When Nest Labs' $129 smoke detector -- which can talk to the Nest learning thermostat -- is touted as a cheap gift suggestion in holiday gift guides, it would suggest the connected home is becoming a reality.

It’s hardly the arrival of the Jetsons age, especially when it comes to how we manage energy use in the home. But this past year has seen some notable movement in how utilities are leveraging thermostats in the home, how companies are connecting services in new ways and changes to residential electricity pricing. 

If you’ve been sleeping all year, here’s what you need to know and what to watch for in 2014. 

Bring-Your-Own-Thermostat

It was bound to happen. Tens of thousands of homeowners are scooping up two-way digital thermostats that can be controlled via smartphones. On the other side of the electric meter are utilities that are eager to curb residential peak energy use, but hesitant about managing devices in the home.

Enter the concept of bring-your-own-thermostat. For people who already have many of the popular brands of new smart thermostats, a few utilities are offering programs where those customers can enroll in peak-use rebate programs.

The pilots, which are happening at Austin Energy, Southern California Edison and San Diego Gas & Electric, are being watched carefully by other utilities that might want to leverage the devices in their own territory.

The utility does not send a signal directly to a thermostat, but to one of the companies that aggregates the thermostats, such as EnergyHub, which was purchased by Alarm.com. Unlike old-school switches that just turn off air conditioning units, these programs can take advantage of pre-cooling homes and fine-tuning the AC so that customers barely notice the temperature difference.

The ever-popular Nest thermostat also got involved in a few of these bring-your-own-thermostat programs this year. Unlike every other thermostat on the market, which are usually aggregated together under one program administrator, Nest receives the utility signal and dispatches it directly to its participating thermostats.

The cost to utilities is far lower than selling thermostats at a deep discount to customers or installing hardware (which necessitates a truck roll to each house). If the pilots are successful, expect to see more programs in 2014, especially in Texas, where the need to curb residential peak energy use in summer is acute.

 

The Evolution of Solar and Energy Efficiency

Many homeowners who are installing rooftop solar PV may also be interested in energy efficiency, so it’s no wonder that firms like SolarCity have an energy efficiency side to their business.

The programs have been quietly simmering for a few years, but have picked up speed in the past year. SolarCity now pairs its energy efficiency offering with possible financing from Admirals Bank. Sunrun has started offering Nest thermostats, and in turn, Nest customers can get a $500 voucher for use on a Sunrun solar system.

On the energy efficiency side, startups like Energy Aware are integrating solar support on their platforms. Alarm.com, which is beefing up its connected home offerings, now partners with One Block Off the Grid to help customers evaluate rooftop solar options. Vivint, another of the country’s larger home alarm companies, moved into third-party-financed residential solar in 2012.

As 2014 rolls in, expect more partnerships and software solutions that will allow energy efficiency companies to help homeowners better match their load to solar production, as well as more solar producers that will have value-added services in the energy efficiency realm.

 

European Startups Enter the Market

The European heating and cooling market is nothing like the U.S. Peaks tend to be in winter, not summer. The technologies are often different, as well. Although some American firms, like Opower, have moved across the pond to tackle energy efficiency, it will likely take homegrown European solutions to curb heating costs.

One such effort is Tado, a learning thermostat out of Germany. It is offered as either a monthly service or flat fee for the hardware and software, which says it can cut about 20 percent on heating bills. Another offering, Qivivo, is a smart thermostat that launched recently in France and has an even lower price point, about $140.

In the United Kingdom, in-home displays will be mandatory as smart meters are rolled out, although it is unclear how much those devices will impact long-term energy efficiency. In the U.S., the time-to-kitchen-drawer for in-home displays was fairly speedy in most pilots. Smart meter data, however, could be the first step to get homeowners to think more seriously about efficiency measures -- if they are given the data quickly and in a useful format.

If Tado and Qivivo gain traction in the market in 2014, expect more startups to follow. Despite the early movement, the smart thermostat market will still grow slower than in the U.S. in coming years.

 

OpenADR for Homes

The automated communications standard for demand response, OpenADR, has been gaining ground for commercial applications in California and beyond. That is increasingly the case in the residential sphere too, where some of the bring-your-own-thermostat programs are using OpenADR 2.0.

The communication standard, which is being adopted by more and more products, is important because it allows utilities to verify the load they are shedding in real time. Honeywell, which bought Akuacom, a company that helped develop the OpenADR standard, has also launched a new residential demand response program in South Sioux City using OpenADR 2.0 this past summer.

