Nth Power, a venture firm specializing in clean technology start-ups, including Comverge. "Energy efficiency has been a yawn in the eyes of the public, but there could be a more vibrant market in this area in the next 12 to 18 months."