Energy efficiency: How the Internet can lower your electric bill

Energy efficiency – revolutionized by cyber networks – may carry the same impact as a new oil boom. Electricity users are seeing power in their 'negawattage' as they cut their bills by 90 percent.

Cover Story

Gary Raymond had had enough of the lights in Warehouse No. 5.

The old metal-halide fixtures cast a sour yellow hue on the stacks of cardboard boxes inside the storage facility. They hummed incessantly and burned out well before their due.

So Mr. Raymond, the landlord, replaced them with a brighter, smarter Web-enabled lighting system. He hoped it would help attract and retain tenants in the increasingly competitive warehouse market on Chicago's Southwest Side. But when the next utility bill arrived, something looked very wrong.

The bill appeared to show only partial electricity use, and the bottom line was a tenth of what it normally was. The tenant thought the new lights might be broken, but as far as Raymond knew, they worked just fine.

The local utility couldn't believe it either. Commonwealth Edison (ComEd) dispatched an engineer to double-check that the meter was operating properly, Raymond recalls, and later hired a consultant to monitor the lights.

Everything checked out. The meter worked. The lights shone. The partial electricity use wasn't a result of the "intelligent" lighting system working improperly. It was a result of it working exactly as designed – and better.

"We were amazed," Raymond says. "We thought it'd be around 80 to 90 [percent savings], and it turned out to be more than 90."

Annual electricity costs at the 177,413-square-foot warehouse dropped from about $50,000 a year to less than $5,000, and ComEd awarded Raymond a $65,176.90 efficiency rebate.

Today, Raymond walks under a cool, white glow in Warehouse No. 5, extolling those lights with the intimate reverence typically reserved for the latest smart phone or luxury car. Forklifts beep past as he strolls through rows of boxes filled with the empty plastic bottles made in an adjoining plant. Twenty feet above his head, networked clusters of light-emitting-diode (LED) bulbs brighten as he moves near them and dim as he walks away.

"I assure you, you've never seen anything like this on a lighting system before," Raymond says back in an office where he demonstrates the lights' online interface, which tracks consumption data. Laughing, he adds, "This is the type of thing you'd see on 'Star Trek.' "

Call it "intelligent efficiency," or "cleanweb." Call it the "soft grid," or the "enernet." There's a host of buzzwords to describe the growth of Internet-enabled efficiency, and they all mean slightly different things. But they all pose the same underlying question: How can we harness the power of the Web to consume less energy? Their end goal is identical: a resource as clean as wind or solar, but as light and gossamer as a cloud.

Internet communications, inexpensive sensors, and data analytics are enabling a high-tech, holistic approach to energy efficiency. In the past it was, "How do I design an efficient light?" Now it's, "How do I design a whole network of efficient lights that talk to one another via Web communications, adjust output automatically, and report back through online data portals that optimize performance?"

This mash-up of energy industry and information technology gives efficiency a shiny interactivity that expands the conversation beyond "eat-your-vegetables" lectures about insulation and compact fluorescent light bulbs. It promises an energy reduction boom to parallel the oil and gas production boom that has transformed the global energy landscape.

"The energy-efficiency potential is larger than the entire proven oil reserves under the sands of Saudi Arabia," says Gregg Dixon, senior vice president of marketing and sales at EnerNOC, an energy management company.

If that sounds hyperbolic, it's because academics, scientists, and politicians have long hailed efficiency as an unsung solution for the world's energy woes. But it can be abstract and hard to quantify. When President Jimmy Carter donned a cardigan to champion conservation, he did little to win over an abundance-loving public that often associates efficiency with discomfort and nanny states.

That's changing. Engineers and designers are taking topics we'd rather not think about – industrial lighting, utility bills, thermostats, our own energy footprint – and making them approachable, understandable, maybe even fun.

"[Beginning around 2005], we really saw the convergence of a bunch of technology innovations that enabled us to do things that we could have only imagined 20 years ago," says Neal Elliott, who leads research on "intelligent efficiency" at the American Council for an Energy-Efficient Economy (ACEEE). "With that, sort of came the awareness within the efficiency community that the component approach to efficiency was maybe not going to get us where we think the opportunity exists in the big picture."

Perhaps a systems-based approach could. We know it saves energy to turn off one unneeded light. We know the result of turning off a million lights simultaneously. Now we can harness the sum of those changes as a resource in and of itself, tallied in "negawatts" – a utility's "antimatter."

