Michaels estimates that the retail-energy market on the Internet could total $40 billion to $50 billion within the next five years. Energyguide is aiming for a tiny sliver of that. "We're a long way from nailing down what our share ultimately will be," says Michaels. "Probably in the hundreds of millions." But to get there, Energyguide will have to fight off challenges from rivals in the consumer-information niche, including ChooseEnergy Inc. In March, Energyguide raised $7 million from a group of investors led by GE Equity, primarily to increase sales staff and develop more partnerships with energy providers. "Going forward it's going to be a little more interesting," says Michaels.
Emily Barker is a senior staff writer at Inc.
Energy Goes Cellular
Along with more competition and -- theoretically, at least -- lower prices, energy deregulation is bringing some uncertainty to the nation's power grid. After all, California experienced controlled interruptions of service this past summer because utilities had stopped building power plants in anticipation of deregulation. That instability is especially bad news for any company that does business on the Internet, since it takes uninterrupted power to keep Web servers humming.
That's where Sure Power Corp. comes in. Sure Power uses high-tech fuel cells to turn hydrogen and oxygen into electricity -- a backup power source that the company claims is both environmentally friendly and available 99.9999% of the time. That availability level translates into a 1% chance of power failure over the course of 20 years, says cofounder and executive vice-president Art Mannion. Although fuel cells are similar to batteries in some ways, they never run down as long as enough fuel is present.
Sure Power, based in Danbury, Conn., is betting on a growing need for dependable backup power. Its target market includes data centers, Web-hosting companies, medical facilities, research laboratories, high-tech manufacturers, and any other business that can't afford to have its computers or equipment go down for even an instant. Using cells manufactured by a partner, ONSI Corp., Sure Power will install several dozen fuel cells for each of its customers and offer maintenance services for those setups.
The installations aren't small or cheap: each fuel cell is about the size of a sport-utility vehicle, and according to Mannion, a typical contract could run into the tens of millions of dollars -- hardly a price point that most small businesses or individual homeowners would fall into. But Mannion insists that for a 10-year span, Sure Power's system can cost two-thirds to one-half of what traditional power-backup systems would run.
So far, with seven employees, Sure Power has just one customer -- First National Bank of Omaha, which hired Sure Power in 1998 to provide uninterrupted power for its credit-card-processing operations. Sure Power's revenues for both 1999 and 2000 hover around $2 million, says Mannion, adding that the company is currently negotiating contracts worth up to $50 million each.
In landing the First National contract, says Mannion, it helped that some of the bank's executives were familiar with fuel cells. Unfortunately for Sure Power, however, not every customer is going to be so knowledgeable. "Our biggest job is educating the public," he says.
Q&A
Current Events
Deregulation can be confusing. To make some sense of the muddle, we spoke with Hugh Holman, a senior analyst at CIBC World Markets who's been tracking energy deregulation since 1997.
Inc.: How did deregulation get started?
Holman: The power industry is really the last remaining large monopoly. We've broken up almost everything else. California opened its market in 1998, and it looks as though the other states will follow.
Inc.: How big is the potential market?
Holman: Huge. The power industry is one of the largest in the United States. Revenues are more than $200 billion a year. Opening it to competition is going to have pretty dramatic ramifications throughout the economy.
Inc.: Is deregulation spawning many new companies?
Holman: There are a lot of newcomers. Some are power marketers who don't generate any power themselves. They just buy power and resell it. A lot of them are selling on the Internet, which is a natural because the wires for providing electricity are already in place. These companies don't need to build warehouses and so forth, like Webvan or Amazon.com, because the power can be delivered over the existing infrastructure.
Inc.: But how can they make money in what's historically been a low-margin business?
Holman: You have to customize your product, differentiate what you're selling. Green Mountain Energy, of South Burlington, Vt., has done that by offering environmentally friendly power, branding it, and selling the environmental attributes of the energy it's providing. In some cases it's going to be reliability that sells. Users like Amazon.com, eBay, and all of the other Internet service providers can't be out of power. So they require highly reliable service, and they are willing to pay for it.
Inc.: Are consumers ready for deregulation?
Holman: I think the proof of the pudding will be whether people switch suppliers. In Pennsylvania they've had a very successful program to educate consumers. As much as a third of all the electricity consumed in Pennsylvania is now being purchased from an alternative supplier. So in that sense deregulation seems to work: people do seem to switch suppliers when given a choice.
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