PUBLISHER NRG, Inc. EDITORIAL DIRECTION Reliant Energy ARTISTIC DESIGN JD Lee CONTRIBUTING CONTENT PROVIDERS Steven Levy / Wired Exelon Energy / Chicago Katherine Tweed / Green Tech CONTRIBUTING PHOTOGRAPHY Ariel Zambelich Various At Large PRODUCTION / DESIGN FIFTHKING Media www.fifthking.com © 2013 nRg MAGAZINE ALL RIGHTS RESERVED WORLDWIDE The title and all material within are protected by international copyright laws and are reserved. No part of this magazine may be reproduced without the publisher’s permission. Although the greatest care has been taken to ensure the accuracy of the information contained in this magazine at the time of going to press, neither nRg Magazine nor FIFTHKING Media, can be held liable for omissions, inexactness or errors.
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ON THE COVER: Matthew McConaughey Photography by Anonymous
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iving in Texas is unimaginable without air conditioning, especially on steamy summer afternoons. Unfortunately, there simply isn’t enough power to go around—and when the energy companies suggest that residents not cool it during those hours, people ignore the pleas. But recently Les Bowles, a retired American Airlines pilot living in a suburb not far from the Dallas-Fort Worth airport, became part of a possible solution. He is a beta tester for a program called Rush Hour Rewards, wherein a lusciously designed thermostat with artificial intelligence and an Internet connection eases his domicile into a zone of thrift and earth-friendliness. True, temperatures can inch into the mid-to-high seventies—but the thermostat orchestrates the AC so the increase sneaks up on him. If he does get uncomfortable he can always override the procedure and lower the temp, but he hasn’t done it yet; he says he’s learned to trust the wisdom of the thermostat in such matters.
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True, temperatures can inch into the mid-to-high seventies—but the thermostat orchestrates the AC so the increase sneaks up on him. If he does get uncomfortable he can always override the procedure and lower the temp, but he hasn’t done it yet; he says he’s learned to trust the wisdom of the thermostat in such matters. His thermostat, as you might have guessed, is the much-touted Nest, created by an all-star team of Silicon Valley designers, engineers and computer scientists, headed by the iPod inventor Tony Fadell. Launched in October 2011, this well-funded team bet that people would happily pay $250 for a gadget with flashy design, a simple, powerful interface, and a learning capability that figures out your schedule and adjusts temperatures accordingly. CEO Fadell has always believed Nest was making the first thermostat that people would be happy to get as a gift, and indeed he reports that last Christmas was the biggest installation day in company history.
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(He won’t give sales figures, but points to the company’s rapid growth as evidence that Nest is hitting its marks.) Recently, Nest announced what may be viewed as the second stage of its strategy. Now that is has invaded thousands of homes with its smart device and gathered data about its customers’ climate and living habits, Nest can begin using its powers in a new way. This summer the company will roll out a series of programs called the Nest Energy Services.
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This pivot is in the best tradition of companies like Apple and even Amazon, whose hardware devices have evolved to become front ends for services like iTunes or Amazon Prime Instant Movies. Explaining how this model works in the thermostat world, Fadell compares power utilities to record labels. Just as Apple provided services to help customers link with the labels to get music, Nest is building digital services to help customers save money. Unlike the case with record labels, however, Nest isn’t eroding the utility business model, but
fulfilling a long-term need–getting customers to change their behavior during periods of energy scarcity. “Until now, if utilities wanted customers to change their behavior to use less electricity at those time, they instituted what was called unilateral demand response— they wouldn’t automate the process, they’d turn off the airconditioning whenever they wanted. It was like DRM during the iPod days—where companies like Sony said, ‘I am the guardian, and I’m going to tell you what to do’.” Nest Energy Services is the company’s attempt at a DRMfree conservation system. The most basic service takes advantage of Nest’s existing technology, which features an Auto-Away process that learns the users’ schedules and adjusts temperatures when no one is home. Because this feature is a proven energy-saver, customers qualify for a number of conservation rebates. Since Nest is a connected, verifiable system, customers can bypass the usual complicated application process and get and instant $100 online rebate. (Fadell likes to point out that previous rebate programs required filling out several forms and waiting six weeks for reimbursement.) Another rebate program gives customers a free Nest if they agree to participate in specified conservation plans.
But Nest’s more exotic services focus directly on tackling the demands of airconditioning a home in summer. The most dramatic is Rush Hour Rewards, which kicks in only a few times a year, during the late summer afternoons when consumption peaks. Those demand spikes are unavoidable mini-disasters for energy companies—their own grid doesn’t have the power on hand, and the utility has to buy it elsewhere—competing with other utilities trying to keep the lights on for their customers. Prices shoot up like bottle rockets, and kilowatt hours that were fifteen to twenty cents just hours before suddenly hit the legal limits that utilities can charge residential customers–around fifteen or twenty >dollars, a hundred-fold increase. (If the prices are higher utilities must swallow some of the cost themselves, as regulators limit how much they can bill customers.) That’s why Rush Hour Rewards is so crucial. If even a small percentage of customers use less power in those times, it makes a huge difference. Nest aspires to accomplish that and even more with new innovations.
