Raphael Anstey ’11

Raphael Anstey ’11 worked with RecycleBank, founded by Ron Gonen ’04, a company that offers a rewards and loyalty program that motivates more than one million households in the U.S. to recycle and engage in environmentally beneficial activities. Raphael worked on its energy markets initiative in New York City. Raphael developed a go‐to‐market strategy that leverages RecycleBank’s successful incentive platform to reduce electricity consumption, thus lowering greenhouse gas emissions and delivering valuable demand reduction to power generators. In addition, Raphael was responsbible for implementing this plan and negotiating partnerships with energy providers.

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Journal #1

Four weeks ago, I arrived at RecycleBank to begin my analysis of energy market expansion opportunities. Since then, I’ve been happy to see RecycleBank increase its core recycling service by 25 percent while exploring exciting new business lines such as energy.

RecycleBank was founded in 2005 to incentivize the economically and environmentally virtuous activity of recycling. To do this, waste trucks are retrofitted to measure and upload recycling data. Member households are then rewarded for each incremental pound of recycling via online reward points redeemable with more than 2,500 consumer goods and services partners (Whole Foods, Coca-Cola, etc.) The firm has achieved time-tested statistically significant increases in recycling, thus removing tonnage from the waste stream and saving cities millions of dollars in landfill fees and trucking to far-away disposal sites.

My job is to determine the best way of leveraging this online rewards platform to change consumer energy consumption in economically and environmentally virtuous ways. I will deliver go-to-market strategies complete with revenue projections for two spaces, demand response (DR), and renewable energy. (Demand response is a term describing the reduction of electricity usage from “peak hours” — e.g. weekdays 2–6 p.m. — when the marginal cost of bringing additional power plants online is the highest. Thus, utilities are willing to pay for a service that will reduce these costs as well as prevent additional capital expenditure for new generation. Some states further encourage demand response by allowing utilities to capitalize “DR” investments into their “rate cases” — hearings where utilities ask regulators for rate increases to achieve market competitive returns.) So far I have completed diligence on DR technology providers as well as utilities, and the opportunities are encouraging.

In the meantime, I am afforded valuable guidance from my boss, David Wigder ’99 (VP of strategy and former Digitas strategy EVP), who critiques and integrates my recommendations into his live partnership pitches and deal discussions. David has also been kind enough to let me attend negotiations, which have been a tremendous learning experience. This week I finalize my renewable energy findings and look forward to attending more partnership meetings as they pop up!

Journal #2

Since the beginning of my internship, I’ve been able to pierce more layers of Utility economics and better understand their cost structure and regulatory regime.

The goal of this analysis is to find partners most willing to pay for RecycleBank’s behavior-changing rewards platform. To do this, we need to know exactly how valuable motivating consumers to conserve power can be. The math goes like this:

1. Utilities place reliability above all else and therefore must plan capacity at 115 percent of projected peak load (e.g. the amount of power needed in case everyone turns everything on at the same time — this “peak day” usually happens on hot weekdays between 2–6 p.m.)
2. With transmission (getting electricity from plants to consumers) losses averaging around 8 percent, utilities must now maintain generation capacity at 123 percent of peak load to meet reliability standards.
3. If one house with a 3 kW central air conditioner turned it off every peak day (10+ per year), the utility could subtract 3.69 kW (3 x 123 percent) from its capacity requirement.
4. Valuing 3.69 kW: One California utility values the avoided cost of capacity at $52/kw per yr, and analysts estimate avoided feedstock and transmission and distribution infrastructure costs at roughly 10 percent of this number. Thus total avoided capacity costs come to approximately $63/kW a year.
5. If we plug this number into our central air conditioning example from #3, we see the utility saves $276 per year for each resident who turns off the central air conditioner during peak load days.
6. However, peak days happen during heat waves, when people need their air conditioning. No one will agree to turn the AC off from 2–7 p.m. in the scorching heat.
7. To get around this problem, utilities use programs called “load control,” which cycle ACs on and off to keep residents comfortable. For example, the utility will enroll three houses with the same 3-kW central air conditioner and cycle their ACs off for only 20 minutes per hour. The utility still sees the same load reduction of 3.69 kW across three houses, and the residents stay cool (AC fan running throughout). The $276 value is now split three ways, but that still leaves $92 to be divided between residents, utilities, and third party providers who run such AC cycling programs. At scale, that’s a lot.