Startup Enervee has a new way to help people finance efficient appliances

Enervee CEO Matthias Kurwig thinks energy-efficient appliances can be a powerful tool in combating climate change — if even cash-strapped households can replace broken-down washers, dryers, ovens or refrigerators with their preferred energy-efficient models as quickly and easily as possible.

But most utility- and government-backed appliance upgrade programs aren’t quick or easy to navigate, he said. Many require customers to take multiple steps to apply for incentives to defray upfront costs or post-purchase rebates, and then they have to wait weeks or months to receive them. Others limit choices to a handful of appliances. And very few offer financing at attractive rates, he said — particularly for lower-income or credit-constrained buyers.

Kurwig founded Enervee in 2010 to tackle these well-known barriers to growing the market for energy-efficient appliances. Since then, the Los Angeles–based startup has partnered with 20 of the largest utilities in the U.S., which together serve more than 40 million customers across states including California, Illinois, Michigan, Pennsylvania and Washington.

Enervee’s e-commerce platform that runs these utility marketplace sites ranks and sorts thousands of appliances, available from Best Buy and other major retailers, based on efficiency and cost metrics. Enervee bundles incentives and rebates into the ​“sticker” prices displayed on the website. Its approach of offering lower prices and a wider range of options has led to a significant uptick in the number of customers parlaying efficiency program dollars into energy-efficiency appliance purchases, he said.

That, in turn, could lay the groundwork for tapping into an even bigger pool of efficiency financing in the form of private-sector lending. Last month, Enervee raised $35 million in the form of $30 million in equity investment from Kerogen Capital and $5 million in debt financing commitment from J.P. Morgan.* J.P. Morgan is also merchant processor for Enervee’s online marketplace, which has recently launched a financing offering that’s expanding the startup’s suite of offerings.

Using microloans to get energy-efficient appliances to mass markets

“A large share of American households don’t have the cash lying around to replace an appliance when it breaks,” Kurwig said. ​“Shouldn’t there be a way to provide some online financing solution — not a buy-now, pay-later predatory loan product, but something that takes the grid-value benefit, the decarbonization benefit, and makes that benefit accessible to a consumer in a more friendly way?”

That’s the idea behind Enervee’s Eco Financing product, launched last year with financial technology provider One, utility Southern California Gas and the state of California. The microloan program offers up to $5,000 in no-money-down, low-interest loans for purchases of energy-efficient appliances, with monthly installments of less than $25 — low enough to be offset by the reduced energy bills resulting from the appliance purchase in many cases.

Of the more than $400,000 in loans financed under the program so far, more than half have gone to customers with FICO scores — a standard measurement of consumer creditworthiness — below 640, according to the latest data from the California Treasurer’s Office.

The interest rate on these loans is an annual percentage rate (APR) of 9.5 percent, and there are no late-payment penalties. That’s much better than the average 16.5 percent APRs and late fees of credit cards, the most likely source of financing for new appliances, Kurwig said.

And because Eco Financing loans are backed by loan-loss guarantees from the state of California, they’re available to people who might not be eligible for other forms of credit, including those with lower-than-average FICO scores, which indicate to lenders that they might be a credit risk. If customers like these can’t easily tap into a government or utility-backed assistance program, their most likely option for replacing a broken appliance is buying a used appliance, ​“which means you have terrible energy efficiency and end up paying triple on your utility bill,” Kurwig said.

These kinds of barriers have stymied faster adoption of energy-efficient appliances, which is a big missed opportunity. It’s far cheaper to reduce energy demand than it is to reduce the carbon emissions of energy supply, as a seemingly endless series of studies and models have shown.

Improved home efficiency also holds greater potential to reduce carbon emissions over the next decade than other household-level changes, such as switching to electric vehicles or installing rooftop solar, according to a recent report from consultancy the Brattle Group.

Bridging the gaps in traditional efficiency programs 

But it’s been hard to align the way that energy efficiency is funded with the way that most households go about investing in their homes. ​“Energy efficiency may be the most sensible and efficient thing to do, but it’s often very difficult,” said Dian Grueneich, a Precourt Energy Scholar at Stanford University and former commissioner at the California Public Utilities Commission from 2005 to 2010.

