Huge Residential Demand Response Market; Opower Wants to Crack It On The Cheap

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Residential Demand Response

Sample Chart That Opower Customer Receives

Only about five percent of residential customers now take part in residential demand response programs that could yield huge savings.

For example, a report by the Brattle Group says that if utilities could help customers lower their usage by five percent during the top “peak” 80 to 100 hours over the course of the year, it would result in $3 billion in annual savings in the US alone.

However, utilities haven’t been successful in enticing residents to cut back their usage during peak demand. That’s due in part to difficulty engaging residential customers and the high expense of the hardware required in the home.

Enter Opower, the darling of the movement to change residential customers’ behavior using inexpensive software, instead of high-cost hardware. The company has seen 156 percent compound growth in revenues since 2008, says Josh Lich, power solutions marketing manager.

Opower has just unveiled a behavioral demand-response program for residential customers that costs utilities 40 percent of what they pay per kilowatt for hardware-based demand response programs.

It’s that much cheaper because utilities don’t need to invest in devices in the home—load control switches, for example. Instead, Opower uses “big data analytics” along with smart meters, says Lich.

Working with its first client, Baltimore Gas & Electric, has allowed Opower to glean critical information about how and when people like to learn about their power usage and peak events, says Lich.

Opower sends participants pre-event notifications—via text, email, or phone call–and also post-event summaries the following morning—including how the customer compared to similar neighbors. The Opower system allows each utility to test hundreds of combinations of content and communications channels to see what works best for each customer.

“We send out over 100 communications to customers. They respond to certain messages. Some highlight the dollar savings, some highlight energy. We’re optimizing what works and what doesn’t work over time.” Some customers want the information in dollars; some want kWh, he says.

Next-day feedback is critical, Opower has found. “If you give customers next-day feedback their reductions increase by up to 25 percent,” he says.

Before this program, Baltimore Gas & Electric had a typical penetration rate for residential demand response: 25 percent. But participation is expected to jump with the Opower system. The utility invested about $500 million in its smart meter business, and is expected to yield $2.5 billion in savings over 15 years. “Our system will account for 49 percent of that savings,” says Lich.

Why is expected savings so high?

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All power systems also require the capability to balance, in real time, differences between load demand and generator output. This balancing capability—which keeps system frequency at the level where it’s designed to operate—is critical to ensure the stability and reliability of the overall power system, for both centralized power grids as well as microgrids. In a centralized grid, fossil-fuel-fired generating plants typically will ramp up or down to ensure demand and generation output remains in balance.
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“We found that residential consumption at peak times is 60 percent of peak. Those figures are for Texas, but it’s a similar story throughout the country. Residential usage spikes more,” says Lich.

Implemented across the country, this program could reap huge savings, says Lich.

“Opower’s solution is a game-changer for the industry,” said a company spokesman. “Never before have utilities been able to engage with all their customers during times of high energy demand to save energy without the need to install special equipment. Now, utilities have the ability to connect with customers in real-time and provide them with information and energy savings tips to help ease the strain on the power supply.”

Opower is delivering a lot of promises with its new system. But there must be challenges ahead. Will the novelty of getting real-time alerts and saving energy as a result of them wear off for residential customers? Or will customers actually get more excited about cutting kilowatt-hours, and engage more with this system as time passes?

Will we see neighborhood energy-saving competitions? Will Opower make every homeowner an energy nerd? If so, we’ll all have reason to celebrate.

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  1. Lisa, and fellow readers:
    Has anybody seen the data on Opower’s claims? How about success rates tied to the price(s) of power? If my average price is north of, say, 15 cents / kwh, I’d be very willing to participate because we’re talking about real savings that add up. Any price below, say, 12 cents / kwh I’m guessing the results are less.
    What does everybody think? I’m looking forward to your inputs. Thanks!


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