A new path to profit for Earth Networks: Energy utilities
Since 1993, Earth Networks has mainly sold weather data to the scientifically inclined. Co-founders Bob Marshall and Christopher Sloop traversed the country setting up more than 10,000 weather stations in individual neighborhoods and built a comfortable business selling the aggregated data to meteorologists, government research labs and a hodgepodge of private companies.
A few years ago the little Germantown, Maryland-based company spotted a new market: giant utility companies looking for untapped cost efficiencies.
Earth Networks nabbed its first utility account in 2012 and has since expanded to a handful of states, a new revenue stream that is already in the millions of dollars, Marshall said.
The most recent deal, a partnership with Northeast energy provider National Grid, was announced last month. The utility, which serves homes in New York, Massachusetts and Rhode Island, is looking to spot cost-savings opportunities by merging home thermostat data with hyper-local weather readings.
"We feel this would really help customers not only to save money, but help us from a distribution perspective," said Carlos Nouel, National Grid's New Energy Solutions chief.
The business relationship grew from a project National Grid was working on with researchers from the Massachusetts Institute of Technology. The team at MIT had developed a mathematical model that could predict certain costs associated with specific weather events.
They quickly realized that it was much easier to accurately measure such costs for a home that sits within five miles of a weather station because neighborhood-by-neighborhood temperature variation can actually have a big effect on how much it costs to heat a home.
"Fifty percent of (energy) usage in your home, especially in the Northeast, is driven by weather," said Nouel, citing National Grid's internal data.
That matters to utilities because minor temperature variations from one neighborhood to the next can affect the rate at which different houses gain or lose heat.
"You might be in D.C., but if you're in Arlington (Virginia) or somewhere else, the weather can be totally different," Nouel said.
Utilities pay Earth Networks for more than just weather data. What National Grid is really buying is the ability to unite home thermostat data with weather readings and to influence costs by taking control of people's thermostats.
Earth Networks has a separate product called WeatherBug Home, a free system that lets homeowners manage energy costs in conjunction with what's going on outside. Opting into the app gives Earth Networks the ability to take control of the thermostat and make adjustments throughout the day. The goal is to avoid the costly energy peaks that the typical energy consumer experiences.
If a particular customer always cranks up the heat when he gets home at 6 p.m., for example, the system could slowly heat the apartment all day while he's away. The result would be the same 6 p.m. temperature level with a more evenly distributed use of energy, which is cheaper for the utility.
The proprietary weather sensor data allows the utility to measure and control how hyper-local temperature variations affect energy usage. That makes more than just a small impact, if studies released by Earth Networks are correct. A January pilot study using National Grid's data cites a 16.5 percent electricity reduction associated with using the WeatherBug Home system.
Nouel would not say how much his company is paying Earth Networks under the new partnership, citing a nondisclosure agreement. Earth Networks charges the utility a flat fee with a variable rate that depends on how many customers enroll in the connected home system.
Earth Networks is chasing a pool of energy-efficiency spending that is driven by a combination of state regulations and customer demand. At National Grid, Nouel oversees a budget of about $500 million that his company has set aside for cost-efficiency programs. That spending goes to such things as in-home insulation meant to keep heat from escaping, financial incentives targeted at customers and analytical programs meant to spot inefficiencies.
This sort of spending has been a boon to at least one other local company. Across the Potomac River in Arlington, energy analytics start-up Opower rode utility sales to an initial public offering in 2014 and a $532 million buyout in May by software giant Oracle.
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