Your mother probably told you that a dollar saved is a dollar earned. But it’s a concept entrepreneurs couldn’t get their arms around until recently, not in energy anyway.

Mothers rejoice! Now, thanks to the rise of the “negawatt,” they can. The idea behind negawatts, or negative watts, is that a megawatt saved is worth the same as a megawatt generated.

The concept is one of a number of new ideas sparking a surge of new money into a once obscure niche of the clean energy market. Four so-called energy-management startups have announced venture capital funding since March, already surpassing last year’s total.

In May, energy-management startup Prenova raised $11 million, and Broadband Energy Network raised more than $2 million. Fat Spaniel raised $3.5 million in March. Comverge raised $5.5 million in April. “The technology, the business models, and the managers—the entrepreneurs—are all getting better,” says Nicholas Parker, chairman of the Cleantech Venture Network (see Energy Management Bags Cash; Energy Management Gets Cash; Energy Startup Gets $3.5M).

Energy Management Bags CashEnergy Startup Gets $3.5M

Add new ideas like the negawatt to surging energy prices, and you’ve got a recipe for innovation. Startups are striking deals that allow them to pocket a cut of a customer’s energy savings, rather than taking cash up front. They are pushing the idea beyond utilities to property managers and big businesses. They’re selling systems that synch up with the systems controlling an office’s heating and lighting.

An ‘Arcane Niche’

While technologies that generate power, like solar and wind energy, have seen an investment boom, until now most venture capitalists had ignored technologies that help manage and conserve energy. Energy-related investments totaled $178.6 million in 2005, according to the Cleantech Venture Network. But energy-management investments were only about 10 percent, or about $17.9 million, Mr. Parker says. It’s an “arcane niche” that makes up less than 1 percent of overall venture investments, he says.

Clever new business models are making the niche more attractive. Some startups are taking on the upfront cost of installing energy-management systems in exchange for the value of the monthly energy savings to utilities. That gives utilities a chance to upgrade their networks for free. One such example is East Hanover, New Jersey-based Comverge. The company uses conventional power purchase agreements—contracts to buy a certain amount of energy at a certain price—to sell negawatts instead of megawatts.

New Markets

Startups have also found ways to sell to a broader market of energy consumers, not just to utilities. Aside from corporations, high energy prices have snagged the attention of institutional real estate-management companies, another new market for energy management, Mr. Parker says. Prenova, for instance, sells its systems to big companies like Gap, Crate & Barrel, and 24-Hour Fitness.

The Atlanta-based company says its software can tap into the diverse collection of systems managing heating and lighting at big companies. It can then manage these systems to save customers up to 3 to 5 percent on energy purchases. As with the new utility-based business models, Prenova’s customers pay no upfront costs for the system, instead paying a set price or percentage for the energy they save, a spokesperson says.

Much of this investment is also driven by higher energy costs, of course. When oil prices were less than $40 per barrel, energy-management business models probably didn’t make sense, but now that oil costs $70 per barrel, they do. “It’s like suddenly discovering vast new oil supplies that are right under our feet,” says Robert Wilder, president of WilderShares, which manages two clean energy indices. “It’s like putting $20 bills in your pocket.” VCs are obviously thinking the same way.