Intelligent efficiency could cut US energy consumption by 12 to 22 percent, according to a June 2012 ACEEE report. That would translate to tens or hundreds of billions of dollars in energy savings and productivity gains.

We may already be seeing the effects. In the United States, carbon emissions are the lowest they have been since 1994, according to the US Energy Information Administration. Energy consumption is still growing, but "energy intensity" – energy consumption per unit of gross domestic product – has been steadily dropping since the early 1970s and is expected to continue to decline. That's thanks to proliferation of many efficient cars and appliances, and a more service-based economy, according to EIA.

Could the future of energy be in the power we don't use?

Caveats and political common ground

Internet-enabled efficiency is no panacea. Some evidence suggests efficiency gains are at least partially offset by savings applied toward more carbon-intensive purchases. The operator who installs smart lights reduces lighting energy, but might use the money saved to buy a gas-guzzling truck.

"You can carve off part of the system and say, 'Look at all the energy and money we saved,' " says Ted Nordhaus, chairman of The Breakthrough Institute, an environmental think tank based in Oakland, Calif., "but it's an open system, not a closed system."

This "rebound effect" is why many economists approach efficiency with an it's-too-good-to-be-true skepticism. Efficiency effectively reduces a good's price, which any Economics 101 student will tell you encourages more consumption of that good. But to what extent is debatable, and estimates range from a modest 10 percent to more than 100 percent.

Most critics don't suggest efficiency is flat-out wrong, but they do caution against irrational exuberance for energy-saving schemes.

"It obscures the scale of the climate challenge, rather than illuminating it," Mr. Nordhaus says. "It basically tells policymakers, 'It's all going to be easy, cheap, and you don't have to do the hard things. You don't have to make the scale of investments or regulations that you need to take to actually decarbonize the economy.' "

The supersmart next wave of efficiency also raises important questions about data security and privacy. Could a thief hack into a smart thermostat and find out if you're home or not? Does collecting data about the grid open us up to cyberattacks from abroad?

Those threats are serious, energy experts say, but manageable, and the benefits outweigh the risks. Energy data live behind layers of cybersecurity, they say, and the information energy companies collect pales in comparison with what online banks, stores, and social media sites collect from their users.

Overhyped or not, efficiency garners support from key stakeholders, and the intelligence component makes it even easier for politicians, investors, and (yes) journalists to fawn over. Even many utilities embrace efficiency, despite its resemblance to asking customers to buy less of their product. It's cheaper than building new power plants and is often mandated by public utility commissions, and it builds rapport with ratepayers.

"We want people to use less energy," says Cheri Warren, vice president of asset management at National Grid, an international electricity and gas utility headquartered in London. "We don't want to make our money on how fast the meter spins; we want to make money on the assets themselves."

In Washington, the issue of efficiency is a rare opportunity for common ground amid polarizing energy topics like clean-energy loans and power plant regulations. At press time, a bipartisan efficiency bill once thought to be a legislative slam dunk in the Senate was sidetracked indefinitely by issues wholly unrelated to efficiency – namely, political wrangling over the Patient Protection and Affordable Care Act, or "Obamacare." The bill would have provided funding for efficiency upgrades in buildings, manufacturing, and the federal government, and it would have been the first major energy bill to pass since 2007. If it were to eventually pass, the bill would save more than $65 billion and create 174,000 jobs by slashing energy waste, according to a September analysis by ACEEE.

An electric bill to look forward to

Up on the sixth floor of a nondescript building in Boston's innovation district, dozens of 20- and 30-somethings pore over computer screens in a gleaming white work space. It could be any high-tech firm designing the next cool photo-sharing application or smart phone game, but this space is as much about atoms and particles as it is about pixels and bytes. The software engineers here rub shoulders with electrical and mechanical engineers. There's a 3-D printer out back and a temperature testing chamber that simulates environments as diverse as the Arctic and the Amazon. In a sort of digital wood shop, 21st-century tinkerers labor beneath dangling wires, lights, and plugs, pawing through an array of colorful bins filled with metal and plastic bits that do only engineers know what.

This is Digital Lumens, the company behind the intelligent lights in Gary Raymond's Warehouse No. 5. Its goal, as president and chief executive officer Tom Pincince says, is "to use information technology and the LED [lights] component together to build a system where every light in the world is intelligent, and that intelligence goes towards efficiency that is dramatic, if not radical."

