Dan Yates: “Earth Day” | Talks at Google

>>Rick Needham: Thanks everyone for coming in today. It's a gorgeous day outside, so I know it's a tough draw to pull you indoors. Hopefully everyone's had a chance to go look around outside about all the Earth Day activities that are going on out there. You've got vendor booths, partner booths, some informational booths. We even have out own internal teams that have their own little booths. A ride-and-drive, and stuff like that. But I'd love to introduce you to Dan Yates. I'm Rick Needham, I'm part of our Energy and Sustainability team here at Google. One of the many teams that focuses on sustainability. And I have the pleasure of introducing you to Dan, who's a really interesting guy. He's obviously founded and is currently CEO of Opower, which is a company that's developing home management, energy management software that actually is connected with over somewhere in the order of 10 to 15 million people, homes already. That's quite an extensive reach that they have in North America, the UK. They've saved enough power already to power the Empire State Building for something like 10 years.

Not a small amount of savings already. Pretty amazing. Before Opower, Dan actually had founded an educational software company called Edusoft, ended up selling that, and then embarking on this trip which I think he'll talk a little bit about, which sounds really cool to me. One day I'd love to do it, too. It went from the Arctic Circle up in Alaska all the way down to the southern tip of South America. At first, I thought it was biking, and he said, "No, no, no, it's actually driving. We drove a car." But that's still quite an amazing trip. And on that trip, that's when he realized he wanted to dedicate his professional career to helping maintain the wild places in the world, and dedicate himself to sustainability. He's also been cited many times, several awards too. He's won the Ernst and Young Entrepreneur of the Year award. In the greater Washington area has been a Tech Titan, which sounds like a really cool label three years in a row.

Awesome. [laughter] And so, something else I found out at lunch is that Dan's also a consummate hula-hooper. Unfortunately, I wasn't able to procure a hula-hoop in time for the talk. >>Dan Hayes: Such a shame. >>Rick: He didn't tell me in time. Now it's too late. But if we run out of good questions, which I hope we don't, you can always ask about how he became a good hula-hooper. But please join me in welcoming Dan. >>Dan Hayes: That was a little Stephen Colbert moment, right? >>Rick: Was it? Yeah, okay. Thank you, Dan. Okay, thanks, Dan, whoo! Please join me in welcoming Dan Yates to Google. [applause] >>Dan Yates: Thanks a lot. It's good to be here. I actually just realized: is there any clicker capability? 'Cause otherwise I will be married to the–. No clicker.

Okay. I will stand here behind the podium for most of this. Unless this is going– no, it will not. Okay. Well, good. I'm happy to be here. I'm excited to be here on Earth Day and honored to be invited to talk. Better than Halloween, I guess. I was thinking about what I should talk about. Some of you probably know a little bit about Opower already. I'll give you a quick overview and then over the course of this presentation tell a little bit more about the company. I was thinking about Earth Day as a day where we're all supposed to be trying to take a day to think about how we can do more to help the environment. As I was thinking about that, and I've been thinking about recently that the evolution and the progression of clean tech companies over the last 5 years since I got into this business. It hit me that there was a theme that I wanted to talk about.

What I want to do is I want to tell a story of incremental improvement. I want to talk not about revolutionary improvement, but evolutionary improvement. When I started Opower, there were all these big, fast-growing clean tech companies: in solar, in wind, in biofuels. Many of these companies haven't panned out. I went through this period of about 3 or 4 years where I was really disappointed to see there weren't a lot of other companies even chasing after Opower or doing other– successfully building clean tech companies and having an impact. And that started to change in the last few years. There's been a second surge of companies. If you tune into this, you'll hear a lot of talk about how these new clean tech companies, many of them are focused on efficiency, like Opower.

But there's a lot of talk also how they're very capital efficient. They don't need $500 million to get going. That is a very important precursor, I think, to successfully building a company. If you need a half million dollars to get it going, you're going to have a very few number of businesses that are going to get off the ground. But I think that the story, the thing that has been last talked about, which I actually think is one of the most important ones, is this difference of not trying to boil the ocean, but looking for incremental improvements that, when you add them up, actually end up being really massive. When I think about Opower, that's the story of our success. Let me start at the beginning and tell you how this came to be, hopefully, in the process, carry you through this. Hey Eric, good to see you there. [laughs] I see a lot of faces in the audience that I recognize.

