Analyzing Home Energy-Usage Patterns with EcoFactor’s Roy Johnson

January 10, 2014

JOHN SHEGERIAN: Welcome back to Green is Good. We’re so honored to have Roy Johnson with us today. He’s the CEO of EcoFactor. Welcome to Green is Good, Roy Johnson. ROY JOHNSON: Thanks. It’s my pleasure to be here. JOHN SHEGERIAN: Hey, Roy, like everybody else, you have a storied history, a lot of success in your rearview mirror. Before we get into talking about this wonderful company that you’re the CEO of, EcoFactor, talk a little bit about the Roy Johnson journey and how you got there and some of the other great wins you’ve had in your past. ROY JOHNSON: Sure. I’d be happy to. When I came out of school, I went to work for a company called ThreeCom that was very successful in the computer and networking industry for a long time, ended up staying there for 13 years. I lived in Australia for three years. I lived in Hong Kong for three years and stayed there right up until the middle of the dotcom boom and then left ThreeCom and went to a startup called Two Wire that make a very good home networking product that is sort of connected to what we’re doing now at EcoFactor from a technology standpoint a little bit. That company went on to great success and is widely used across the country. Then I was CEO of a company called Red Line Network, which was acquired for a nice sum by Juniper. Then I spent four years in the solar industry, which was great fun. I learned a lot and we built up a great solar company, as you may know. The good news on solar is that the prices are very low so people can install solar. The bad news is that it’s hard to make money for the manufacturer so I moved on from that and landed at EcoFactor about two years ago and it’s been all up in the ride since then. JOHN SHEGERIAN: That’s wonderful, and for our listeners out there who want to not only listen to Roy and what he’s doing at EcoFactor, but want to watch and look, I’m on his website right now. It’s actually a great website and for those who want to look at it, it’s www.ecofactor.com. Talk a little bit about EcoFactor. Why would this be the next part of the evolution of the Roy Johnson story going from solar into energy efficiency? Why did you see that as the next step? ROY JOHNSON: Right, so when I made the decision to move into the energy sector seven years ago now, it was partly because it’s interesting business opportunities. There’s a lot of disruption going on in the energy industry and certainly, my last company, CaliSolar, was a part of that in the solar industry with a completely different approach to making solar but the thing I love about EcoFactor is, energy efficiency is by far the most cost-effective way of reducing greenhouse gas and energy consumption overall because if we can all reduce our usage of electricity and gas and so forth, it makes a huge difference and it’s much cheaper to deploy a solution like ours than it is to build another power plant or to build another power array or another wind farm so that’s one of the things that I really like about this is that it’s very cost effective from a societal standpoint. It’s very competitive. It’s software based so what we do is we put a communicating thermostat into a home and there are lots of wireless thermostats available in the world and we work with a variety of different ones and once we get it in the home, we [use] clever software that works out in the cloud that analyzes the usage patterns of the consumer, the way the house heats and cools and our software will control the thermostat in a much more efficient way than the consumer ever could or a thermostat by itself could because we have so much more computing power that we can bring to the problem. JOHN SHEGERIAN: We’ve got a lot of homeowners that are listening to this show across the United States right now. Let’s bring it home to them, no pun intended. What would that mean? What kind of thermostat should they be buying and how do they tie into your great service or as they say in Silicon Valley, get the ROI for their investment? ROY JOHNSON: The way that we go to market, we don’t actually have something that would go directly to consumers. We work through other larger companies to get this into the hands of consumers and these are companies that have existing relationships with consumers and regular contact with them so for example, our biggest rollout so far is actually with Comcast. Comcast has a new service offering that’s been around for about a year called Xfinity Home. Xfinity Home is home security, home automation, and home energy management. We are the energy management part of that. There’s other companies that provide the security and so on and so anyone who lives in Comcast territory, which is about 40% of the country, can go to Comcast and say, ‘I want to sign up for Xfinity Home,’ and they have a variety of different offerings available and then they’ll get the EcoFactor service and then once that’s installed, not only will they have this great home security offering and so on, but they’ll also have this ability to have their thermostats managed on a much more automated basis and the idea is that the consumer doesn’t really need to do anything any different. When we first install, we ask a few basic questions about lifestyle. Roughly, how warm do you like it in the day, in the night, in the summer, in the winter? Who is home during the day? And then we build a schedule for them and we manage the system for them so they really don’t have to think about it and they can give us some input into how efficient they want to be and then our system will conform to that so that’s sort of the user experience. For other customers that live in certain parts of the country where we have programs, we also have programs with utility so if you happen to live in Nevada for example, the utility in Nevada, which is called Nevada Energy, has a program where anybody can sign up. In their case, they actually get a free thermostat and it’s provided by the utility on a subsidized basis and then they go from there so it’s a really simple structure and we’re working on rolling this out into other geographies as well. JOHN SHEGERIAN: So, you’re the CEO of EcoFactor. When you came on, how much has the company grown since you’ve been the CEO? ROY JOHNSON: We’ve grown from zero. When I joined, we had really zero customers two years ago, and now we’re in the tens of thousands of homes and so it’s moving along very, very quickly. It’s growing very rapidly. One of the things that works in our favor on this is that there’s much greater awareness of energy use around the country and people are more aware of what’s going on. They’re paying attention to their energy bill. They’re really trying to make sure that they’re being efficient, partly because they want to save money and partly because they want the remote control. One of the nice things about our solution is you