In 2014, OpenADR 2.0 could very well become the de facto standard as utilities look for more measurement and verification from residential demand response programs than they have had access to in the past.

 

No Smart Meter, No Problem

One of the promises of smart meters was that they would help the average person better manage energy use. While that may be the case, vendors are also finding that the smart meter simply isn’t necessary for demand response, and many utilities aren’t using it to get into the home.

At DistribuTECH 2013, a hot topic was using broadband to enter the home instead of the meter. While there are about 30 million deployed smart meters, broadband is far more ubiquitous. It’s not just about thermostats, either. Emerson received a $1.5 million grant from the USDA as part of a consortium delivering rural broadband. Amongst other advantages, broadband access across rural America could help drive down the cost of connected home services to customers, but it also opens up the possibility that it won’t be the utility to deliver those services.

The home energy management innovations that could come from smart meters are also being held up by the wait for Green Button Connect. Originally slated to be up and running in fall of 2013, the program has been pushed back again to sometime in 2014. Currently, customers of utilities that have enabled Green Button must download the files, which contain their interval meter readings, and then upload it back up to any third-party developer that has an energy app they want to use. It’s far too clunky to catch on for the average person.

Although Green Button Connect could move beyond beta in 2014, don’t hold your breath for innovative apps to flood the marketplace and transform how we manage energy in the home. Instead, it will be companies leveraging the broadband connection that will start to offer consumer-friendly energy apps that could support the utility, but will also operate outside of the utility realm.

 

Dynamic Pricing Gets Real

Sacramento Municipal Utility District has been serious about dynamic pricing from the start. One of the purposes of installing smart meters was to bring dynamic pricing and greater energy efficiency to customers.

This year, SMUD took the first giant step down that road. The utility is only halfway through its pilot on dynamic pricing, but it already sees a future of rates that are more closely aligned with the costs of delivering electricity. The rates, which can be as high as $0.75 kWh at critical peak, are also designed to be revenue-neutral, and some customers saved between 6 percent and 26 percent.

Other utilities that aren’t as well-liked as SMUD or Salt River Project are looking at mandatory peak rebates. Pepco is hoping to begin a pilot in summer 2014 that would test a critical peak rebate across the District of Columbia. Baltimore Gas & Electric rolled out its Smart Energy Rewards, a peak-time rebate program, in 2013 after four years of pilots.

For the large investor-owned utilities, the peak-time rebates are a way to get customers used to the idea of variable pricing, using starter schemes that are all carrot and no stick. Next year, will see expanded programs (and more of them) that use the rebate pricing structure, but in the future, expect some more progressive utilities to offer dynamic pricing programs that look more like SMUD’s design. For now, and in coming years, however, it’s still the era of dynamic pricing training wheels. And that includes selling it as something else besides “dynamic pricing” to customers. 

 

Connected Home, Not HEMS

The terms "dynamic pricing" and "time-of-use pricing" don’t seem to resonate with customers, and "HEMS" seems to have fallen flat as well. In the acronym-saturated utility world, the “home energy management system” is a catchall for any efforts to control or bring visibility to energy use in the home.

The problem is, it’s not really a system -- not yet, and maybe not for a long time. Though energy controls such as two-way digital smart thermostats have caught on in recent years, this trend hasn't really been related to energy management systems.

On the utility side, some of the most successful HEMS companies don’t really offer a management system at all. For example, Opower’s reports and tools are effective at slicing off a few percentage points of energy loads from many homes, but they don’t involve a management system in the home; rather, they rely on behavioral cues.

On the hardware side, people buy Nests and other smart thermostats at Best Buy or from an alarm or cable company because they’re cool, and because they can control their home heating automatically or from their smartphone. Most people buy new refrigerators and hot water heaters because the old one is giving out, not because of the energy efficiency rating of the new one (energy geeks not included).

The connected home is slowly starting to materialize, and energy savings and controls are a part of it. But it is only one part of it, and the notion of a home energy management system being central to the average person’s lifestyle anytime soon is misguided. The vendors and utilities that see the control of lights, window shades, thermostats and large appliances as a consumer offering of comfort and convenience, rather than viewing them from an energy efficiency perspective, will be better prepared for the coming internet of things in the home, whenever that actually materializes.

Tags: bring your own thermostat, demand response, dynamic pricing, energy efficiency, energy use, home energy management, rooftop solar