But hopefully carry you through and see this story of incrementalism. It all started, as described, with a trip through the Americas starting at the very top and ending at the very bottom. This photo here is me and my wife as we were in Bolivia. One of the highest points of the trip. It's something like 16,000 feet. So we took this trip. We drove for about a year, heading south. It was easy to get directions. We went on the trip just to have fun. I'd sold my last company, an educational software company. And I grew up camping and liked backpacking but wasn't environmentally minded in terms of what I wanted to do with the rest of my life. I still say I don't know the difference between the horned owl and the spotted owl and I probably won't ever. But we went on this trip to have a great time, and we did. We saw the things that we thought we were going to see. We saw beautiful animals, we saw this vicuña in the Bolivian Altiplano, a rare cousin of a llama. We saw these amazing forest canopies.

I love this photo because it's just so amazing, the efficiency with which these trees grow together, yet just stop growing right where the other one takes over and capture all the sunlight. We had a great time. We also did a lot of fun tourist stuff. But in the process, we saw a lot of the reality of what it's like out there in the rest of the world. I left on this trip with this naive picture that the US was the most inhabited, most developed country. In reality, when you go through the rest of the Americas, it's not true. We actually have some pretty rich wildlands that are well protected. There are other countries that are totally devastated. They're not devastated because these guys– these are not bad guys, these are just poor people who are trying to incrementally eke out a living. Unfortunately, their incremental steps are working against the environment.

So I came back feeling very viscerally how at risk and fragile the environment is. I'm not going to spend any more time talking about this point, because I'm quite confident that everyone here in this room knows how at risk and fragile the environment is. But this is a key part of my story. This is when, for me, it became really visceral because I couldn't– After this trip, I no longer had to envision it or imagine it, I could remember it. I could remember all the spots where I saw the fragility and I saw how at risk the environment was. When I came back, I thought about what I should do. Basically asked myself the simple question, "What do we suck at here?" And the answer was pretty clear. At the end of the day, where we're by far doing the worst is that we use a lot of dirty energy. I wanted to figure out what I could do to have an impact.

This is 2006. There was actually a lot of energy, pun intended, clearly. I was living in San Francisco, surrounded by entrepreneurs talking about clean tech. We were getting — There was a lot of progress on wind development. There was a lot of progress on new solar: with the utility scale solar here but also residential solar is taking off. The very first inklings of electric vehicles. These things all seemed so full of potential, and they are full of potential. I was living in San Francisco, working out of this tiny home office, and I downloaded this graph, which was from the DOE, or the Energy Information Agency. This is a wonky little picture that I actually just found an updated version of this morning. Well, almost updated. 2010 anyhow. This is how we use energy in the US.

On the left, you've got all the sources of the generation. And then on the right, you have all the consumption. It hit me, 'cause I had this thing literally just taped on the wall next to my computer, that every single person I was talking to that was innovating in clean tech– I'd gone to the big solar conference in San Jose. It was the second annual conference, and there were thousands of people there, and Governor Schwarzenegger came and talked. There was just so much enthusiasm for this. Absolutely every innovation and idea that was being discussed was over here. There was no one talking about the right side. I really actually think it was thanks to this diagram that I could just see so plainly there was this gap missing, this hole. I just started to ask simply, "What about just using less energy? What can we do there? Why aren't people focusing on this problem?" I'm somewhat of a contrarian, so it gave me a lot of pleasure to think that nobody was thinking about this problem.

I didn't have an idea yet, but I knew that there was some open space to hunt around. So Mackenzie has done a very nice job. This is actually– Their studies came out after we started Opower, but quantifying just how much energy is being wasted. It is astonishing. Just looking at residential energy use in the US, at wasted energy between now and 2020, we're going to waste $400 billion of energy, which is almost 5 trillion pounds of CO2 and 3.4 million gigawatt hours of energy. This is not energy wasted because you bought an extra TV, which you could argue is energy wasted. But this is energy wasted by your TV that you bought when you're not using it. Energy wasted by your air conditioner that you're running when you're not home and is making no one more comfortable. It's just a tremendous amount of waste that's sitting there. So I couldn't help– So it felt big and unattended, but then the important question is: why? Why are people wasting all this energy? It seems like a no-brainer.

This is energy that, if saved, will actually save money. You don't even have to care about the environment to save this energy. This isn't like solar where it's more expensive than coal. This is just not wasting money and energy. No one's winning. Here are some of the reasons why. 6 minutes, 6 minutes is the average amount of time that an American spends thinking about energy use in a year. [sighs] We all– Most of us here, probably unwilling to admit it, but most of us here probably think about Justin Bieber more than we think about our energy use on an annual basis. It's just completely not paid attention to. The reason why is– There's a couple reasons. First one is it's boring. It's just not a fun thing to think about. The second thing, which is the more fundamental problem, is that it's inexpensive. The average American home spends only 1.7% of their annual income on electricity.

