You Will Use Less Electricity, and Here's Why

As utilities increasingly turn to companies like Opower and EnerNOC to help customers curtail demand, you will comply for your own good, and for the good of the utility.

Aug 18, 2014 at 10:52AM

The utility industry faces a changing regulatory environment. And while the government is looking to consumers to help on the environmental front by reducing their electricity consumption, the U.S. court system recently said paying customers to reduce their use during peak demand periods wasn't good enough to offset the construction of new power plants. Even with that setback, companies like EnerNOC (NASDAQ:ENOC) that make money by managing customer electricity use are virtually assured that helping customers get a handle on their demand will be, well, in demand.

The customer side of things
The recently proposed Environmental Protection Agency (EPA) rules about carbon dioxide include an interesting twist: States will be able to count changes in customer demand toward CO2 targets. That materially softens the blow for utilities and pushes the envelope on conservation.

Such regulatory largess was music to the ears of Opower (NYSE:OPWR). The company specializes in helping utilities track and display power use to their customers. This helps customers better manage their consumption and expenses. It's technology that utilities will increasingly want to have at their disposal.

Source: ReubenGBrewer, via Wikimedia Commons.

Why? The U.S. Energy Information Administration (EIA) projections explain. The EIA makes multiple electricity demand projections: an expected outcome and then higher and lower scenarios. The reference case (the expected outcome) is for demand to increase 25% by 2040, but the low growth case calls for demand to flatline. Negative growth (conservation) on the consumer side is the driving force of that call, offseting a modest increase on the industrial side. Commercial customers are expected to show no growth.

A subscription to Opower's service allows utilities to show customers how well they are doing at reducing their power consumption. Which is a big deal, because using less power will require customers to spend money on new appliances and home improvements. But according to the EIA, the savings achieved on their electric bills should come close to offsetting those costs.

Opower CEO Daniel Yates is pretty excited by the opportunity: "We are still in the early days of addressing a multibillion-dollar opportunity to help utilities achieve their demand management objectives and improve their engagement capabilities." Since revenues were up 50% year over year in the first quarter, money-losing Opower looks like it is fast approaching the profit tipping point as it helps address this key issue.

But what if you paid customers to use less power?
So Opower, which works with over 90 utilities around the world, should see continued demand for its product. However, utilities providing better information to their customers isn't the only way to get customers to use less power. And that's where EnerNOC comes in.

EnerNOC makes software that helps commercial and industrial customers track and control their own power use. And energy is a notable expense. For example, late last year, EnerNOC highlighted Adidas' goal of cutting energy consumption by 20%. The company spends around $200 million on energy, so such a reduction would save some $40 million.

Remember, the industrial sector is the one area in the EIA's low demand case that still sees growth. But it gets better. Not only does EnerNOC allow customers to better control their own use, it also ties into utilities looking to pay customers to use less.

Source: ReubenGBrewer, via Wikimedia Commons.

EnerNOC's systems basically allow utilities to tell select customers when to curtail power use. Those customers get paid for that effort and the utility saves the expense of running its plants harder or, worse, having to build new ones. And not spending is a big benefit to a utility since power plants are expensive to build.

In fact, if utilities can get customers to use less power, the EIA projects that infrastructure construction will fall by about 50% versus its reference case. And, on top of reducing capital spending, the reduced power consumption helps compliance efforts with new regulations. That's a win-win for everyone involved that virtually assures you will be asked to use less power and willingly comply.

Do you know this energy tax "loophole"?
You already know record oil and natural gas production is changing the lives of millions of Americans. But what you probably haven't heard is that the IRS is encouraging investors to support our growing energy renaissance, offering you a tax loophole to invest in some of America's greatest energy companies. Take advantage of this profitable opportunity by grabbing your brand-new special report, "The IRS Is Daring You to Make This Investment Now!," and you'll learn about the simple strategy to take advantage of a little-known IRS rule. Don't miss out on advice that could help you cut taxes for decades to come. Click here to learn more.

Reuben Brewer has no position in any stocks mentioned. The Motley Fool owns shares of EnerNOC. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.

Compare Brokers