Can Smiley Faces Incentivize Energy Efficiency?

by Robert Collier, MBA ‘14 (4/11/13)

Robert Collier, MBA ‘14

SGE Immersion students visit Opower, a young startup that saves consumers’ money and reduces carbon emissions through transparent energy bills.

In March, the SGE Immersion students visited a number of companies, non-profit organizations, and government agencies in Washington, D.C including Honest Tea, The Department of Defense and IFC. Among these companies, the most significant for me was Opower. In a nutshell, Opower is a software startup company that intends to transform the relationship between customers and utility companies through innovative methods in data analytics, behavioral psychology, and gamefication. 

According to Opower, most people spend just 6 minutes per year thinking about their home energy usage. Thus, it is no surprise that encouraging consumers to wade through the morass of a traditional utility bill appears to be a daunting challenge. For one, utility bills are confusing. Additionally, the per unit price of energy is so low compared to other commodities that many people do not take the time to worry about it. For years utility companies have futilely attempted to inform their customers about the potential environmental and financial savings that could be made when they pay more attention to their energy usage. Even CFL light bulb giveaways have yielded marginal results.

During our hour-long informational session we learned that Opower is trying to change this bleak reality. The premise of Opower’s work is simple: empower consumers to make informed choices about their energy usage by making utility bills more comprehensible. Opower strives to achieve this transparency in energy bills through many different means.

smiley faceAt the core of Opower’s value proposition is the use of behavioral psychology and social-normative messages to encourage people to actively engage with their energy usage. For instance, Opower contracts with utility companies to mail personalized home energy reports that not only contain individualized information about a customer’s usage, but an energy-saving grade of that customer relative to neighbors expressed in smiley faces: two smiley faces is well above average, one smiley face is just above average, and no smiley faces is below average.

Though using smiley faces may seem childish, there are studies in behavioral science that justify its effectiveness. The results speak likewise: the method is proving to have a dramatic impact on energy savings. As of February 2013, Opower’s products have enabled customers to reduce 3,170,710,000 pounds of CO2 emissions and to save $220,135,000 on their energy bills.

Now Opower is looking to expand beyond the home energy report to other products and services including an advanced programmable thermostat that incorporates a smartphone application. 

Opower’s innovative products were not the only aspect of the company that amazed us: the excitement and enthusiasm we could feel while walking through the office stood witness to the care that the company shows to its employees. With an open floor plan, complete with standing desks, couches, and large windows, we saw small groups of employees sharing and discussing ideas. We even passed by two massive kitchens, equipped with kegerators, that had fully stocked pantries. Employees receive weekly massages and had lunches catered to them on Fridays. It was clear that the company values its employees and puts a lot of effort to retain its top talent.

The company is expanding rapidly. With plans to double its impact in 2013, Opower will no doubt need to bring in more talented MBAs and the SGE Immersion is preparing its students for these types of positions.