If you save 25% on your energy bill, that's like 0.45% impact on your overall expenditures for the year. It's just not a big deal. So it's boring, it's inexpensive, and the last thing is, is there's just no feedback mechanism. This is a programmable thermostat, one of many crummy ones out there. There are a great companies, including Opower, that are now working to make these thermostats much, much more user friendly. But today, the average programmable thermostat is not programmed. In fact, 80% of them are not programmed. And almost nobody remembers to turn off the air conditioner when they leave the house. Why is that? They're hard to program, but they're not that hard to program, and you can save a lot of money doing it. It's 'cause there's no feedback. You don't feel bad when you leave the house and the thermostat isn't programmed. What I've liked to say for a long time is if CO2 were purple and it smelled like rotten eggs, we wouldn't have an energy problem.

You would turn off your thermostat because your house would stink if you didn't, your neighbors would see it and get angry, you'd have the hassle of the purple smoke. But there is no feedback. There's no emotional connection to this. It isn't visceral. It's not that expensive. And so we all just plow along and we waste our $400 billion worth of electricity. Okay. So these are all problems, right? So how do we fix this? How do we correct these misconceptions? I was looking at this, thinking about these different ideas, and I was very fortunate to run across this study by Robert Cialdini, who is a world-renown behavioral psychologist. He's written a book called Influence that's prescribed reading at the GSB and at Harvard Business School, published in a dozen languages internationally. He had just done this study. What he was trying to do was he was trying to figure out how to get people to take an environmental action, and figure out what would motivate people to save energy.

So here's the study he did. He was in San Marcos, CA, a suburb of San Diego, and he was trying to get people to turn off their air conditioner and turn on their fan in the evening. He had a bunch of grad students working for him. They went around and printed up all these door hangers. They went door to door. They hung these things on the doors. And they had different treatments. They had a control where they actually had two different varieties of control. There was very statistically significant, well-structured academic study. They would read the meters in each of the homes after they had hung up these door hangers to see if they were having an impact. The first treatment was monetary: "You know, you could save 50 bucks every month if you turn off your AC and switch to a fan." Second one was environmental: "Help save the environment. Keep the sky clean. Take xyz pounds of CO2 out of the air. Just turn off your AC and switch to a fan in the evening." Third message was a societal, citizenship.

"Save money for future– Help conserve resources for future generations. Turn off your AC and switch to a fan in the evening." They did this week after week all summer long. These groups, zero impact. It was as if they had not been there. And this is about as expensive a marketing campaign as you can do. No company can afford to go door to door, even with grad students, hanging door hangers every week. If we can't get people to do some simple no-cost behavioral change with this kind of marketing, nothing's going to work. But wait! There was one more treatment. Make room for it. There was a simple last door hanger that said, "In a recent survey of your neighbors, 75% of them turn off their AC and switch to a fan in the evening. Join your neighbors. Turn off your AC, switch to a fan in the evening.

" This group saved 6%. This sustained throughout the duration of the study, all through the summer. What does this mean? It means that people benchmark to the norm. We know this in a lot of other circumstances. But this is a really powerful tool. It's actually a very rational thing for us to do. The instinct that we all have when we hear this is "keeping up with the Joneses." We like to keep up with the Joneses and we've all been taught by our moms and dads not to keep up with the Joneses because it's not how you're supposed to live your life. But the reality is that if you're operating in a complex environment like energy usage, you don't know much about it. You don't want to be an expert: most people don't.

Benchmarking to what the wisdom of the crowd says is actually a really good shortcut for figuring out whether or not you're in line. Whether you're doing what you ought to be doing or living your life the way that is most reasonable. We see norms throughout our lives. We have these buffoonish guys who are all very happy with themselves because they all look like each other and they're not ashamed of it. But you put one of them in this room, they might feel a little awkward. And then you have, on the nicer side of the spectrum, women in beautiful saris. No one here is wearing a sari today, but this is absolutely a norm that is– and they're all almost wearing the same color sari, actually. That is totally established in other parts of the world, and totally normal and beautiful. If we had norms like this about energy use, we'd probably all start wearing the same energy clothes and start drafting off of each other. But there is no signals.

Most people don't know if they're efficient or not. To me, the data that– the graph that has most illustrated this for me is this graph, which I have not labeled, so you have to wait with bated breath for me to explain what it is. We have a ton of data. We have almost half of the US energy data under management in our colocation facilities, Edipower, because we work with most of the major utilities in the US. When we work with them, the first thing they do is they send us all their consumer energy data. We've been able to do some really interesting analytics. What we looked at, and this is actually something we did from the very beginning, is we looked at: how dispersed is the energy consumption of a set of similar homes in the same neighborhood? Taking for each home the hundred closest homes of similar square footage of closest proximity– basically an algorithm that weights your distance in real distance with your distance in terms of house size, and tries to find the minimally distant set of homes. How different is consumption across those homes? This is the graph that we get no matter where we do it.

