It’s an uphill battle, but Philip Playfair, co-founder of Toronto-based start-up Lowfoot with business partner Steve Hammond, is convinced that if Ontarians will only lessen their skepticism of energy entrepreneurs they will understand a basic truth about his business, and the energy industry in general – less is more.
“The demand for electricity can be met in two ways,” Playfair told me: “you can create more generation to meet demand, or you can reduce demand. The idea of Lowfoot is to reduce demand to deal with high-demand periods for electricity, and that has equal value to building a power plant.
“Our view is that the cheapest kilowatt is the one that’s never used,” an idea that is slow to catch on in Ontario.
Here’s how Lowfoot works: an individual, family, or small business – in fact, anyone in the world with a smart meter already installed for gauging electricity use – can register for free with Lowfoot, indicating they want to reduce their energy consumption by at least 10 per cent. A new user identifies which utility they draw power from, and assign Lowfoot as their agent to view energy usage data and present it to them in ways the average person can understand: kilowatts used per hour (kWh), peak and off-peak times, and whether they have consumed more or less energy than their baseline reading and 10 per cent reduction target.
A typical graph from Lowfoot will look something like this:
Still with me? If you excel at reducing energy and stay below your 10 per cent reduction target, you earn Lowfoot credits – 1000 credits = $1. It’s not a lot, but they add up the more energy you reduce: the more you reduce, the more you earn. At the end of each month, Lowfoot sends you a Paypal transfer which is the financial equivalent of the energy you have saved. And the built-in Facebook and Twitter applications makes it painless to share your energy (and cost) savings with others.
What’s more, all that energy reduction will show up as a net cost-savings on your monthly energy bill from your local utility. Not only does Lowfoot pay you, but it helps you save money, too.
But how does Lowfoot make money? Some is made through advertisements on their website and e-mail newsletters, but much comes from Playfair and Hammond themselves; they are the primary investors until others can be found. Work they cannot do themselves they contract out to keep the company lean, nimble and manageable.
Lowfoot has an interesting relationship with their advertisers, dabbling in a micro-carbon trading system. Say WorkCabin.ca has sponsored the Lowfoot credits issued in a given month (which they have): by paying Lowfoot to encourage their hundreds of users to reduce their energy consumption and then paying them with advertising revenue from WorkCabin, WorkCabin can claim to have offset their own carbon use by trading money for reductions.
Problems arise with the business model because it sounds too good to be true. North Americans have grown accustomed to subsidized electricity prices that keep its true cost hidden and the subsidized cost artificially low. So long as the average Ontarian pays so little per kWh (from 6.2 ¢/kWh at off-peak times to 10.8 ¢/kWh maximum during peak hours in winter), there is little financial incentive to reduce consumption when we pay pennies for energy. Convincing people that despite the artificially low cost of electricity in Ontario, reducing energy consumption can help their bottom line is a challenge.
“We are paying people to reduce,” Playfair told me, “and we’re the only ones I know of that do this. Not only is this an environmental issue, but really it’s an efficiency issue: North Americans are profligate wasters of energy and electricity, and with the right set of both incentives and disincentives in terms of price, people can use electricity and energy much more efficiently.
“We want to have people consistently use less and then reward them when they do.” It’s the power of the carrot, without the fear of the stick.
And the idea is catching on. Operational for 12 months, Lowfoot has grown from 80 members to 650, and continues to grow by 3 or 4 members each day. The energy Lowfoot has helped reduce is the equivalent to 74 tonnes of carbon kept out of the atmosphere and counting. While Playfair indicates their system can work anywhere in the world where smart meters are installed, gaining access to some portion of the 600 million estimated smart meters installed worldwide is difficult.
But new markets have been found. Lowfoot is now operational in California to all customers of Pacific Gas and Electric, in addition to almost 4 million energy consumers in Texas. And that’s just for energy: Playfair indicated that the smart meter technology applied to energy is gradually being applied to water and gas consumption, markets that Lowfoot is uniquely poised to move into. They are also currently in negotiation with a Dutch utility company to bring their brand of conservation overseas.
Texas is an interesting example. The state that exemplifies Big Oil has begun leading the pack in determining alternatives to traditional energy consumption. Enter SURGE Accelerator. Based in Houston, Texas – “the energy capital of the world,” as they call themselves – this organization brings together entrepreneurs and established companies working in five key energy areas: Smart Grid Applications, Energy Trading & Risk Management, the Digital Oilfield, Energy Efficiency, and Regulatory Compliance.
Every year SURGE Accelerator offers ten companies $30,000 and the opportunity to come to Houston for 12-weeks and meet with like-minded energy-innovators; the endgame is presenting to high-level potential investors to help get their idea off the ground. For the Spring 2012 session, 400 entrepreneurs applied, 50 received interviews and 10 were selected, Lowfoot among them. Playfair leaves for Houston in mid-March.
Aside from low electricity costs that dis-incentivize consumers to reduce energy, the lack of competition in Ontario – companies providing the same service as Lowfoot are few and far between – means the public are generally unconnected from their energy use. If more companies like Lowfoot were competing for consumers attention and exerting even greater pressure on government and utilities to think of reduction as equal to increasing generation, the debate over energy pricing and how best to meet demand would be much more prevalent.
There is surprisingly little discussion over energy pricing, and often when there is, the calls are coming from Progressive Conservatives and New Democrats alike to lower electricity prices to “make life easier” for families.
But this is ridiculous, according to Playfair. “The price for electricity needs to be set by the market, and not by government,” especially given how low energy prices currently are. Companies like Lowfoot go a long way towards demonstrating there are still incentives to reducing consumption even when prices are artificially low, but even greater interference from government could critically undermine any reason the average Ontarian has for using less energy.
“Cash is king,” Playfair told me. “We could be way more efficient with regards to energy in Ontario if we wanted to.”
Ideally, people would be more aware of the impact of profligate energy waste and reduce consumption accordingly, making companies like Lowfoot redundant. But Lowfoot’s blending of cash incentives with energy bill savings for reducing demand strikes a unique and necessary balance – getting people to do the right thing (reducing energy), albeit for the wrong reason (because they want to be paid for it) – making them well-suited to change hearts and minds in the struggle against energy waste.
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Andrew Reeves writes the Morning Cable (and other stuff) for Toronto Standard. Follow him on Twitter at @reevesreport.
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