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Sustainable Returns- Issue 38
California blacks out...
Like many of you, we’re stuck in the midst of a heatwave. Hopefully, you’re reading this week’s edition of Electrified somewhere cool.
Let’s get to it.
This weekend California was hit by rolling blackouts for the first time since the days of Enron. On Friday night, tweets like the one below were common.
Several media outlets explored the possibility of rolling blackouts and many speculated on their causes. But, Greentech Media’s coverage caught my eye for a different reason.
OhmConnect operates a fleet of 150,000 residential customers in California, to whom it sends notices to reduce usage at key times. The company also controls 50,000 home devices in the state, which it can cycle on and off remotely.
150,000 seems large until you realize California is a state with 11.5M residential households. Realistically, 50,000-75,000 is the number for purposes of alleviating strain on the grid since we can’t assume that all 150k households participate in each event.
So, OhmConnect has, at best, a 1.3% market share in the most progressive state, with the best incentives, and some of the highest energy rates in the country on a per kWh basis. Theoretically, it should be the perfect market for their service.
This should serve as a warning for startups tackling consumer energy.
Similar to the hobbyists that jump-started the tech revolution of the 70s and 80s, energy has a passionate subset of early adopters. Simon Mahan is a great example.
In his blog post “25k miles, $0 fuel cost. How?”, Simon details the steps he took to optimize his energy consumption by leveraging a time-of-use energy product. Simon is the customer that seeks out YOU, but unfortunately he’s also the exception to the rule.
Moore’s Crossing the Chasm is the bible for customer adoption, but there is danger in applying his theories too broadly. Not all chasms are the same size, and in energy, they vary wildly due to policy, ideology, and grid capability. As B2C energy startup, you have zero control over 2/3 of these variables
California is ideologically perfect for smart grid solutions that help consumers reduce their carbon footprint. State incentives and a high per kWh price of energy create a great economic environment. A modern distribution grid (transmission is another story) enables consumers to participate and achieve maximum return.
The chasm in California from early-adopter to early-majority should be the smallest of any customer segment.
Texas is a similar story. The grid is one of the most modern in the country and consumers can choose retail energy plans that allow them to maximize value from solar and storage.
However, there’s one notable difference. Texas kWh rates are in the middle of the pack. This disparity widens the chasm because early-adopters and early-majority consumers decide primarily on value over ideology.
Customers between the early-adopter and late-majority segments are the highest cost customers any company will ever acquire. The chasm varies by market and its width determines the amount of time you’ll spend acquiring the most expensive customers.
In the early days, ideology drives adoption. Consumers are attracted to your mission or see themselves as innovators on the cutting edge. The next set of customers adopt as they see more innovators adopting.
After the early-majority, brand recognition takes hold and customers again find you. But, the middle is no-man’s (or woman’s) land. This traps generalist investors and founders new to the sector.
The early adopters are reminiscent of tech-adopters, passionate, cutting edge, and public about their views. The mental models kick-in and assumptions are made about future adoption, but unless you’ve seen it, the chasm is a canyon.
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“The dominant tenor of environmental communication during this period has been apocalyptic. And yet, the sorts of threats that people have generally responded to have been closer to home, and the actions to address them have brought near-term benefits.”
“Investing in measures to better adapt to climate change means investing in the future, in the belief that humans can continue to thrive, even on a hotter planet.”
Since 2018, there have been over 170 ESG-related regulatory measures proposed globally, more than the previous six years combined.
ESG is an umbrella term for a combination of largely unrelated thematic issues. Implying there is only one way to organize the relative importance of metrics across all these areas potentially negates the value of cognitive diversity to both a company’s impact on the world and the world’s impact on a company
According to the World Bank, nearly 300 cities and regions have implemented people-friendly streets initiatives that allow residents to bike and walk within their city. In Europe, for example, almost 2,400 kilometers of cycling infrastructure has been announced by various levels of governments as of August 5, 2020.
What I’m thinking about
The similarities between the quality of revenue and quality of audience.
See you next weekend,