Opower doesn't often enter into strategic partnerships with companies that overlap with its business. The behavioral efficiency company has been very successful landing utility partners so far, and other than starting a relationship with Honeywell for a smart thermostat deployment, it hasn't needed to rely on others to expand.
That's why today's announcement that Opower has teamed up with the Lexington, Mass.-based commercial building analytics company FirstFuel is a fairly big deal.
Over the last six months, Opower and FirstFuel have been working to tie their user interfaces together to give clients a seamless analytics offering across the residential, small commercial and large commercial segments. Opower has solid footing in the residential sector, where it pioneered the use of behavioral messaging to cut home energy use. The company has also been building out its analytics for small businesses. But it hasn't yet moved into large commercial buildings, a segment in which only a small number of customers currently participate in utility efficiency programs.
FirstFuel was initially founded as a virtual auditing company that uses meter data, mapping tools, weather data and occupancy data to create models of how commercial buildings are performing without ever needing to step inside. The company said it has identified more than a half-billion dollars in low- or no-touch efficiency opportunities at six times the speed of ordinary audits.
Investors and utilities have responded favorably to FirstFuel's approach. The startup has raised nearly $21 million since launching in 2011 and expanded to eighteen utility partners and five government agencies. FirstFuel has also expanded into efficiency services by partnering with large program administrators to use its analytics to help execute projects for utilities. (Boston-based competitor Retroficiency has expanded in a similar way, inking new deals with utilities and efficiency providers.)
Opower also took notice of FirstFuel's capabilities, which filled a gap in the company's offerings. After working for some of the same utilities over the last two years, including E.ON, National Grid and PG&E, the executive teams at Opower and FirstFuel realized how much their analytics engines and approach to the market overlapped.
"We did an evaluation of a number of potential partners. There was a strong culture match with FirstFuel," said Opower CEO Dan Yates in an interview. "We knew some of their investors, we've been in bids together, and we shared the same philosophy about how to do business."
Today, Opower is offering a three-tiered interface co-branded with FirstFuel that blends a new source of commercial building data with existing residential and small commercial data.
FirstFuel CEO Swapnil Shah said the partnership creates cost efficiencies for utilities by giving them an end-to-end platform and integrating customer care capabilities across all segments. For utilities in deregulated markets, which must always worry about losing large customers in a competitive environment, the offering could help them increase retention.
"Customers are becoming more energy-savvy, and utilities are also hungrier about commercial building insight," said Shah.
The partnership is a valuable one for FirstFuel, which can now expand from eighteen utility clients to nearly 100 with Opower's help. It's equally beneficial for Opower, which gets to offer a powerful analytics tool for a segment that it hasn't yet been able to crack.
Listen to FirstFuel CEO Swapnil Shah talk about the opportunity in commercial building analytics on the Energy Gang podcast:
"A partnership is not going to happen if it’s not a benefit for all three parties -- us and our customers. Utilities have been asking for this for a long time," said Yates.
The partnership is an indicator of Opower's long-term strategy to move beyond simple behavioral reporting and into broader customer engagement. The company's well-known behavioral science techniques will be "downplayed" as part of the co-branded offering in favor of more detailed reports for building owners and managers of utility efficiency programs.
Part of the reason for this is that large commercial buildings are highly varied and may not be served by the same kind of behavioral cues that bring predictable improvements in the residential sector. In addition, many of the energy managers targeted by FirstFuel and Opower are already experts and need more detailed reporting to make decisions.
In February, Opower released its fifth-generation software that beefed up the company's reporting capabilities, enhanced its smart thermostat and demand response offerings, and rolled out new features for back-end customer care. Yates has also hinted at helping utilities procure and manage distributed generation.
So if both companies have such complementary offerings, would Opower consider a full-on acquisition of FirstFuel? "We have no comments on that at this point," said Yates.
But he did allude to further collaboration between the companies: "We don't BS about this sort of thing. Partnerships are rare for us. You'll hear more about Opower and FirstFuel in the future."
In April, Opower went public on the New York Stock Exchange, marking a win for the "cleanweb" investment thesis. The company's stock has since fallen to $16.38 from a high of $26 earlier this year. Although some analysts have lowered their price targets for Opower's shares, the average analyst rating remains "buy." In its second-quarter earnings, Opower reported $31.20 million in revenue and $0.04 earnings per share.