“Home air-conditioning is the peak load problem, and we’re able to tackle the loadshifting in a very automated way,” says Matt Rogers, Nest’s engineering VP. In exchange for some cash (between $20 and $60 a season), participants in the program get alerts via thermostat or their phones that a Rush Hour event is happening. (Nest promises it won’t be too often and never on weekends.) Nest employs sophisticated algorithms that take into account local weather, the customer’s usual schedules, and the temperatures that its customers consider comfortable –which it often knows better than the customers do. This allows Nest to micromanage the air-conditioning so that it runs as little as possible during the three-hour demand spike, with the inside temperatures at most only three degrees above the usual. (One trick: “pre-cooling” the house with an extra burst of chill before the higher demand starts and prices rise.) There are endless other benefits to using the Nest. “Here’s the endgame–Nest ends up being the brains of the human energy system of the future,” Fadell says. “And we want to be part of that.”
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eliant Energy doesn’t like to think itself as a utility. Instead, the electricity retail provider that is part of NRG Energy likes to think it offers a lot more value for customers compared to a traditional utility. In many ways, Reliant is correct. It operates in the most successful deregulated electricity market in the U.S. -Texas -- and has everything from “lifestyle plans” to text alerts and a robust social media platform. The offerings Reliant has pulled together would make most other traditional utilities swoon. The company is not afraid of social media, and uses it to reach out to its customer base with promotions and during outages. Reliant sees where the future of utilities is headed and it is preparing for a world where selling kilowatts is just one piece of the pie. “We see a world where Reliant can offer multiple types of in-home devices and appliances, and we offer the rate plans and services to add to that,” said Craig Tinder, senior manager of smart energy technology at Reliant. “We foresee a world with automation and smart appliances, but that take time.”
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Before that brave new world is a reality, though, Reliant is building a base of products that help its 1.5 million customers manage their energy use. More than 400,000 customers are using one or more of their current products, which include a very popular weekly summary email and text alerts, a web portal, an iGoogle widget, cash-back nights and weekend plans, and a home energy display. The response to text alerts “has been phenomenal,” said Tinder. Not only was it one of the simplest and most low-cost solutions for the utility to put into use, but it also allows customers more control by letting them opt in to receive an alert when their bill reaches a certain amount. And for consumers who want more, weekly summary emails have also been very popular -especially during the recordsetting heat that has hit Texas. The next level is a web portal, which was built inhouse by Reliant, as was the iGoogle widget and the iPhone app. “We are passionate about having our fingerprint on that user experience,” said Tinder. The home energy monitor is provided by Tendril, but the platform it runs on was developed by Reliant and Tendril together.
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On the social media side, Reliant has an active Facebook page, although it has racked up only a tad less than 10,000 fans. There is also an active Twitter feed and various iPhone apps, including OutageAssist, which was recently launched. Bonus: it also has a flashlight function. On YouTube, you can answer energy efficiency questions posed by a gruff electrical outlet named Jack. If you guess right, you get to watch a funny video, like a mariachi band riding on a golf cart; guess wrong and you’re stuck with a clown giving a foot massage. Reliant also offers AC protection and filter replacement programs. Not only is the company not afraid of reaching into the home, it is looking for more ways to do so. For Reliant, meeting customer needs isn’t just a nice story; it’s a way of life. “Being able to develop new tools is a differentiator for us,” said Tinder. “None of this existed before.”
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ecuring a stable business electricity rate is ideal for those companies that prefer the simplicity and predictability of a fixed rate plan. Many operations are too expansive to track energy usage accurately, and because the cost of power shifts from hour to hour, it can be extremely difficult to maintain a proper record.
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Because of this, budgets that factor in utility costs may be too nebulous to take seriously. This can hamstring growth or resource allocation for new projects. Fortunately, a fixed business electricity rate can dispel these concerns by contracting a single price of power that does not vary as the market does. While this means that the company may
pay a small premium when the cost of energy is low, more commonly, it can save a good deal of money. This is because most operations spend the majority of their energy during peak hours of grid operation, and it is at these times that the price of power is at its highest. Locking in a fixed cost under this peak price will save money when the company is operating during peak hours.
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There are many ways to further reduce utility costs through a fixed business electricity rate, however. When an operation knows how much it needs to allocate to utilities on the budget, it can be more flexible in other areas, and this additional efficiency can help alleviate logistical expenditures that arise when a project is either overfunded or underfunded. With management software on the backend, a company owner can monitor power usage and predict when the best time to scale back on usage will be. This software can help set up response programs that automatically cut power to some nonessential areas when it would make the most sense to do so.
For instance, if the price of energy is higher in the morning, then some lighting can be automatically switched off, or the thermostat can be raised a degree or two, to lower usage amounts; coupled with a stable business electricity rate, this can save the company tens of thousands every year on utilities. Some power operations also couple these pricing programs with efficiency initiatives that can further drive down the expenditures on utilities. For instance, a company may come in and make drastic improvements to infrastructure, such as switching out aging light fixtures with greener and better functioning models. There may be automated controls attached to these fixtures that automatically turn some of them off, or dim them a bit, during off-peak hours to cut down usage.
The HVAC units in the building may be outfitted with modern thermostats that are quicker to adjust and use less power during low traffic times. All of these improvements to the building’s infrastructure will obviously cost the company, but this can be assimilated into a fixed business electricity rate that slowly pays off the price of these upgrades over time. What this means is that the building will use less energy, but will be charged a cent or two more per kWh to pay off the improvements. In effect, the company is running more efficiently at a predictable cost, and once the contract is fulfilled, utility expenditures will dip drastically.
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