Fast-track to growth? Ecova's two-sided business model (and how it impacts utilities)

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By Jesse Berst

 

As part of a recent consulting assignment, I was put back in touch with the company I hadn't paid attention to for years. I was so intrigued by the changes I wanted to spotlight the firm here. I think utilities can learn a better way to think about the full value of their customers. And I think vendors may have something to learn from this interesting, two-sided business model.

 

Now called Ecova, the firm was called Advantage IQ when I first encountered it as a wholly owned and unregulated subsidiary of Avista Corp (the parent of Spokane-based Avista Utilities). Advantage IQ was in the business of bill verification and reconciliation. Working primarily with national chain operations such as 7-Eleven, Rite Aid and Papa John's, they would receive the client's electricity bills. Then they would verify their accuracy, request changes, look for discounts and incentives to apply, and so on. That arm of Ecova is still in business (with extensions and enhancements), under the rubric "Energy Supply Management."

A home energy management renaissance?

Ecova's move into utility programs and personalized recommendations puts it in competition with dozens of energy management companies, both those aimed at commercial/industrial and those aimed at residential. That category has been slow to take off, but may be seeing an upturn.

 

According to research from Groom Energy, the energy management software category is a $5.2 billion industry in North America alone and growing at 40% per year. Groom Energy has identified over 300 companies in the category, and earlier this year named Ecova one of the top 10 companies to watch.

 

On the commercial side, Ecova already represents one quarter of the Fortune 500 companies in North America. On the utility side, it works with more than 40 utility clients.

 

Cobbling together a total solution

Ecova is an amalgamation of several companies. In 2009, the parent company acquired Portland-based Ecos, an energy efficiency company. In fall 2011, the two firms merged to create Ecova. Shortly thereafter, Ecova acquired two energy management companies - Atlanta-based Prenova in November 2011 and Dallas-based LPB Energy Management in January 2012. In Schultz's words, "we had a series of products and programs and we melded them into a full value chain."

 

It is actually quite difficult to successfully bring together multiple companies with multiple cultures at different locations. Yet Ecova seems to have been able to make 2+2 = 5. Thanks to acquisitions and to organic growth, Ecova has nearly doubled in size in the last year. It now numbers 1,300 employees operating in 14 offices in North America. It is the largest non-regulated subsidiary of Avista Corp. (NYSE: AVA).

 

There's more to this unusual company than I have space to share. I hope at least I've spotlighted its two-sided business strategy and its connect-the-dots philosophy. What do you think of Ecova's business model? Does it have any risks for utilities? Are there other energy management companies utilities should pay attention to as well?  I'll be curious to read your comments below.

 

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Jesse Berst is the founder and chief analyst of Smart Grid News.com, the industry's oldest and largest smart grid site. A frequent keynoter at industry events in the U.S. and abroad, he also serves on advisory committees for Pacific Northwest National Laboratory and the Institute for Electric Efficiency. He often provides strategic consulting to large corporations and venture-backed startups. He is a member of the advisory boards of GridGlo and Calico Energy Services.

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