What it basically comes out is that in any given home, in any given neighborhood, more than 30%– more than 50% of the homes are further than 30% from the mean. You get this big dispersion of energy use. To me, the signal that– What this signifies is a couple things. First, everything I just said: energy use is– there is no feedback, and people are drifting off on their own trajectories of consumption, some using more, some using less. The second thing is that energy use is elastic, because if there's this much variability within similar homes in similar areas, there must be an opportunity to reduce their usage. This is what gave me a lot of the confidence early on when we started the company that there would be an opportunity to change the norms and to move behaviors.

The opportunity was clear. Thanks to the study by Robert Cialdini and some research that we did on how energy efficiency markets work. There's about a $10 billion a year energy efficiency market internationally. We ran some math and realized that if we could make– if we could change behavior by a few percent, we could actually have a real business. So where do we start? Here. We started with the utility bill. This is your typical craptastic utility bill. [laughter] Barely tells you how much you owe. It gives you– this is actually a real bill. I think we cut off the name of the utility to save their reputation, but you've got the price of natural gas to 8 decimal points, just for good measure. And yet, no useful information to really help you figure anything else out about your usage other than how much you owe.

So this felt like a big opportunity to improve, and we applied all the lessons from that study and our own best practices from direct marketing and software analytics to deliver this first product. This was Opower's home energy report. We did our first program with SMUD, just up in Sacramento nearby. We started sending home these mailers that showed people how their energy use compared to their neighbors, to their approximately hundred occupied homes that are similar in size. We gave– Alex Eagle here actually wrote a lot of the energy calculator code that made this first report possible. We sent these out. We set it up as a clinical trial with a test and control groups so that we were able to exactly measure the impact. And we started to get these great results.

Here are many results now from many of our utility programs. Each line represents the difference between the average consumption of the control group minus the test group. We've consistently been getting this 1.5-3.5% reduction. It's gone on now for over 4 years. Every year, we tend to see a slight increment in savings of these groups as they progress and customers accumulate some energy saving measures that are long lasting like somebody replaces a refrigerator, etcetera. Important to our business model, which is not as important to the environment but is important to our longevity: when you turn off this program, the savings diminish. Once you use us, you're hooked. But the thing that I also want to flag– and these are just some of the groups that have certified are results, the third parties that have evaluated it.

But the thing that I want to highlight is: 1.5-3.5% doesn't seem like that much, right? It isn't. For a consumer, if I were selling it to you, you wouldn't be disinterested, you wouldn't buy it. Luckily, our business is we sell to utilities, they buy blocks of hundreds of thousands or millions of homes and we deliver it and it's free to the consumer. But for an average consumer, this isn't a big impact. I'll get back to that in a few slides, 'cause I want to show you how much this has added up to. We started with this normative comparison, but behavioral science was just the beginning. We immediately started to look to analytics and what we could do with personalized recommendations.

I just want to highlight– I'll touch on just a couple of the neat things that we do, and then I'll bring this speech to a close and we can talk further. This is one of the features that I really, really like. What we do is– We are now– We don't have Google-sized data, but we have some pretty big data. We're running it all on a Hadoop grid. We've custom developed a batch processing system that sits on top of it because we need perfect reliability and restartability of our batch jobs because we're not just running large scale approximate analytics. We have to get results for every single customer and get it right every single time. We've got this system that's pretty slick. A data platform that we've built. What we do on it is we're able to run this multivariate regression analysis where we can separate out– Using your smart meter data and the local weather data stream, the hourly data stream, using both temperature and humidity, we're able to separate out the parts of your usage, the biggest piece of your usage: your heating, your cooling, your baseload, which is the stuff that's on all the time, and then everything else.

With that, we're able to do things like send you this, whether it's in the mail or on our website. Or when you call in, have the CSR at the utility tell you how your heating usage compares to the average. This becomes incredibly valuable because we can start to focus you on where you need to be– what actions you need to be taking. This shows up on our webportal. We have a breakdown and we bring you to the first most important part of your usage. We direct that immediately to recommendations and we've partnered with retailers and other third parties to connect this to actions. Trying to really draw this whole flow through, we've identified an opportunity, we motivate you, we explain to you what it is, and then we say, "Hey look, here's the action that you can take to insulate your home.

