Tag Archives: NRG Energy

Google’s Acquisition of Nest Shows How B2C and Advanced Automation Make for Success in HEM

Yesterday Google announced a cash purchase of home automation start-up Nest Labs for $3.2 billion; Google Ventures has been a major investor in the company, whose last funding round totaled $80 million (client registration required). The acquisition represents a re-entry of sorts: Information technology companies’ initial foray into HEM last decade proved to be tricky, owing to fragmented utility sector, lack of clear standards, high hardware costs, and lack of clear incentives, leading Google, Microsoft, and Cisco to exit the space in late 2011 (client registration required). Google’s acquisition signals that home energy management (HEM) is a hot sector for investment again. In addition to Google, Microsoft has shown the intention of re-entering HEM with the acquisition (client registration required) of id8 Group R2 studios in Q4 2012.

Nest labs has done three things well to overcome the difficulties faced previously by HEM segment: 1) making an aesthetically appealing device with a simple payback under two years, which is the tipping point for the residential consumer; 2) combining a B2C distribution strategy with advanced automation capabilities; and 3) moving beyond energy management into security and smoke detection to offer a more complete user-comfort package (client registration required). Lux Research mapped 25 innovative developers in the HEM space based on their distribution strategy and automation capabilities (see upcoming report “Master of the House: Cutting through the Hype in the Home Energy Management Space“). What is striking is that there are just three companies that have both B2C and advanced automation: Nest Labs, Tado, and There Corporation.

Although the price for the acquisition looks rather high, 4X of the valuation in the last funding round in January 2013Google has three distinct motivations for it: 1) innovation in smartphones and tablets is incremental and arguably with diminishing marginal utility; 2) a smart thermostat and smoke detector are good additions to the line of connected gadgets from Google such as Google Glass; and 3) the acquisition fits with Google’s long standing strategy (client registration required) of clean energy and energy efficiency investments.

The Nest acquisition has critical implications for utilities, venture investors, and consumer electronics companies. Utilities are looking for differentiation and customer retention, especially in a market like the U.S., which has 3,200 utilities, so partnering with large analytical powerhouses such as Google can now be very attractive. There have been early signs of such collaborations between Nest Labs and NRG Energy. For investors like Nest backers Kleiner Perkins, the attractive returns underscore the appeal of energy IT or “cleanweb” sector for the 10-year venture fund, no doubt prompting the VC herd to keep sniffing around for me-too deals. Finally, Nest’s success will increase the already high interest in “smart homes” from consumer electronics companies such as LG Chemicals and Samsung. Conventional thermostat manufacturers such as Honeywell have been behind the curve on this, and have previously tried to stop Nest through legal means (client registration required). These laggards should change tactics and seek a second mover advantage by coming up with a better version of the smart thermostat.

GE and partners back Emefcy’s energy-positive water treatment technology

Late last month, Energy Technology Ventures (a joint venture between GE, NRG Energy, and ConocoPhilips) announced plans to invest an undisclosed amount in Israeli company Emefcy. Additional investors included Pond Venture Partners, Plan B Ventures, and Israel Cleantech Ventures.

Emefcy has developed a microbial fuel cell (MFC) that uses naturally-occurring bacteria in an electrogenic bioreactor to treat wastewater and generate electricity. It works by using bacteria to biologically oxidize organic chemicals dissolved in wastewater. Specifically, the bacteria release electrons, free protons, and CO2 as part of their metabolic processes. The electrons are captured by the anode, while the free protons combine with oxygen that permeates the cathode to make water and complete the electrical circuit.

In effect, Emefcy’s technology harvests renewable energy directly from wastewater. This, the company claims, is less energy-intensive than conventional aerobic processes or methane-producing anaerobic digestion, and enables an energy-positive wastewater treatment plant. According to both Emefcy and Energy Technology Ventures, the benefits of this technology are both economic and environmental. In its release, Emefcy states that “conventional wastewater treatment uses 2% of global power capacity (80,000 megawatts and 57,000,000 tons per year of carbon dioxide), costing $40 billion per year.”

While GE’s interest in the technology is remarkable, arch competitor Siemens reported in a poster session at this week’s Singapore International Water Week that it is in the process of building its own pilot scale MFC.

Emefcy’s target markets include wastewater treatment in the food and beverage, pharmaceutical and chemical industries. We estimate that the addressable market size is $4.25 billion, comparable to that of membrane bioreactors plus conventional aerobic treatment equipment. The company plans to use Energy Technology Ventures’ investment to further develop the technology into a full-scale commercial plant by the end of this year “for municipal and industrial wastewater treatment,” said Emefcy’s CEO Eytan Levy.

GE is a large player in wastewater treatment, and is expanding its technology focus on Israel, calling it the “Silicon Valley of water technology.” In fact, GE recently opened its newest research and development center in Haifa, which will partner with local technology companies and universities to develop clean energy, water, and healthcare technologies. GE is also partnering with Kinrot Ventures, an incubator company that’s based in Israel and active in the water space.