get remote control on your thermostat so if you want to adjust the temperature up or down, you can without getting off the couch, just like a TV remote. I’m old enough to remember when TVs didn’t all have remote controls and so you actually had to get up to change the channel and we were essentially providing the same type of capability for the thermostat. JOHN SHEGERIAN: I’m on your website and again, for our listeners out there to see Roy’s really great company and website too, it’s www.ecofactor.com. Is this also controllable vis à vis our Android or our iPhones, too? ROY JOHNSON: Exactly, so the way that I generally control my system in my house is I use my iPhone and I find that to be the quickest and easiest thing but there’s a web interface you can get to from your computer or Android and that really does make it simple and quick for people and we find that one people get used to it, they really don’t bother going and pushing the buttons on the thermostat anymore because it’s just easier and quicker. Most people always have their phone in their pocket. JOHN SHEGERIAN: I was at a conference about a year ago or so, Roy, and again, there was a very, very smart venture capitalist from Silicon Valley sitting next to me and I asked hi what was his investment strategy from then on and from the foreseeable future and I asked him ‘Are you going to be doing more wind or more solar?’ and he said no and I said, ‘Why?’ and he said, ‘John, the smart money is going into energy efficiency,’ and obviously, Roy, you’ve had so much success in your past and obviously, you’re part of that smart money. Talk a little bit about the need for energy efficiency. Is it true that in terms of the worldwide production of energy, we’re wasting right now about 50% of the energy we produce and really this is going to be one of the greatest megatrends in the next foreseeable decades ahead, energy efficiency and doing exactly what you’re doing right now? ROY JOHNSON: The big gain of energy efficiency is that you can get benefits with really very little money spent and without making sort of lifestyle tradeoffs. That’s really the goal so if you think about automobiles, which is a little bit outside of our segment, but automobiles, if the fuel economy standard is increased, which it has been over the last few years, and the U.S. still has one of the lower fuel economy standards. China has a higher fuel economy standard than the United States does. Most of Europe has higher fuel economy standards than we do and they meet them and so the technology clearly exists. Part of the challenge is that we prefer to drive great big SUVs and things like that than lower our average fuel economy but if you could increase the average vehicle fleet from 20 miles per gallon to 40 miles per gallon, everybody gets to drive just as far as they always did. They just use half as much fuel and the same idea applies on your heating and cooling or on your lighting or all the other parts of the energy mix that a consumer has, is that if you can be more efficient with the way that you use energy, then you’re much better off so swapping out incandescent light bulbs for CSLs and LED light bulbs make a huge difference. Refrigerators are five times more efficient than they were 30 or 40 years ago and all of that is technology that’s readily available and the great thing about refrigerators for example, is that nobody has to do anything. When their old refrigerator dies, they buy a new one and that one will automatically be much more efficient than the old one because the industry requirements have gotten so much tighter than they used to be so it’s a big, big one and not to say that we shouldn’t continue to construct solar and wind and other alternatives to fossil fuels, but using less energy without making major compromises is really the right way to go. JOHN SHEGERIAN: We’re down to the last couple minutes or so, Roy. Talk about the huge trend in big data, which always seems to be growing because of our ability to gather it more and to digest it. How does that tie into improved efficiencies with utilities and homeowners, which is then again, your sweet spot and where you’re going with your great brand? ROY JOHNSON: Big data is a very important technology around Silicon Valley and around the world so it’s used in systems like what Google has. Their whole search engines and all the stuff that they do was really one of the first examples of the power of big data and our ability to take data and analyze it and work through it. What we do is pull enormous amounts of data back from thermostats about how quickly does the house warm up? How quickly does it cool off? How does it behave? And embedded in that big data is really useful information about the way to optimize it and the idea of big data is taking huge amounts of data and sifting through it and figuring out insight that you can get from that data and so the people that we have, we have a group of three people that we call our ‘quants’, they’re the quantitate people that really design the whole big data system. All of them are physicists. They’re not regular software engineers. They come from the particle physics world and they’re incredible data guys and they’ve done a wonderful job of building a system now that allows us to get an insight in what’s going on at home. JOHN SHEGERIAN: What’s the future? We’ve got a minute left. What’s your goal? Obviously, Roy, you’ve done well. You’ve scaled companies before. You really know what you’re doing with regards to leading companies as a CEO. When you go to bed at night, EcoFactor, how many million households, two three years from now, are going to be signed up to this great service? ROY JOHNSON: Our target market is North America, and there’s about 140 million households in North America and so if we could get to even 5% of those houses, we’d become a very large company and we’d save enormous amounts of energy and we’d save people an awful lot of money so I think that’s really where we’re headed and we expect that this will continue to ramp up over the years so whether we do it or somebody else does it, people will end up with communicating thermostats in their home. They will end up with these kinds of systems because it’s so much better than what they have today. JOHN SHEGERIAN: That’s awesome. For our listeners out there that want to be part of this new trend of energy efficiency and really help do something good for the planet but also do something good for your own pocketbook, you can go to Roy’s great website and company. It’s www.ecofactor.com. Learn more about what’s going on with regards to energy efficiency and leverage this because, as Roy pointed out earlier, it’s easy to use. You can do it right off your iPhone or your Android and it benefits your family and it benefits the earth at large. Roy Johnson, you are a visionary sustainability leader and truly living proof that green is good.