EnergyHub CEO talks white-label frustrations

EnergyHub is a Gowanus-based company of about 25 that was acquired by Alarm.com in May 2013.

Quick recap: EnergyHub was early into the business of making programmable and internet-connected home thermostats, but when the big hardware makers came in, the company pivoted. It was ahead on software and quickly the larger manufacturers turned to EnergyHub to white-label consumer-facing software for their equipment.

The next phase for EnergyHub was demand response at the utility level. The company had software that would reach out to consumers’ devices and make small adjustments to thermostat settings in exchange for credits on energy bills. (Customers had to agree to join the program, but the benefits were strong.)

When we last spoke, the company was expanding its territory in Texas and California.

Seth Frader-Thompson, one of its founders and the company’s CEO, spoke to us about, among other things, the challenges of being a white label software business, the Polar Vortex and the internet of things.

(This interview has been edited for length and clarity.)

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Tell me what you’re seeing right now as a company using software at the enterprise level to help people control energy consumption.

The most interesting thing that’s capturing a lot of people’s imagination now, is that every internet of things device probably was put there because the customer bought it for some specific reason. But the customer is not really extracting the full value of that.

Usually there’s someone out there somewhere who’s willing to do something. I think if you fast forward five years you’re going to see a million unforeseen benefits of all these internet-connected devices. But the best one right now is if you go buy a connected thermostat, in many markets the utility will actually pay you for the ability to control your thermostat. The utility doesn’t have to roll up to your house and install something, they can just pay you for access to it.

When we last spoke to EnergyHub, it was adding new utility customers. What happened with your business this summer?

This was a big summer, definitely. Texas is our biggest market. We grew our revenue there by at least 5X. It may have actually ended up being a little bit bigger. Next summer we’re expecting to do at least another 4 or 5X. So we now have the equivalent of a good sized utility in Texas in these demand response programs.

Our five largest customers are all secret. That’s generally a frustrating place to be.

That’s been super exciting, but we added a bunch more. We added new programs in California. We added some in the Midwest. I wish that we had permission to talk about the names of these programs.

In general, this confidentiality thing has been tough. We chose the path of being a white label ingredient brand, but what we’ve found is that most people don’t want it to be an ingredient, they want to keep it totally silent and make it look like they built everything themselves. So, literally our five largest customers are all secret. That’s generally a frustrating place to be.

In terms of nationwide coverage of programs, if you’re a cable company, you talk about a metric called homes passed. Which is basically if everyone were a subscriber, this is how many subscribers you’d have. So we doubled the number of homes passed in 2014.

We’ve now got close to a million people connected in one form or another. That’s total people connected to EnergyHub. So I’d say about 25 percent of those customers are eligible to participate in demand response programs. Where we have programs running, we are typically signing up about half of eligible customers.

 

What’s your take on the internet of things?

There are a lot of unsexy aspects of this business and one of them is just figuring out how you’re going to power something. Figuring out how you’re going to power some sort of internet-connected device is probably the single biggest challenge.

Little, unsexy problems are really huge for the internet of things.

Let’s say you want something really simple, like putting a thermostat on your wall. And you’re holding your phone in your right hand and looking at the thermostat it’s connected to. Let’s say you want, when you push the temperature up or down button on your phone, you want to see that push get more or less immediately transmitted to the thermostat. That requires that you always have a network connection to the device. That means that either the thermostat needs to be powered — and a lot of thermostats aren’t plugged into power, they are running on batteries — or you need some incredibly efficient network technology.

There’s just now a generation of supposedly battery-powered WiFi chips coming out. The idea being that it’s a standard WiFi implementation with an IP stack. But the device has to be very sleepy. To make the battery last one to two years, the device basically sits there completely asleep, and every now and then wakes up, finds the network, connects to the network and reaches out to the cloud to figure out whether it’s got any new instructions.

Supposedly, this new generation works. There have been at least two generations that weren’t quite there yet. These little, unsexy problems are really huge for the internet of things.

 

Is winter important to your business? Is there a winter application?

There are lots of places that are so-called winter peaking, which basically means there are a lot of people that have electric heat. There are definitely a lot of utilities that worry about power consumption during the winter.

This was not very widely reported, but during the Polar Vortex, there was a shortage of natural gas in the Northeast. Basically, the pipelines that deliver natural gas to New England used to be big enough, but natural gas has gotten so cheap that a bunch of coal-fired power plants got retired and were replaced with natural gas-fired power plants. Consumption of natural gas went up pretty considerably. And then when it suddenly got really cold and suddenly everyone was trying to heat their houses at the same time while these power plants were using a bunch of natural gas, there was a constraint on natural gas that could be delivered to the Northeast and prices went crazy.

So a bunch of utilities in areas like that are focused on efficiency — and how can we just generally get people’s energy usage down.

From a consumer standpoint, I would say summer and winter are not quite equal. They are like 60/40 in terms of important.

There are a bunch of basic things you can do, like help someone understand how much it costs to heat the house to 68 as opposed to 72. Just giving them that piece of information is typically a really valuable and important thing.

For most people, this was the first really cool smart home thing you could do from your phone.

To consumers, winter is definitely important. To utilities, it’s not as important, but locally there are big areas where it’s important.

When I started the business from my second bedroom in an apartment in Brooklyn, I was shocked to find there are people with homes in Westchester who pay $700 a month for electricity in the summer. That’s like renting a studio apartment; it’s like renting a nice apartment in cities other than New York. To be spending that kind of money was just shocking to me. So there are people who have that immediate problem.

The thing that’s really striking as to why this is a hot topic with customers is, really, it was the first thing in the real world you could control with your phone.

You might control your DVR or open a Zipcar, but probably you didn’t. Really, for most people, this was the first really cool smart home thing you could do from your phone, and then the fact that it saved you a bunch of money and it was good for the environment — it helps you justify the fact that you bought it because it was really cool.

I think that as a business trend, that’s a pretty awesome place to be.