California’s work in the 1970s to create efficiency standards and programs for appliances and buildings has become a model for similar efforts across the country, Grueneich said. But those structures largely rely on utility and government funding to encourage efficiency investments that are cheaper than building new sources of energy supply.

That’s led to metrics for approving investments ​“that are in fact far more stringent than [for] our other choices,” she said. In other words, it’s more difficult to drive efficiency than to drive installation of solar panels or purchases of EVs, she said.

These strict cost-effectiveness metrics have tended to limit how utilities go about offering incentives to households, said Anne Arquit Niederberger, Enervee’s senior vice president of market development. For example, utility ​“direct-install” programs that offer free energy-efficient appliances to lower-income customers require lots of paperwork and offer ​“a very limited collection of product categories” to choose from, she said. Those and other factors have limited participation in these programs to only 2 percent of qualified lower-income customers in California and 1 percent in New York, she said.

What’s more, most efficiency programs weren’t designed to help customers when they’re most likely to be looking for new appliances, which is when they need to replace their old ones, she said. ​“The only programs that were done on these natural replacement cycles were rebates,” she said — and unless utilities are actively marketing rebates in the same places where people are shopping, programs are likely to miss out on capturing more than a handful of potential users.

There are good reasons to scrutinize utility and government efficiency programs to avoid waste. But Grueneich said that an overly cautious approach to how efficiency funds are spent has stymied innovation, particularly in terms of creating programs that can capture a larger share of the potential market demand for energy-efficient products.

California spends at least $1 billion per year on energy-efficiency programs funded by utility customers, but Grueneich believes that the addressable market for efficiency investments is at least an order of magnitude greater than that. Meanwhile, California is not on track to meet the demands of SB 350, a 2017 law that calls for doubling energy efficiency in the state by 2030, she said.

In light of this disconnect, regulators and utilities need to become open to more aggressive efforts, she said. ​“You have financial entities that are willing to put money into energy efficiency,” she said. Programs like Enervee’s Eco Financing initiative are ​“a start, because they’re bringing in that private financing — which is the holy grail.”

Creating a private-sector market for efficiency financing 

As the founder of a digital marketing startup and former head of Ogilvy Group’s digital media and marketing arm, Kurwig saw plenty of room for improving the standard methods for connecting customers to energy-efficient products. The idea for Enervee came to him after his family moved to Los Angeles and realized how hard it was to comparison-shop for energy-efficient appliances.

“You’re forced to purchase something that costs hundreds, if not thousands, of dollars, you know nothing about it, and you’re facing the choice of spending hours of your weekend doing research on something you have no emotional attachment to,” he said.

In building the comparison-shopping platform that became Enervee, ​“we had a very important learning along the way, which is when you show people consumption differences in kilowatt-hours or dollars, it only has one effect: People leave your site and go to a place where there’s less complexity.”

That’s a common sentiment among residential efficiency providers, who stress that customers are far more interested in comfort, convenience, aesthetics and upfront cost than in efficiency metrics.

Enervee replaced specific efficiency measurements with a simple 0–100 score that compares estimated lifetime efficiency across similar products, from water heaters and furnaces to lightbulbs and televisions.

“We ended up with about 100,000-plus consumption profiles” for individual appliances, ​“and wrote the software and digital smarts to see what’s been sold in the marketplace every day,” he said. Enervee’s site provides users with a ranked set of top-selling and top-performing appliances in the categories they’re searching for. Here’s how Enervee’s marketplace for Southern California Gas customers displays dryer options.

Another key step for Enervee was to directly link customers to the retailers that sell appliances, Kurwig said. Too often, the energy-efficient appliances promoted by utility programs were out of stock or unavailable in the timeframe that shoppers needed them.

Jennifer Amann, a senior fellow at the nonprofit American Council for an Energy-Efficient Economy, agrees that availability has been a key bottleneck. The Environmental Protection Agency’s Energy Star rating system, which is the core metric for appliance efficiency in the U.S., is a vital tool for utility and government efficiency programs, she noted. But too often the products that get Energy Star certification ​“aren’t manufactured in large quantities, or aren’t available” in all markets, she said.

