Efficiency 2.0 Offers Energy Diet Plan with Perks to Consumers

7/7/11Follow @jpruth

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of energy companies such as Northeast Utilities in Hartford, CT and Commonwealth Edison, a unit of Chicago’s Exelon. The customers can earn points redeemable for merchandise with participating retailers if they meet certain energy saving goals.

Scaramellino, a Yale Law School alum turned entrepreneur, says the program puts customers on a kind of power diet that shows them how incremental investments in energy efficiency can be beneficial. So far more than 300,000 homes across country participate in the PEER program through their utility companies. Scaramellino says he is aiming to sign up five million homes by the beginning of 2014. “That would have us working with a little under five percent of the U.S. population,” he says, “which would be a significant market share capture for an early stage company like ours.”

Getting five million homes into the program could generate $75 million in annual revenue for his company, Scaramellino says. The utilities pay Efficiency 2.0 based on the amount of total energy saved through the program. “Most folks can’t monetize that kind of online penetration at such a high rate,” he says.

Investors seem to concur about Efficiency 2.0′s prospects. Scaramellino says the company so far has raised just under $8 million through angel investors, small funds, and a strategic partnership. One of the company’s investors is Jason Finger, the founder of SeamlessWeb. He says the concept of coaxing customers to curb their energy use resonated with him. “Behavioral science-based offerings are next generation, value-added businesses,” he says. “The applications can go beyond energy to other things that will be in Efficiency 2.0′s purview.”

Efficiency 2.0 has a staff of 30 and Scaramellino says the company is weighing options to raise more capital to grow its sales and marketing divisions. He hopes PEER’s combination of analytic, marketing, and engagement services that are packaged together, will be appealing to gas and electric utilities that are facing more regulations aimed at reducing power usage.

Scaramellino wants to sign up five million customers by early 2014.

Scaramellino says legislation has already passed in many states across country—particularly since 2006—that requires utilities to sell less energy. “Utilities that don’t hit their goals of reducing energy use can receive very significant penalties,” he says. Incentives are often offered by states to utilities that do meet their goals, Scaramellino adds.

Part of the challenge is convincing customers to replace older refrigerators and other appliances that gobble power. PEER offers customers recommendations on products they can buy to cut their energy needs. “There is still a large portion of the customer base that is primarily focused on no- and low-cost actions to reduce energy use and isn’t making those big home investments,” Scaramellino says. Efficiency 2.0 may help improve adoption rates he says by enticing customers to make those purchases.

Recommendation programs have worked in other types of consumer markets, he says. PEER’s e-commerce platform suggests energy-saving products to suit the customers’ needs, similar to Amazon’s recommendation system he says.

Scaramellino is not concerned that the country will become so energy efficient that he will be out of business. “We would love to be so wildly success that our service isn’t needed anymore, but that is an incredibly difficult goal to attain,” he says. But capturing five percent of the country’s population would be significant for Efficiency 2.0, he says, because the company operates at margins in excess of 75 percent thanks to its low overhead. “It’s fundamentally marketing and software, we’re not selling any hardware,” Scaramellino says.

João-Pierre S. Ruth is the editor of Xconomy New York. He can be reached at jpruth@xconomy.com and followed on Twitter @jpruth. Follow @jpruth

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