" This is where Opower has grown. We started with this report, and now we have this whole platform, this customer-centric experience as we talked to the utilities about it. For us consumers, it's just suddenly the utility actually got smart and is giving you all the stuff they should be giving you, that makes energy information easy and digestible. We have the reports like I showed, we have a social app that we just launched, we have this great outage and alerts platform so we can give you, preemptively, a notification if you're on track for a high bill before you get the high bill. We have all these consumer marketing features like this coupon I just showed. We're launching an API platform and mobile apps, and we have this great website. Now, also, we're doing in partnership with Honeywell Thermostat, where we're giving people the ability to control their usage much more easily using an Android or iPhone app.

This is what our company has turned into. But the reason I want to tell you this is I started with this simple idea. We identified a blank space and we looked for making an incremental improvement. And we did make that improvement, and it steamrolled, and it snowballed, rather. You can't do both. Here's where we are today. We've saved 900 gigawatt hours, almost a terawatt hour of energy, which I was just hearing is about half of what Google uses on an annual basis. So in which we all think Google's being a pretty big power consumer and we're saving almost half what Google's generating or consuming. We've saved consumers $100 million, and that turns into 650,000 tons of CO2. But all of these reference points, to me, are not as clear or compelling as this one: last year, we saved as much energy as half of the entire US solar industry. We think of solar as this non-incremental, transformative, turn-everything-on-its-head technology.

And it is. But we, with this incremental approach, have saved one company half as much energy as all the solar companies combined did in the US last year. If we ran what we do at Opower, it doesn't have to be Opower, but our approach, worldwide, it would be 2011 coal-fired power plants that we could shut down, which is a tremendous, tremendous amount of energy savings. This is my point: incrementalism is powerful. I think that there's so many opportunities out there. On Earth Day, the reason why I picked this as the theme is because when you think about the– Earth Day is the day to think globally and act locally. Opower is a company that in many ways gets the pleasure to tally up all of the disparate thinking globally, acting locally actions of our customers. We happen to be able to count it up and report it out. But what we're really doing, fundamentally, is motivating millions of people to make small changes, and it does make a difference. So that's my message for today.

Thank you guys for taking the time to come out. I'm happy to answer any questions. [applause] >>Male #1: [inaudible]Say the question is about water. Do we have any opportunity there? >>Dan Yates: Yeah. Yeah, we definitely do. We actually work with, today we work with both electricity and gas. We work with a bunch of utilities that serve both. We were just talking about this at lunch. Water is an easy next step for us. The only reason we've been held back is that there is just– While the need is as obvious, the regulatory and policy infrastructure isn't there, so the money isn't there. So it's very hard to find people who will pay you to do it, and to build a business on it. What we have is a number of utilities who actually provide all three.

Like in Palo Alto, it's gas, electricity, and water. I think they even do waste as well. So we're going to probably start reporting on water for those utilities. But it's the same– and there's another company. There's a company called waterSMART, I think, that's trying to do this. I've heard them calling themselves "The Opower of water" so I can presume that's what they're doing. >>Male #2: So in one of the slides you identified opportunities for third party app developments though an API that you'll be offering. Just curious to hear any ideas you have on what some of those apps might look like, and whether or not you think your company will allow those apps to leverage the energy saving recommendations that you offer, because I know that– I mean, in my mind, there's a huge market for that.

Just curious to hear what you think some of these apps might look like. >>Dan Yates: So we're just getting started on this. Actually, Wayne Lin, who is a former Googler, who is our head of product management for this part of business, all of our web and social and API strategy is here today, but he's not here in the audience. Otherwise I would just hand it over to him. There's a couple different things that we're looking at. Our order of priority is actually starting first with the enterprise, and then extending more and more to third party APIs. The first set, which we already have live, is actually, ironically, just giving– exposing the analyzed data back to our utility partners because they don't have the wherewithal to do this kind of analytics on their own data. Second evolution for us is building an integration framework. For other utility facing companies that want to provide services to utilities, we can expose access to that data with utility permission. Then these providers don't have to integrate and do all the heavy lifting that we do to connect with these utilities. And the third is connecting to third party– is making it– putting in place all of the permission and everything to authenticate third parties and let consumers turn on and off different third party apps.

