So how much does this cost?
Not much. The cost program for the deployment, which includes distribution and installation, plus
the setting up the services, is as unique to Negawatt's business model as are Negawatt's products
Most of the costs for the hardware are offset by the utility programs for establishing a DR customer
base. The pricing for Negawatt peripherals are far less then the conventional alternative faced
today by utilities contracting out to DR aggregators the installation of devices provided at below-
market-value or at no-charge.
Funny Money
There's nothing funny about saving money - but "Funny Money" is a term in this case being used to
the burying of costs and expenses through the DR programs that are sanctioned by utilities and de-
ployed by DR aggregators. Just as farmers are paid NOT to grow a crop at times, utilities will pay
customers NOT to use power. The amount of this DR funding ranges up to $30,000 to $60,000 per
Megawatt. This revenue stream can provide for Negawatt operational costs, plus accrue a percent-
age amount in the individual's account. Having an individual grow a cash value is a key factor for
gaining user acceptance to the program, as nowadays in particular people are seeking ways to save.
DR Programs? How do they work?
For example, PG&E has a programmable thermostat delivered and installed at no charge to the consumer if the consumer enrolls in its DR program. It provides a 10% or so discount of energy billing right off the top, plus more if and when the DR program is activated. How can they do it? Funny money? They pay for the thermostats, about $75 dollars, and for the truck roll installations, $150, plus for the administration costs associated with the program - totaling over $500 to $750 per installation, depending on location. The savings comes when the devices are used to cut back the demand during critical periods in which outside generation is necessary to be purchased on the open market. Peak and critical generation can cost the utility upwards to hundreds of times more than normal generation costs (in the case of Enron thousands of times) and a "penny saved is a dollar earned" in these cases. "A Negawatt generated is a Watt saved ~ our slogan".
A conversational walk through the bookkeeping
Say a typical starter package consisting of: 3 intelligent circuit breakers 1 computer interface module
1 ZigBee thermostat 3 Appliance modules
1 CD ROM
has a cost of manufacturing and packaging of $200. (This $200, by the way, is a new plateau of price/performance unheard of thus far in the deployment cost for residential DR programs) On a price per Kilowatt, this is very efficient. More on this in another section.
Let's say this starter kit is shrink-wrapped and on the shelf of Costco for a price of $89.00. Also on the package is a $50 rebate once the customer signs on the Negawatt web server. (This $50 rebate hooks the people into applying their time to register the products vs. just keeping the box on the shelf uninstalled. Once registered, the account has a positive balance!) Plus Costco would be receiving their normal profit margin of $20 or so on the purchase. So where's the profit? Let's see - cost to make - $200 and selling price $89 less $50 less $20 - or $19 dollars! How can you make money? Volume.
This is the first time that comical joke actually applies to a real business model. The deployment of this will cost the total amount to Negawatt - $200 - but will be instantly saving well over $500 in additional fees that would have been necessary to pay for a traditional deployment. (The truck roll.) The more we give away the more we save. The more installed the more Megawatts become under the program, the more Megawatts are switched off by DR, the more Negawatts generated, the more money earned.
Negawatt's users would be getting a portion of the saving of the DR program as mentioned above. Also the percentage of the savings of the customer will be funneled into the Negawatt web service sector to maintain and develop web functionality. This will enable signifient development of the web services "free" to the users, and can evolve into opportunities that we'll discuss later. Additional Negawatt hardware can also be sold and distributed through a shopping cart program, offering another stream of web-based sales. Advertisers targeting the energy conscious consumer will provide an income stream into Negawatt to further increase its business revenue.
