"When you were conducting energy audits, what was your medium of choice?" Carter Erwin asked Colin Davis at a recent MIT Energy Conference.
"Pen and paper, floor plans if I was lucky, Excel spreadsheets, and crying softly in a cubicle as my life ticked away doing data entry," Davis responded, describing his prior work in a commercial energy auditing industry that is seemingly stuck in the 20th century.
Davis and Erwin are among the entrepreneurs making Vice President Joe Biden proud. In October, Biden unveiled "Recovery through Retrofit," the Obama Administration's aggressive program to promote residential energy retrofits. On March 21, kWhOURS, Inc., a startup Davis founded and at which Erwin works in product development, is releasing its first product: software that will enable energy auditors to perform commercial audits more efficiently and cheaply.
"I proposed doing this within my old firm and they basically said, 'We're not a software company,'" said Davis.
According to Davis, kWhOURS' product has been in development for a year and is currently being beta-tested by, among others, a large electric utility, a Northeast-based energy service firm, and several small private consultancies.
kWhOURS' potential customers are interested in its technology because of the lengthy, expensive and archaic process through which most energy audits are currently conducted.
"They take a long time. They're performed by people with an average of 15 years of experience. They're usually professional engineers with multiple degrees billing the equivalent of $150-200 an hour," said Davis. "These highly skilled individuals spend a very significant portion of their day counting light bulbs, recording nameplate efficiencies on pumps, motors, HVAC equipments, manually migrating their shorthand notes to a digital platform, and trying to guess what all the site photos they took actually depict."
"An investment-grade audit for a 500,000-square-foot hotel, for example, could take a month," continued Davis. "Data collection would take a week or so in the field. Then everyone goes to their dark little three-walled rooms, migrates from pen and paper to Excel spreadsheets, and manually inputs that data into Energy Star and different energy analysis and modeling tools to analyze various ECMs (Energy Conservation Measures). Then they write a report from scratch. It's a terrible misuse of highly skilled engineers to [have them] spend so much time on simple repetitive tasks."
In the system developed by kWhOURS, auditors can export their Excel spreadsheets or instantly plug it into benchmarking and analysis software like Energy Star and DOE-2. A second release, coming out in Q3-Q4 2010, will sport automated analysis and reporting tools.
Dennis Costello, Managing Partner at Braemar Energy Ventures, believes that there is a market for innovative software that would help modernize the energy audit industry.
"The whole idea of energy audits -- let's broaden it to include energy building commissions and LEED Certification -- is an industry that will need software and needs to be more automated than having individual engineers walking around with clipboards and then inputting the data into spreadsheets," said Costello. "There is a lot of opportunity there. I don't know who the winners will be yet. It is very intriguing."
Many firms are currently working to develop software for more efficient energy audits. Some focus on residential customers and others, like kWhOURS, target commercial auditors. Perhaps the best established of the bunch is Recurve, formerly Sustainable Spaces, which was recently named a Greentech Media Top 50 Greentech Startup. The San Francisco-based firm's software enables it to conduct residential energy audits and retrofits quicker and more cheaply than traditional auditors. Currently, large builders in different regions in the U.S. are testing Recurve's software.
Then there are companies like BuildingIQ that have created applications for dynamically controlling air conditioners, heaters, and someday soon, other applications in a building. These companies don't specialize in retrofits, but they create computerized models of the buildings they control and collect data on building performance. One can imagine companies like this moving into the retrofitting and auditing software space, as well.
The challenge kWhOURS faces is selling into a fragmented market, as energy audits are conducted not only by utilities and large energy service firms, but also by thousands of small energy consultancies. Marketing and selling energy audit software could be expensive -- particularly when competition among software providers becomes intense.
"I really like the idea generally. The biggest worry that I have is that there are a lot of companies that are trying to chase the same customers in the same market," said Bilal Zuberi, Principal at General Catalyst Partners. "You have to stand out. To stand out, you need a direct sales force. These businesses will live and die by their cost of customer acquisition (COCA). I am standing on the sidelines. I want to invest in these companies when they can show me they are steadily bringing down their COCA to the point where it is sustainable."
Yoni Cohen is a JD-MBA student at the Yale Law School and the Wharton School of the University of Pennsylvania. He previously worked as a reporter for Fox Sports, among other jobs.