Some of the examples that we have top of mind are that we got– Zillow reached out to us. They're actually very interested in being able to manifest a certified last 12 months bill on any new home listings that somebody can get credit for investing in energy efficiency. Mint are of a similar interest in being able to help separate their pie chart of energy use to show you where your waste is within your overall consumption, your expenditures. We've been talking to some weather websites that are also interested. So that's been the areas where there's been the most interest, but one of the APIs that we've just developed has been top tips. So exactly to your point, and I think that there will be a lot of– that actually is one of the things the weather companies are interested in. "It's going to be hot! Here's top tips for you for saving energy this summer." >>Female #1: How much customization do you have to do for utilities who want different levels of engagement? Have you found that dealing with different utility personalities has been a tricky part of the process? >>Dan Yates: So we are, at the end of the day, whether I like it or not, an enterprise software service business.

We deal with big enterprise customers who write us huge checks and have every right to ask us to do things for them that, as a consumer facing company, you would tell that consumer to go away or buy something else. The flip side is that enterprise customers stick with you for a long time. It's a mutual partnership. So that sounds like a long way of me saying we do allow customizations. We actually don't do a lot of customizations. We have built– We do a lot of configuration, and we've put a lot of configuration into our platform. The variants across utilities– and increasingly we've been better and better at this as we continue to invest in our technology. Utilities vary widely in what they've deployed in terms of how many reports they've sent or whether they're system wide or not, but in terms of the actual features themselves, we don't build a lot of custom applications for partners.

I mean, from a business model perspective, we look in this part of our business at companies like salesforce dot com or other cloud-based enterprise companies, where they've built really thoughtful platforms but then allow configurability without having to write new code. Let the customer write the code. >>Female #2: It's likely that a lot of people actually here already understand this. But you're partnering with a lot of the power companies. I'm just not really getting why, what's motivating them? >>Dan Yates: Why do utilities do this? >>Female #2: Yeah, what's the model there? >>Dan Yates: Mmhmm. Great question. [pause] There's a couple different answers. The way we started the business was very focused on energy efficiency. Utilities have state mandates that require them to hit these efficiency standards that are called energy efficiency resource standards.

Basically every populous state in the US now has a standard that these utilities are being held to. What happens is the utility commission in each state will set a goal, a certain terawatt hour goal or gigawatt hour goal that we've passed down pro rata to the utilities in that state. The utilities will then put together a portfolio of programs that are proposed back to the commission every 3 years. Based upon the costs of those programs, they will put a tax on the utility bill that funds these programs. That's been– And from a utility perspective in this regard, it's really compliance exercise. They don't have any stake in it, but they've been mandated to do it. And they definitely adhere to commission mandates because they commission is their one customer, really, where they get approval or denial for building new things.

That was the core value proposition for us starting the company. What's happened now is we've grown. As the utility industry has started to evolve in this direction, as utilities are realizing that their future is much more consumer centric than it ever has been, or certainly for the last 85 years. Many of them may be, more than they wish it were. But as this political spotlight has been shined on the utility industry, it's not easy to go build a dirty coal plant anymore. So to hit capacity requirements, to handle new population growth, and to invest in new infrastructure, which is how utilities make money, they're finding that all of their new investments inevitably are more consumer intertwined. Whether it's smart meters where we've all heard about the crazy ruckus here about people being upset about them, or peak reduction programs where they try to get you to install a thermostat that reduces your peak usage. There's a lot of interaction you have to have with the consumer. So as utilities are moving in that direction, they're realizing they need this consumer infrastructure to engage customers and to be able to provide a better value.

Also, as rates are rising, which is the other thing that's happening, is people are not allowing coal plants to be built. So for all these reasons, it becomes politically very important for the utility to have a much better capability to engage the consumer. That's how, as we've grown, how this has grown. It's still the core– What we like to say is an energy efficient customer is a happy customer 'cause we just want to save money on our bills. That's a major factor. So the question is, we have this feedback loop where we're sending signals once a month. Do we have the capability to send it faster. We definitely have the capability to send it faster. Then the question is– We're taking 6 minutes a year of attention up to 12 minutes. Can we take it up to 400 minutes? I think at some point, the answer is no, people don't actually want to think about their energy use that much. So where we're focused– One of our mantras for a long time has been insights in analytics trump real time.

People actually don't want to get feedback constantly. They want to get more and more, richer and richer, more and more tailored feedback. I always come back to– I was thinking about what would my mom want to get? My mom would love to get a notice in the spring that says, "Last summer was a doozy. You paid twice as much as your neighbors on AC. Here's the top three things you should do to save energy this summer on air conditioning." Rather than getting a weekly or daily email about her energy use. That being said, one of the features we've just rolled out is a weekly smart meter-enabled update on your usage for people who are engaged at that level. We do emails as frequently as people want. We do alerts now. We're doing, for some of these utilities that have load reduction days, we'll send out, for one utility, 2 million emails in 30 minutes because we've got to get all of these people this information. So I'm hearing two different questions. Let's see if I can answer this.

