After a decade or more of false starts and unrealistic expectations, “connected home” technology is finally gaining enough market share for vendors to start bragging about the numbers.
And that means that the energy management side of the business, while still low on the list of consumers’ reasons for buying into the technology, could start to reach the critical mass required to make it a true grid-scale asset.
That’s one takeaway from this week’s Connections conference in Burlingame, Calif., which brought together some of the biggest names in the smart home industry. Attendees included Comcast, which earlier this month revealed that it has surpassed the 500,000-subscriber mark for its Xfinity Home platform, and home security giant ADT, which claimed 1.2 million users of its ADT Pulse home automation service -- nearly one-fifth of its total customer base -- in its second-quarter earnings report last month.
And that’s just a few of the bigger hosted, subscription-based services. Retailers such as Home Depot, Lowe's and Best Buy, appliance and thermostat makers like Whirlpool and Honeywell, bundled communications providers like AT&T and Time Warner Cable, and security-plus-solar players such as Vivint, are all bringing wirelessly networked, smartphone-controllable devices to market, whether as partners or as competitors.
Research firm and Connections conference host Parks Associates reports that about 10 million smart, wirelessly connected thermostats, lights, power strips and plugs were sold last year, and it predicts that figure will nearly double to 19 million units by 2017, with a commensurate growth in market value from $850 million to $1.6 billion.
But for the most part, the connected home business hasn’t found energy savings to be a big selling point, even when that’s the ostensible primary function of the device in question. Nest’s breakout success in the smart thermostat field -- and Google's decision to spend $3.2 billion to acquire it -- has arguably had far more to do with its design and marketing success than its differentiation from other smart thermostats in terms of energy-saving capability, for example.
“This is a secondary concern at best, the energy value proposition,” Seth Frader-Thompson, president of EnergyHub, said during a Tuesday panel session. Brooklyn-based EnergyHub, bought by home automation player Alarm.com in 2013, was founded on the premise of bridging the consumer and energy worlds, which it continues to do for a broad range of home automation devices. It’s also proven its ability to reduce energy consumption in Southern California homes, even without the push of demand response payments or time-of-use prices.
But while “people who are buying a Wi-Fi thermostat may be justifying it” on the energy savings potential, “they’re really buying it because it’s really cool -- because you can show your friends that you can control your house from your phone, or you can adjust the temperature from bed without getting out from under the covers,” he said.
Icontrol Networks, the startup that’s providing the underlying technology platform for ADT, Comcast, Time Warner Cable, Cox, and a growing list of independent dealers, revealed a similar trend in a 2014 survey. While 42 percent of the sample of typical target customers expressed interest in a thermostat that automatically adjusts when they’re away from home, only 21 percent cited better energy management as a primary reason for their interest in connected home technology.
“Our primary value proposition across the board is peace of mind,” Letha McLaren, Icontrol’s chief marketing officer, said in a Tuesday interview. That’s the core proposition behind home security, whether it’s a professionally monitored service or a do-it-yourself approach with smartphone-viewable spycams and door locks and motion sensors that send text alerts. “Peace of mind is also applicable to HVAC control -- people forget to turn down their thermostat, or want to make sure they turned it down," she said.
Even Reliant Energy, the Texas retail electricity provider, started selling home security services last year alongside its long-running smart thermostat programs with Nest and other providers. “Energy is not the leading driver of going to a connected home,” Scott Burns, Reliant’s senior director of innovation, told me in a Wednesday interview. “The security and convenience pieces are more important” -- and as one of some 40 competing energy providers in the deregulated Texas energy market, winning and keeping customers is Reliant's primary objective.
That’s not to say that Reliant's fleet of smart thermostats isn’t a valuable energy market resource, he noted. The NRG Energy subsidiary has built its own software platform to give its energy trading team access to the smart thermostats that its customers have turned over to the company's control under its Degree of Difference program, he said. “Our supply team loves it, because unlike peaking plants, a thermostat can respond very, very quickly," whether it's to meet a utility demand response program call or manage Reliant's supply-demand imperatives on the Texas energy market.
This kind of real-time aggregated energy flexibility is the long-range goal of connected home pilots happening around the country. Nest is running its Rush Hour Rewards and Seasonal Savings programs with utilities including Commonwealth Edison, CPS Energy, Direct Energy, Austin Energy, Green Mountain Energy and Southern California Edison. Comcast’s EcoSaver program uses startup EcoFactor’s technology to shave customers’ cooling and heating bills, and Alarm.com uses EnergyHub’s platform to work with “bring-your-own-thermostat” programs with utilities in California and Texas.
“At some point, demand response will become an important thing for consumers,” Icontrol’s McLaren said. “The point where it becomes interesting for residential is when you have enough of these residences under control in a geographic area.” That’s when individual homes can be turned into aggregated blocks of demand response or energy efficiency to serve the larger needs of utilities, demand response aggregators, energy traders and other parties on the grid side of the equation.
That’s going to take some time, of course. “Right now, it’s more of a land-grab perspective for the smart home,” McLaren said. In the meantime, preparing for a future of large-scale utility partnerships requires “knowing very quickly when load is shifted, when opt-outs from customers are coming in,” she said. “When you have all the lighting data and thermostat data, there are a lot of interesting insights you can gain from that.”