Rationalizing Energy Efficiency

Today’s utility industry is an interesting paradox: on one hand, we have monopolistic incumbents struggling to evolve within a rapidly changing market, and on the other — innovative startups are aggressively looking to change the entire paradigm.

While we seemingly live and experience innovation in every service that touches our lives, the utilities that we count on to deliver our most important service — energy — seem to have been left behind. Though the building and maintenance of a reliable infrastructure delivering public goods like water, gas and electricity is not trivial, much of today’s utility business model is propped up through traditional programs and a culture of subsidies.

Yet we live in a world where the focus on sustainability and energy that is good for the world is at an all time high — and an important topic to unpack is the conflicting messages delivered through utility rate decoupling and energy efficiency programs.

So, what exactly is decoupling? It refers to the the separation of a utility’s profits from its sales of electricity. Designed to promote energy efficiency and generation from wind and solar, decoupling provides utilities a level of profit guaranteed by the state utility commission — in exchange for support for these energy efficiency programs. The conflict lies in that, without decoupling, utilities have very little incentive to innovate or promote energy efficiency or distributed generation programs — if they did, it would reduce the amount of electricity sold, and in turn, result in lower revenue and profit.

A very real world example of this happened in California. Water utilities worked with their customers to massively reduce water use through a historic drought, resulting in incredible rate hikes and generating massive customer backlash.

While there is no easy, short term solution to evolve beyond a market driven by decoupling, the world and consumer behaviors are certainly changing. There is clear demand for solutions around energy efficiency and distributed generation — without subsidies — to maximize environmental and financial impact.

Our position at Inspire is that, the market is ready and hungry for a fully integrated energy service — one that provides customers complete control of and transparency into their energy, while allowing them to make an impact and actually use less energy overall. All without subsidies or other forms of financial engineering.

The way we do that today is through our Smart Energy subscription which consists of (a) a clean energy subscription powered by 100% wind power (b) smart home and energy management technologies (c) our loyalty and engagement program, accessed via our mobile app, that drives continued engagement through aligned incentives and calls to action.

This collectively allows us to deliver our Triple Bottom Line, which consists of:

1. When the customer uses less energy, we reward them by giving them cash back.
2. When the customer uses less energy, we do better as a business because we didn’t have to buy as much energy supply.
3. When the customer uses less energy, the world wins because the cleanest form of energy is the energy we don’t use.

With this, we’re able to deliver true decoupling without the need of subsidies, and all parties involved are better off. Also, working off of this model, energy efficiency funding and programs are allowed to deliver maximum impact without having to offset profit loss.

If you are interested in learning more, or partnering with us as we continue to build our Smart Energy products, please reach out at partnerships@helloinspire.com.