[pause] There's this long term challenge of, okay, so if everybody installs the residential PV, there's no– efficiency doesn't matter anymore. I've two thoughts, I've number of thoughts on that. One is, God, that'd be awesome. I'd be happy to go out of business if everybody loaded up with a solar PV. But on top of that, that's going to be a long, slow slog. We've been at it for, it's really in earnest been going on for 5 years now. I think that they're just nearing 100,000 solar homes in the US, which is 1/1000 of the number of homes. So we've got a long way to go. Within that, I think there's a ton of opportunity for us to help promote solar, to help report back on solar, to aggregate solar on lots of different things that can be done, and to be involved in selling it, not just promoting it. And financing, etcetera. That, to me, is a long term opportunity and problem, and in the same timeframe as solar starts to happen, that's why we are getting into the things like thermostats.

And we'll be– As electric vehicles become more scaled, we'll be looking at what we can do there. The other question was about what if behavior dries up. That one is– I've got at least 100,000 years of evolutionary history to say that we're going to stick with the pack for the next 100 years. That one I'm not too worried about. [laughs] If you're a City of Palo Alto resident, you should be getting our home energy reports which were sent out in the mail or email. Who is a City of Palo Alto resident here? >>Male #3: Yeah. >>Dan Yates: Are you getting it? What's your neighbor rank? [laughter] What's your neighbor rank? Do you know what your neighbor rank is? >>Male #3: No. >>Dan Yates: Oh, okay. I ask 'cause most people tend to know it, and I always like to highlight it because the fact that people could remember it is indicative of the amount of attention it captures. But unfortunately, this didn't play out so well with this group.

[laughter] In Palo Alto, we're just sending out the reports. We haven't started to do any of the web offerings, and Palo Alto doesn't have smart meters. At PG&E, we're sending reports to a lot of customers, but probably many of you aren't getting them because we started with them targeting the largest homes. We have something like 300,000 homes, I think, of the 5 million getting reports. The biggest thing we're doing at PG&E today is we're powering most of the website. So when you log into My Energy, the 2 tabs that are about ways to save and I forget– the other one was called "my energy use." Those tabs are entirely powered by us. And then we also have all of the– If you look at changing rates at PG&E, the tool that helps you analyze that is an Opower tool. Now I was just talking to Kevin, I don't know his last name. >>Male #4: Chen. >>Dan Yates: Chen, in the sustainability group about his experience with this rate-switching tool. He wanted– on behalf of him I'll let you know: when you get to the end, it makes you call PG&E and then you have to spend half an hour dealing with their phone tree to finally get to the point where you can switch your rates.

That's not our fault. They were unable to– They had no APIs to send rate switch signals to any piece of their infrastructure, so we have to, basically, put a little thing that says, "Call PG&E and read them this." Implementations are imperfect with these utilities, but it's been exciting what we're– PG&E's actually been a great customer. They also have signed onto the social apps. So if you go to social dot opower dot com, you can utility connect with both PG&E and City of Palo Alto and you can compare with your friends. We're continuing to invest a lot in that application. We just launched it and there's a lot more to do. >> Female #3: >>Dan Yates: Yeah, so we– The question is: how have we tackled commercial building? There's 2 areas in commercial building that we're probably not going to tackle. One is where there's a master meter building, where there isn't individually metering because we just don't have– we're all about the meter data, and at least now, we're not in the business of metering. So we wait for people to do their own metering.

And a lot of places in older buildings that are not individually metered, it's not just– the electric circuits actually don't enable individual metering, so it's not trivial. The other place is really big buildings and big commercial enterprises. We're probably not– It's going to be a long time before we get there. And the reason there is that it's just a different problem set. If you can afford– If you have a full-time energy manager like Walmart does, and they have a whole team of them, and you can afford to have people come on site and do audits, our expertise in behavioral psychology and direct marketing is out-gunned by door knockers. Where we are expanding is into small, medium businesses which in many ways is like a stratified prosumer or heavy, large consumer. There we are, we've already done some stuff and we're looking to do more.

>>Male #5: I've a question about the size of the opportunity ahead of you. You made a comparison to the solar industry, so obviously you're doing huge work in energy reduction. But solar's really low on its exponential curve. You cited some numbers for how many installations there are residentially. But you– So I heard a couple numbers from you, which is that you have half of all US energy usage under management. If that's the case, and you're asymptotically approaching 2-3%– >>Then I can only double and then I'm done. Yeah, let me answer that. Yeah. So we have– That's great. This is a very smart audience. All of my little stats are being finally picked apart in the right way, which is good. So we manage half of the US energy data right now on behalf of these utilities, which is a great capability. It's a great position to be in so that we can do things like launch an API platform or launch APIs on our platform, or we can– For example, with social, when we turned it on for a new utility, we didn't have to get any more data from them.