The company shaved more than 90 percent off Warehouse No. 5's utility bill (and expects the system will pay for itself in about two years). It cut annual lighting costs by 97 percent for a cold-storage facility in Kent, England. Associated Grocers of New England dropped 90 percent off energy costs for its cold-storage facility in Pembroke, N.H., according to Digital Lumens.

What makes those seemingly impossible savings possible? Each individual light is itself highly efficient, but that accounts for only half the savings, Mr. Pincince says. The other half is made possible by sensors, data, and the Internet technologies that control the entire network of lights. It's a scale of efficiency that exists only by thinking of an individual light not as a discrete unit, but instead as one light in a system of lights working together in concert to illuminate a space. Each light senses if anyone's around, and how much light is already there. If the sun comes out, the lights near the windows dim. If a forklift breezes by, the lights brighten. Light is cast only where it is needed. An online data portal lets operators adjust preprogrammed settings and see exactly how much they could save by, say, dimming lights an extra 10 percent when no one's around, or shortening the time it takes for a light to dim after someone has left the area.

That intelligence appealed to Henry Sick. The 2011 Northeastern University graduate works as a mechanical engineer for the company, passing his time "tinkering, designing, and doing." It's not always easy to explain to his friends what he does for a living, and building lights may not carry the same cultural cachet as a gig at Apple or Google. But that doesn't seem to bother Mr. Sick.

"I'm doing work that has an impact and – regardless of what that work is – I know it's meaningful," Sick says.

At Digital Lumens, he says he can contribute to something larger than himself. With conviction, he adds: "We're saving a huge amount of energy."

Peer pressure power

Alex Laskey opens his February 2013 TED Talk with a series of simple questions: How often do you check your e-mail? At least once a day, if not once an hour. How often do you check your bank account? Weekly, maybe. Now, how often do you check your energy consumption? Once a month, if that.

That's the challenge facing Mr. Laskey, president of Opower, an Arlington, Va.-based company that aims to save energy by making it more personally relevant to utility customers.

"When it comes to the Internet helping energy, you actually have to get people to care about their energy use first," says Rod Morris, senior vice president of marketing and operations at Opower.

How is that done? With financial incentives? Moral reasoning? No, something far more potent: peer pressure.

Opower partners with utilities to provide end-users better information about not only their own energy consumption – be it on a paper utility bill, a smart thermostat, or an iPad app – but also information about their neighbors' energy use. The data is anonymous, but it gives homeowners critical context about their consumption levels, not to mention a deeply human desire to smother the competition.

"We're testing to see who can get their family to use less energy," Mr. Morris says. "We have the largest body of energy data in the world, [and] we're able to get incredible insights on how to harness the power of individual choices."

Today, Opower partners with 85 utilities across seven countries, providing easy-to-read bills and digital consumption alerts over the Internet to 18 million homes. The company calculates that its behavioral energy-efficiency programs have saved more than 2.7 terawatt-hours (and counting) of electricity worldwide. That's more than what it takes to power all the homes in a city the size of Atlanta for a year. It translates to about $320 million saved by consumers, according to Opower, and a reduction in carbon dioxide emissions equivalent to taking 200,000 cars off the road.

It's the work of, as Morris puts it, "behavior change, powered by Big Data, run through really smart communications technology."

A thermostat like a smart phone on the wall

Say you've left town for a weekend away. You're a hundred-odd miles down the road when you realize you forgot to reprogram your thermostat for the time you're gone . The dreadful image of a needlessly warm, empty house hangs over you. In your mind, dollar bills spew from the vents.

It's why some thermostats these days come with apps that let you adjust your thermostat remotely. And it's why – with the next generation of Internet-enabled, sensor-equipped, "smart" thermostats – some thermostats do the adjusting for you.

In 2011 Nest Labs debuted a "learning" thermostat that promised to do exactly that.

If Opower banks on data-driven competition to engage customers, Nest Labs uses the power of slick gadgetry to get people to think about – and thus reduce – their energy consumption.

The founders of the Palo Alto, Calif., company came from Apple where they got their "PhD in consumer products," as cofounder Matt Rogers puts it. After helping the company revolutionize the telecommunications industry with the iPhone, Mr. Rogers and cofounder Tony Fadell set out to make a splash in the energy sector. They targeted the thermostat – a decidedly banal but vital tool, convinced they could make it better.

"The gap between the consumer experience in mobile products and the ones in our homes is enormous," Rogers says. "I've been a programmer my entire life and could not program a thermostat for the life of me."

