Drift is taking on the massive challenge of shaking up the utility industry giving the power to the consumers by providing better energy options.
The Seattle-based startup is promising to save customers an average of 10 – 20% on their utility bills compared to traditional utilities. Those numbers may increase over time.
Earlier this week the company announced that they reeled in $7 million of a larger round which brings their accumulative funding to more than $10 million.
In the three years since its founding in New York, the company has gotten investment from IA Ventures, First Round Capital, Lerer Hippeau Ventures, Macro Ventures, Liquid 2 Ventures (run by football Hall of Famer Joe Montana), Kal Vepuri, Third Kind Venture Capital and Joshua Schachter.
With the additional investment, the company, which launched in New York, plans to expand to take on the utility industry.
Drift differs from traditional energy companies by using a combination of machine learning, predictive analytics, energy management, and high-frequency trading tools to predict the amount of energy a customer will need.
According to a statement from Drift citing the Energy Information Agency National residential electricity prices have risen nearly 50% since 2003.
Why Electricity Costs are Rising
Traditional utility companies estimate how much electricity they will need to power the market for a given day 24 hours beforehand based on a rough combination of average monthly energy use in the previous year and citywide weather forecasts for the next day.
In part, energy forecasts determine energy costs. But forecasts are influenced by ever-changing factors, from weather to the relative costs of different energy sources.
Utility companies are focused on keeping gigawatts of energy moving around a system so the lights stay on for everyone. However, the process is not the most efficient and cheapest for the consumer that uses that power.
According to Peter Tertzakian’s book ‘The End of Energy Obesity’, 60% of nonrenewable energy goes unused at the power plant in the US, never to be available again.
For years traditional utility companies have struggled to implement technologies that will make the generation, distribution, and management of power more efficient and cheaper. Billions of dollars of investment in legacy infrastructure make it that much harder.
Drift chief executive Robinson believes this is holding back progress and the fact that that process hasn’t been updated in decades is absurd.
According to Drift, on a grid scale, there are tools that exist to make sure that power flows relatively smoothly and that the lights are kept on for customers, but none of the benefits of those technologies trickles down to the customer level.
How Drift plan to solve the issue of High Electricity Costs
Drift’s solution to the issue is to equip individual consumers with access to the same tools that big utility companies possess to manage their power loads and expenses.
“Unlike traditional utilities and retail power companies, we are using the latest technology to bring the advantages of sophisticated energy trading to everyone. “Advantages of choice, transparency, and savings,” Robinson told GeekWire.
Drift has developed sophisticated algorithms, code, statistics and complex models to create more accurate forecasts, eliminating the customer’s frustration of paying for inaccurately overpriced energy.
Margins are small in the energy business, but Drift reduces costs by selling power to their users at wholesale, rather than retail prices. According to GeekWire, the company earns revenue by charging a weekly $1 subscription fee using blockchain technology to help process the peer-to-peer transactions.
On the other hand, many utility companies make money off how much power is used by prioritizing providing reliable and secure power versus offering lower prices.
The company boasts: “We’ve made buying low-cost energy directly from power makers as simple as buying something on Amazon.”
The startup also gives smaller power providers, ranging from local solar plants to wind farms to large buildings with excess power, an easy way to sell electricity.
Drift says it gets rid of the middlemen by removing “opaque fee structures” from the traditional energy procurement process.
But the startup could face an even bigger obstacle than established utility companies and middlemen – the government.
Currently, Drift operates only in New York and government regulation may be the biggest obstacle in their ambition to expand across the US.
There are 14 states in the US that currently offer “retail choice” programs for electrical energy, according to a 2016 report prepared for the Electric Markets.
Paving the way to the future of the US power grid will depend on overcoming these obstacles.
But, so far Drift does have some financial backing from notable investors, and perhaps more importantly, the backing of the many consumers who are frustrated with their inaccurate and overpriced power bills.