We already had it. But we are only monetizing probably 10% of that data that we have under management. So a good example is when we sold Com Edison in the Illinois region and Chicago land area. We had a 50,000 home program with them, and they gave us all 3 million homes worth of data. That's the case all over the place. To talk about our business, our TAM is in the multiple billions of dollars, between 3 and 5 billion. We're nowhere near that right now in terms of our growth. As we serve– There's a lot of great stuff ahead of us. so our big expansion areas are domestically in the US we still have new utilities to sell, and we have a lot of expansion with our existing utilities. And then we're just now starting to really expand internationally. That opportunity is as big as the US opportunity. And that's just market expansion. Then we continue to build new products, like this thermostat which I'm excited about.

It's going to be a total new product line. It's actually interesting. We haven't actually looked that much at the interfaces much on cars . We did– I was at an event last spring, and I actually talked to a business development guy from GM who said, "Hey, you should come talk to us, 'cause we're designing some new cars and we want to talk to you about the interface." And we just didn't make it high enough up on the priority list. We didn't feel like it was believable. It's going to be small scale, and they don't have an electric car yet, or they almost do but not quite. So that is an interesting opportunity. I think we haven't looked into that that much. The area where we've thought a little bit more is charging management, because that's where the utilities– The utilities are thrilled that there's going to be these new power consumers on their grid using up more energy, and they can make money off of them. But what they're confused about is: how's this going to work? Because an electric vehicle in charging mode is like a house, so it's like you're driving houses around and jamming them into the grid.

All of a sudden, the transformer melts. That's very, very expensive compared to the value of the electricity from the car. So they're trying to get a handle on how they manage that. There are lots of companies that are astutely going after this in a way that we haven't yet, but it's an area that we're monitoring. >> Male #6: Inaudible >>Yeah, so there's a lot of different– people taking a lot of different tacks. One is the charging station that works like Zipcar for charging. Well, not really, but whatever. You get it. And another way is, Better Place has tried to do it, where you have replaceable batteries and there's essentially gas stations for batteries. And then there's the third way, which is that people just don't have either and you just charge your car at home and maybe cut a deal at your office to charge your car there. I think it's to be seen how much these other– I think this is all early days.

It's to be seen what's going to stick or not. >>Male #7: Is it that bad? >>No, I think it's actually not that complicated. There are a lot of decoy facts out there that are hard to parse out, like the tiered pricing, which is a mandated structure from– This is a California phenomenon. It's manned by the utility commission as a way to try to, essentially, charge rich people more for electricity and discourage overconsumption. But that's not a fact of the energy market. It's a policy manipulation. The core dynamic is– Just think about cell phone companies. They have a network they put a lot of money into. They want you to use it. But they max out at peak times, and then they have these trough times where there's no usage. Just like cell phone networks, they have all these– they can't shut down the base stations at night. Even if they did, it doesn't matter because the base station is you build as many of them out to meet peak demand, not because of– and so it's just wasted at night. The cell phone companies would be happy to pay you, probably, to use their network.

It means nothing to them at night time. It's why they have nights and weekend plans. So it's the exact same thing with utilities and with the peak usage and the off-time usage. And with coal plants, the problem is, and with all these baseload plants, is they literally take 24 hours to power up, so they can't shut them off at night. So that is not just a waste of capital in the infrastructure, but it's actually a huge waste of emissions and fuel. So the utilities are motivated to reduce peak. They have an endemic interest in doing that. Then the commissions, which are– you should think of them as your proxy– are motivated in reducing overall usage because they want to save people money and help the environment. So the commissions will set these efficiency standards, and the utilities go out and try to come up with ways to shave peak. Those are basically the two major dynamics. In the top hours, it's a loss. In the worst hours of the year, it can be a loss, depending on the utility. If the utility has their own generation or they're buying on the open market.

Yeah. When the utility exec wakes up in the morning, he does not want, or she does not want, to deliver energy efficiency. They may be interested. They are in many cases interested in reducing peak. And then the commission wakes up in the morning and says, "I want to save citizens of California energy and money and help the environment." And that's the group who says, "Let's have an efficiency standard." And then the utility says, "Well, if they want it, I got to endear myself to them because they're my buyer, when I go to try to sell this next thing. So maybe I should take into consideration this efficiency stuff." And then the complex political intertanglings continue to unfold. But those are the two major fundamentals.

All right. Thank you guys so much for so many great questions. [applause].