A New Energy Management Business Model

How do you consume electricity in your home? For many households, this isn’t a question often considered. The question “How much do you spend on electricity?” resonates more with households and bill payers. Most people need an easy and actionable plan for managing costs, which at the same time will reduce overall energy consumption. Understanding these dynamics in matters of residential energy efficiency is crucial to designing programs that will drive increased energy savings.

Building energy efficient homes requires both technical engineering and “financial engineering”. The latter is increasingly the focus of stakeholder business models. Efficient products for the home – from insulation to windows, and appliances to distributed generation – have advanced rapidly, and demand for energy efficient homes is on the rise. But the market has struggled to connect supply and demand, and a profitable business model for whole-house retrofits or energy efficient-designs hasn’t fully emerged.

Lending organizations and new service providers are eyeing business models based on residential energy efficiency, and some big names in the market think there is money to be made in providing related services. The KfW Bankengruppe in Germany is a notable example of a proactive lending organization that has developed dedicated green product lines to stimulate energy efficiency in residential properties. KfW’s green portfolio includes financing for residential upgrades at low interest rates, support for innovation, and consumer outreach. This proactive approach to the residential energy efficiency market is also driving successful whole-house approaches to retrofits.

In the United States, SolarCity – the firm that changed the dynamic of the distributed solar market through solar leasing – has turned to energy efficiency as the next aspect of its home energy management business model. SolarCity offers customized home evaluations and delivers reports detailing opportunities to save energy. Through its strategic partnership with Admirals Bank of Boston, SolarCity targets reducing the financing barriers in the market as well; offering either a one-year interest free loan, or a three- to ten-year loan with low interest rates.

Big-box retail stores such as Lowes and Home Depot are eyeing the growing market for residential energy efficiency, by partnering with programs like ENERGY STAR and offering energy efficient products ranging from windows to home energy management devices. These stores are also increasingly eyeing the services market for residential energy efficiency, in which energy management could become one of several services as part of a home automation package offered by large retailers.

These innovative business models not only acknowledge the value of investing in residential energy efficiency, but are also poised to drive the market forward. The ultimate success will come in combining technical and financial engineering prowess.

Article by Brittany Gibson, appearing courtesy the Matter Network.

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