Utility companies have a tricky path to tread as consumers are encouraged to use less of their electricity
Home energy management devices are increasingly providing monitoring, advice and automated and adaptive controls for domestic use. Global corporations such as Deutsche Telecom and Time Warner are snapping up nascent HEM firms. Google bought Nest Labs for $3.2bn in January 2014. But why?
Alex Herceg, lead researcher at Lux Research, based in Boston, says companies such as There Corporation have demonstrated energy cost savings as high as 40% through their HEM products. But big business wants in for other reasons, too.
Energy efficiency resource standards are obligatory energy conservation programmes that have been widely adopted in the US states responsible for two-thirds of all energy sales in the US. These standards require utilities to achieve specified customer energy use reductions against predicted business-as-usual increases.
“In order to meet reduction targets, which may be as high as 2% of total sales, utilities turn to third-party service providers, such as HEM companies, to deliver savings,” says Herceg. Burgeoning HEM firms can then turn a tidy profit while helping the utilities help their customers conserve energy.
More meters
There is lots of potential. “In the US there are states with large populations and utility energy efficiency spending to match,” says Herceg. “However, many states, regardless of their electricity prices, climate zones and renewable energy mixes, are lagging in smart metering implementation. If utilities can find a creative way to defer the cost of implementing a service, it could very well boost engagement.”
Energy provision is of course big business. Lux Research says utility revenues are huge: around $265bn a year in Europe, $370bn in the US and $1tn in Asia.
And regulation is pushing utilities to use some of their profits to help their consumers. The European Union has set a target for 80% of consumers to be equipped with intelligent metering systems by 2020. One estimate has valued the European HEM market at up to $2.4bn in 2014. In Asia, South Korea plans to have smart metering rolled out to 50% of customers by 2016.
Ted Fagenson, chief marketing officer at EcoFactor, a US based HEM provider, says he understands another motivation of large companies such as Google buying into the sector. “As ‘the internet of things’ spreads, Google captures a more complete picture of a consumer’s habits and preferences,” he says. If home energy usage is part of this, so much the better.
Fagenson also believes that by promoting energy efficiency and searching for technology solutions that provide savings and convenience for the consumer, utilities can become a trusted adviser. Whether they do this in-house or through external partnerships is up to them.
“A metric known as ‘net promoter score’ is a measure of a consumer’s willingness to recommend a product or service to a friend or family member,” he says. “This is the standard benchmark for a company’s success in the marketplace. Great companies have a score in the 80s; utilities traditionally have a score in the teens.”
So there is plenty of room for improvement – and opportunity for utilities.
energy efficiency energy management devices home energy Lux Research