After selling Edusoft, the educational software company he founded, to publishing giant Houghton Mifflin in 2004, Dan Yates went on a yearlong road trip from Alaska to Argentina. The trip inspired him to think about energy conservation, and he decided to dedicate his next venture to preserving what's left of the planet. In 2007, with his longtime friend Alex Laskey, he founded Opower, which combines behavioral science, data analytics and customizable software that helps utilities help their customers save energy.
The privately backed company has contracts with several of the nation's leading utilities, including PG&E, and recently signed a business partnership with Tepco, the largest utility in Japan. Opower says it saved more than 3 terawatt-hours (TWh), or 3 billion kilowatt-hours, of energy as of the end of 2013, which the company says is equivalent to removing more than 450,000 passenger vehicles from the roads for a full year.
Opower's headquarters are in Arlington, Va., but 210 employees work out of its growing San Francisco office; the company also has offices in London and Singapore. This newspaper recently met with Yates in Opower's San Francisco Street office. His comments have been edited for length and clarity.
Q One of Opower's first products is a "Home Energy Report" that is mailed to customers. It shows how much energy you save compared with similar homes, tracks your electricity and gas usage over the past 12 months and gives three quick tips on how to save energy further. I'm a PG&E customer and I get Opower's statements. But we live in a pretty energy-efficient household: We had a full energy audit of the house done, we have an efficient heating system, we have a Nest thermostat. There's not much more that we can do to reduce our energy use, and to be honest, I don't think the Opower reports influence my behavior all that much.
A I believe it. Most of the people who get our reports are really high energy users, and we get less savings from really efficient people. Everyone says that the reports don't influence their behavior, but we see about a 2 percent reduction in energy consumption. That doesn't sound like a lot, but for the utility in aggregate, that's huge. The average American spends only about six minutes a year thinking about their energy use. We've also found that when utilities turn off our program, there's a drop-off in the savings. From the utility's perspective, we've become a huge part of their portfolio. We're one of their most compelling options for hitting their energy-efficiency goals. We are plucking the lowest-hanging fruit, but today only 10 million homes actually get our energy reports. That's 10 million out of 120 million homes in the United States. There's a lot of room to grow.
Q The crux of Opower is behavioral science, and how you message that to different market segments. How has the thinking around that evolved as the company has grown?
A The monthly Home Energy Report that you get in the mail is our first product; we now have five products in the market. We've learned that "normative comparisons," as they say in behavioral science nomenclature, is a very powerful lever. But it's one of just many behavioral methodologies. We've learned to say "You've lost $300 this year by not doing XYZ" instead of saying "You could save $300" because it turns out that loss language is more effective. We have three energy tips on the back of each statement, and these work because they feel authoritative. We've done tests, and when we've switched to beautiful pie charts that are personalized, we see a 10 to 15 percent reduction in the energy savings. But that's just the report. We have a suite of products, including automated calls, mobile apps and a partnership with Honeywell. We do predictive high-bill alerts, and call you in advance of a high bill.
Q So which utilities are really on the ball in terms of embracing the Opower platform?
A PG&E, National Grid in Massachusetts, Baltimore Gas & Electric which is part of Exelon, E.ON in Europe; we just announced Tepco, the largest utility in Japan. We have contracts with 90 utilities, and we have deals with utilities that cover 40 percent of the households in the United States.
Q Opower isn't your first rodeo; you started Edusoft, built it and sold it. This time around, how does this feel to you personally, in terms of exits? Are you determined to keep Opower a stand-alone company?
A I focus day in and day out on just building the business. For me personally, I have built and sold a company. I've seen the devastation that is wrought. This is my life's work. Alex and I are amazed at how successful this has become, and I feel lucky to be here and lucky to be leading the company. It's what I'm most passionate about. I feel proud of the fact that we've saved 31/2 terawatt-hours, and I feel terrified that we are not on track as a planet to prevent climate change. I don't have a better lever than this right now to pull. I have no illusions that I'm going to solve climate change, but I want to be a bigger part of the solution. The exit stuff comes when it comes. If you have a great company and you have a VC who wants to exit and you're private and no one is buying you, they can sell their shares. That's kind of their problem. I'm very close to our VC board members and investors, but we don't have to drive the business that way. We're going to drive it to what's right for the growth of the company.
Contact Dana Hull at 408-920-2706. Follow her at Twitter.com/danahull.
Current job: CEO of Opower
Previous job: CEO of Edusoft
Education: Bachelor's degree in computer science, Harvard
Residence: Mount Pleasant neighborhood of Washington, D.C.
five things about dan yates
1. Within the company, he is known for his hula hoop skills, which were captured on video at a 2010 company picnic.
2. His wife's career took the couple to Washington, D.C., but California is home. Yates grew up in San Diego and lived in or near San Francisco for nine years.
3. When he spoke at Google headquarters on Earth Day 2012, he wore a blue T-shirt that read "I'm not lazy. I'm energy efficient."
4. The yearlong road trip that Yates and his wife took from Alaska to Argentina, and the environmental degradation the couple witnessed on the trip, is a key part of the Opower creation myth.
5. His Twitter handle is @danjyates.