Getting started was rocky, he says. "If you pitch thermostats to venture capitalists, they go, 'really?' " But this was no ordinary thermostat. The company's roots at Apple are immediately recognizable in the Nest Learning Thermostat's polished black and silver design. There are no dials, buttons, or monochromatic screens to squint at. There is just one big disc with the temperature on it.

"At the core," Rogers says, "it's a smart phone on your wall."

You turn the Nest thermostat up and down as you would any other thermostat. But this one keeps track of those changes and "learns" your routine. After a couple of weeks, it adjusts automatically, aided by a built-in sensor that determines whether you're home or not.

The savings are similar to those of traditional programmable thermostats – about 20 percent. But the problem is that many people don't actually take the time to program their programmable thermostat or at least do so effectively. The $249 Nest aims to take the guesswork out of it, engaging the human as much as it can, and leaving the rest up to algorithms and sensors.

That functionality motivated Andrew Kimpton, a software engineer, to install five Nest Learning Thermostats in his family's recent remodel in Winchester, Mass. When the family goes skiing in Vermont, the Nest will automatically turn down the heat even if the Kimptons forget to do so before they leave. And they make use of the thermostat's iPhone app on the way home. "[W]hen we get to the Massachusetts state line we turn it on again, and the house is warm by the time we get home," Mr. Kimpton says. Nest and Opower aren't alone. The home energy management systems market is valued at $1.5 billion in the US, according to GTM Research, an energy market analysis firm. By 2017, that number will more than double to surpass $4 billion.

Virtual power plants

The ratio of pixels to persons is high at the EnerNOC Network Operations Center. Bathed in the glow of a bank of computer monitors displaying numbers, data, charts, and graphs, the men and women working there could be landing an astronaut on the moon. The room, with a large map of the US splotched with clusters of white dots, evokes NASA's "Houston," but quieter, more earthly.

Just a stone's throw from Digital Lumens in Boston, this " 'mission control' for energy management" has processed and analyzed more than 53 billion data points from 14,000 customer sites across five countries.

When demand for electricity threatens to outstrip its utility partners' ability to provide it, EnerNOC contacts customers who have agreed – in return for a predetermined payment from their utility – to temporarily reduce their consumption. In some cases, EnerNOC can directly adjust its customers' loads remotely.

Thousands of grocery stores dim their lights. A major university turns campus-wide air conditioning down a hair. A manufacturing plant idles some machinery. Those tiny adjustments add up, and suddenly the line charting upward on EnerNOC's demand monitor starts to level out and decline. Blackout averted.

EnerNOC is one of several companies that focus on the demand side of a utility industry that has traditionally solved capacity issues with adjustments in supply. The typical response to a demand increase is to build more power plants. But those plants are only useful during peak periods of demand – like when temperatures spike and everyone blasts the AC. The rest of the time they sit idle, unused.

"Enter the demand side of the equation," says Mr. Dixon, of EnerNOC. "If we can connect demand to the grid with communications and control the load that way, we can operate the system much more efficiently."

Instead of investing in expensive new power plants, why not just pay customers to turn off nonessential equipment when demand peaks? Why generate more energy if you can simply better manage the energy you already have?

That's the logic behind demand response. It's not a new concept, but it is growing in popularity as cheap sensors, Web-enabled smart meters, and even social media make energy management possible on a previously unimaginable scale.

EnerNOC, for example, has between 24,000 and 27,000 megawatts of peak load under management. It can curtail 30 to 35 percent of that load – about 8,500 megawatts – for demand response. That's more than twice the size of the output of the largest nuclear plant in the US. It's a source of power made not with concrete, steel, and fuel, but with communications, algorithms, and data stored in the cloud.

As EnerNOC puts it, it's building virtual power plants to curtail the need for real ones.

It all adds up

If a light shines in a room, and there's nobody there to see it, does it actually illuminate? Yes, it does. We have the technology, data, and communications to prove it and to show just how much energy that wastes.

Intelligent efficiency isn't cheap, and there are concerns about rebound, privacy, and security, but industry leaders say the risks of not adopting the technology are even greater.

That resonates with Gary Raymond, landlord of Warehouse No. 5 and owner of Silver Beauty Real Estate – named for the B-17 bomber his father flew in World War II.

He's convinced intelligent lighting is the future, and says he regularly gives tours of Warehouse No. 5 to representatives of major companies looking to cut costs, but wary of the new technology. He tells them what he tells everyone: "The LEDs, the motion sensors, the daylight harvesting – it all adds up."

[Editor's note: This story has been updated to clarify EnerNOC's amount of peak load under management.]