Enervee’s focus on providing convenient service to lower-income customers is particularly noteworthy, Amann said. ​“It’s hard to make decisions that will save you money over the long term if you barely have the money to buy the product in the first place,” she said. ​“In today’s economy, where we see people living from paycheck to paycheck, we need these supports, even for things that are relatively routine purchases, such as appliances in your home.”

Since its launch in California, Enervee’s Eco Financing program has been picked up by utilities AEP Ohio and the Tennessee Valley Authority, Arquit Niederberger said. Enervee plans to roll out the offering in New York later this year through the New York Efficient Marketplace program, tapping a state-backed loan-loss reserve fund to make low-interest loans available to lower-income and credit-constrained customers, she said.

Enervee isn’t the only utility marketplace platform out there. Others are available from Uplight, a major provider of customer-engagement software to utilities, as well as other vendors such as EFI and TechniArt. But those sites tend to offer a more limited range of products that are tied to direct utility rebate or discount programs, such as lightbulbs or smart thermostats, rather than a broader universe of appliances available from multiple retailers, Kurwig said.

Not all household appliances are available in a wide range of options on Enervee’s marketplace platform yet, he conceded. Water heaters and furnaces, which tend to be sold through home improvement stores like Home Depot or via contractor-distributor channels, aren’t yet in the mix, though Enervee hopes to expand to include them in the coming year, he said.

But the products that Enervee does offer tend to be bought by customers at much higher rates than those achieved by traditional utility efficiency channels, Kurwig said. In some cases, the rates are better than e-commerce industry averages, he added.

For example, utility Arizona Public Service has seen about 26 percent of customers that visit its Enervee marketplace buy a product, which is about three times higher than industry averages, according to the utility’s data. That site also got 97 percent of customers who bought smart thermostats to pre-enroll in the utility’s demand-response program, which offers payments to customers willing to allow the utility to control their thermostats to reduce peak loads on its power grid.

“These are fantastic results,” said Kerri Carnes, APS’ manager of customer technology. ​“All of it happens when the customer is on the marketplace. […] All the incentives come off the top; there’s no additional paperwork to fill out.” Last summer, APS was able to achieve 80 megawatts of load reduction enabled by smart thermostats, and it expects to have 150 megawatts available by the end of 2022, which is a big chunk of the load-shifting potential it’s relying on to meet its long-term decarbonization plan.

As utilities strive to absorb more solar and wind power, they’re eager for customers to install appliances that not only use less energy overall but can also shift when they consume energy to balance out the ups and downs of that renewable energy. Enervee sees the opportunity to promote the sale of energy-efficient appliances that can also enable this kind of load-shifting as a way to bring its eco-financing model to nationwide markets.

Earlier this year, the company applied for financial support from the U.S. Energy Department’s Loan Programs Office. Jigar Shah, the head of the office, has expressed interest in supporting business models that could ease the financing of efficient and grid-responsive appliances in U.S. households.

“We’re having this discussion with Jigar Shah’s program,” Kurwig said. ​“They have the desire to scale demand-response-capable devices over time.” 

Federal loan guarantees could allow the Eco Financing model to expand to more markets, which could open up the broader private-sector financing that efficiency experts like Grueneich see as vital to reaching the sector’s full decarbonization potential. Neil Doshi, vice president of technology and disruptive commerce at J.P. Morgan Commercial Banking, noted in last month’s Series B funding announcement that J.P. Morgan is ​“excited to collaborate with Enervee on this financing round and as it continues to grow and scale.”

Kurwig declined to speculate on J.P. Morgan’s potential appetite for financing the sale of appliances to meet these potential new markets. But he pointed out that combining residential-sector decarbonization with equitable financing, as Enervee’s Eco Financing program aims to do, could ​“easily go into a loan-portfolio market of tens of billions of dollars” in scale.

* Clarification: Enervee’s Series B financing round announced on April 22 consisted of a $30 million equity investment from Kerogen Capital and $5 million in debt financing commitment from J.P. Morgan. A previous version of the article incorrectly stated that J.P. Morgan was an equity investor in the company.