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Oops! Is OPower the next Solyndra? Non-prices for non-production.

7 Oct
I just became aware of a company, what we in DC call a Beltway bandit, Opower, that has grown rapidly since 2007, when many other companies have shrank or folded.  Presumably since they were founded in 2007 the “O” is not a paen to Barack Obama, though the company has close ties to him – he visited recently and published an endorsement of them on the White House website, and they have in turn donated a lot of money to him.  Here’s what founder Alex Lasky says about Opower in his TED bio: Opower works with more than 80 utilities on three continents, and serves over 15 million customers. Since its launch in 2008, it has cumulatively saved utility customers more than $200 million and 2 terawatt hours (TWh) of energy — enough to power a city of more than a quarter million people. It’s all through a powerful combination of behavioral science, data analytics and good marketing.

It’s privately held so it may be harder than with publicly traded companies to figure out how they make money.  (For example do utilities purchase Opower services because they are covered by green subsidies or green tax credits, but would not without those programs?)  Paradoxically what they mainly do is work for government sponsored utility monopolies, helping them get “customers” to buy less, to “save” energy — they are making money by getting producers to produce and sell less, and buyers to buy less.  One of their two founders even gave a kindergarten level (props and all) TED talk on it.  Inverting a title from Nobel Laureate F.A. Hayek, you could say that their business plan is NON-Prices and NON-Production.  They seek to create websites and other social media, door hangers, mailings, etc. that encourage people to purchase less electricity – the 15 million customers now receiving Opower reports (how many resources do these mailing use?) supposedly have dropped their power consumption 2.5% (though some people who used much less power than their neighbors have reportedly starting using more after discovering that they were unusually frugal).  They claim research shows that prices and budgets don’t lead people to conserve power, and neither do guilt trips and environmental preaching.  But engaging competitiveness, by telling people their neighbors’ have superior talents at saving energy by turning off lights or using fans instead of air conditioning does have bigger impact, according to Opower.  It’s Ayn Rand’s The New Left: The Anti-Industrial Revolution, but with new millionaire hipster nerds instead of unwashed Occupy protestors.

It’s hard to say where their money comes from (green subsidies?  green tax credits?  contracts with utility monopolies), but you can see where they spend it.  By DC standards it actually isn’t that much, though the ideological hegemony is telling.  Everyone there donates to Democrats and only to Democrats, $35,000 in 54 donations since 2010.  This does not including spouses’ donations — founder Daniel Yates’ wife Tobie Withman gave Obama her own $5000 in 2012.   And I don’t know if they participate in the buying of papal indulgences like giving to Hilary Rosen’s Business Forward bundling for Obama, which reportedly had a minimum entry fee of $75,000.    Here’s the search from OpenSecrets: Donor Lookup: Find Individual and Soft Money Contributors | OpenSecrets.

Obama and other politicians visit their Arlington offices.  If one scratched, it might smell a little Solyndra-y or even ENRON-y (the old employer of Paul Krugman, this tribe’s fave economist).  This campaign donating is clearly an investment.  Having President Obama speak at Opower, endorse them, and post his speech on the White House website helps them get venture capital and deal with regulators, maybe even get special treatment from regulators, in the states and countries where they operate.

If you search their twitter feed and tweets about them you find some interesting stuff.  MSNBC’s Lawrence O’Donnell is a fan.  You also find geeky statist “green” flaks saying things like it is great that Opower is going to help America cut down its energy use to the level of the British, apparently absolutely clueless that the British don’t generally have need of air conditioning, and that other countries that use less energy, from France to Cuba, are countries where people are poorer and don’t have air conditioning or adequate heating, live in small houses and apartments, or live with many generations packed into one dwelling.  Americans are 9th by energy usage per capita, with the top 8 being wealthy countries that are either hot most of the year or that have very cold and long winters Americans and Australians generally live in homes over 200 square meters, while many Europeans live in homes under 100 square meters.

I also am not sure anyone if this crowd knows that energy prices, from gasoline to electric bills, may be higher in those other countries — in part because here in the U.S. Opower’s political co-religionists populate the local utility rate commissions that both prevent competition in utilities but also set rates low so that (1) power is “affordable” to more consumers, who then buy more electricity, and (2) utilities disinvest, deferring maintenance and upgrades (for example in Washington, DC, and its suburbs, where every major storm knocks out power for tens of thousands of people, who get their power from overhead power lines running between limbs of century old trees).  By encouraging consumers to use less power, instead of to demand cheaper power, new power sources, or even renewable power sources, Opower incentivizes and fossilizes the status quo, with dirty power and decaying infrastructure.

The founders of Opower are likely true believers, despite how well they have cashed in on the green movement.  One founder, Dan Yates, drove from Alaska to the southern tip of South America with the woman to whom he is now married (a wonk in the non-profit DC policy world), and was disturbed by the environmental degradation he saw.  (He now lives in an almost million dollar home on the Adams Morgan/Mt. Pleasant border in DC, though at least it’s old enough it counts as recycling.) He also profited off selling a $20 million software company that services government “schools.”  The other, Alex Lasky, worked as a campaign manager for state ballot initiatives for the Nature Conservancy and the League of Conservation Voters.

One wonders if a future look at OpenSecrets will show lots of donations from founders Alex Lasky, Dan Yates, and their employees, to Terry McAuliffe, the Democratic gubernatorial candidate who created a fake shell company to take green subsidies and build no actual green technology products, while obtaining fraudulent US Visas for any Chinese investors in his ventures.