by Jeff St. John
June 15, 2018

GTM Research’s latest report on energy management in the connected home covers a lot of ground. But its primary insight can be boiled down to this: tap into the home energy management opportunity that Alexa has built. 

Since its 2015 debut, Amazon’s Alexa has become the recognized brand — the household name, if you will — for the new class of voice-activated, Wi-Fi-enabled, broadband-connected personal assistant devices that are rapidly becoming the de facto platform for the next-generation smart home. Alexa isn’t the name of the actual speaker Amazon makes (that’s called the Echo), but it’s the voice, not the box it comes in, that people identify with. 

Around 39 million Americans, approximately 16 percent of the adult population, owned a voice assistant device by the end of 2017, according to surveys conducted by NPR and Edison Research. The Consumer Technology Association (CTA) estimates U.S. sales of stationary voice assistant devices, often in the form of speakers, more than tripled from 8 million in 2016 to 25 million in 2017. 

And while Google Assistant has made inroads in the past year — and Apple, Honeywell, Samsung and a long list of others are integrating voice commands into their home products — Amazon maintains a commanding lead in the smart speaker market, according to the latest market research

The growth in voice assistant devices isn’t going to go on forever. As GTM Research analyst Fei Wang noted in this week’s report, “reaching customers beyond the ones eager and interested in adopting this technology will be increasingly difficult, particularly due to concerns about privacy.” An always-listening household device can be as creepy as it can be helpful, depending on one’s point of view. 

Still, GTM Research estimates that voice assistant devices will be in 41 percent of U.S. households by 2020, a huge penetration rate for a technology platform that’s capable of supporting all kinds of home automation and connectivity — including home energy management devices and applications. 

Amazon, Alexa and ecobee: How smart thermostats could piggyback on the home automation wave

About 30 percent of households with voice assistant devices today use them to control other connected devices, but GTM Research assumes that the share will grow to 35 percent in 2018 and keep growing at 10 percent per year. By 2023, 48 million households will consider voice assistant devices the brain of a smart home, with 75 percent of them controlling multiple devices like webcams, smart door locks, networked light bulbs, smart thermostats, and the like. 

These devices are designed to last for many more years than smartphones, meaning that competitors in the space won’t be able to make money selling brand new hardware every few years. But for Amazon, getting Alexa into homes is just the first step in a plan to offer customers greater access to its panoply of online shopping, streaming entertainment, and home delivery services. 

As GTM Research notes, voice assistant devices are effective touchpoints for companies to upsell. Among the 39 million voice assistant device owners, 31 percent have spent more on Amazon and Google since getting the device.

Security remains the biggest driver for homeowners to spend money on home automation, accounting for about 60 percent of the U.S. smart home market, or about $9 billion in 2017 revenue, GTM Research noted. Just last week, Amazon bought Ring for $1 billion, acquiring the startup’s networked doorbell, motion sensor and camera-enabled home security business — and quickly slashing the price for its package to $199 to compete with Nest’s $399 home security system. 

At 13 percent penetration, residential energy management in the smart home market added up to about $2 billion in 2017, Wang noted. That figure could expand dramatically along with the boom in voice-assistant-enabled home automation. To serve that role, Amazon also has a listening thermostat partner, ecobee.

In March, the startup closed a $61 million Series C round, led by the utility-backed Energy Impact Partners, as well as Thomvest, Relay Ventures and, notably, Amazon’s Alexa Fund. The Alexa Fund also participated in ecobee’s $35 million round in September 2016, helping the startup to deliver the first thermostat enabled with Amazon’s voice assistant capabilities last year. This year, ecobee launched new connected lighting products with Alexa voice service built in, increasing its lead against its key competitor, Google Home and Nest. 

The competition, from Google and Nest to the rest

Amazon stopped selling Nest smart home devices on its online retailing platform in March, making it clear that it considers Google its main competitor.

But Google and Nest have lagged behind Amazon and ecobee in integrating voice control into their offerings, Wang noted. Google’s decision to integrate Nest Labs into its Google Home hardware team in February indicates an interest in accelerating that development.

Google and Nest lead Amazon in utility partnerships. Nest has multiple relationships with investor-owned utilities to tap thermostats for automated energy management capabilities to serve grid needs. It has also been working since 2012 with energy retailers in competitive electricity markets, where getting and keeping customers by offering cheap or free smart thermostats is the driver. 

Wang offered the case example of Reliant Energy’s Speak & Save 24 program, launched in January, which offers customers a package with a Google Home and a Nest Thermostat E, in exchange for a two-year contract. While Reliant has been working with Nest since 2012, the 2018 version includes services like managing the Reliant account by interacting with Google Home via voice commands. 

As noted, Amazon and Google may dominate market share for voice-activated home automation, but pretty much every major vendor in the field is incorporating it as well.

Honeywell, the country’s biggest thermostat maker, announced plans late last year to spin off its connected-home business, including utility partnerships, into an independent and publicly traded company by late 2018. The new company is more likely to pursue voice-controlled technologies, as well as integrate with various "third-party demand management flexibility orchestration providers," such as EnergyHub, AutoGrid and Whisker Labs, Wang noted.

Comcast, another major home automation contender, unveiled a new voice-command function in January to enable additional control of connected home products in a Wi-Fi-connected environment, Wang noted. Comcast works with Nest and ecobee thermostats, as well as smart lighting from Philips Hue and GE, and smart door locks from Kwikset and August. 

Of course, Amazon, Google, Apple and other key home automation contenders each have their own long and growing lists of devices that are compatible with their platforms, including smart thermostats. By 2023, 55 million broadband-connected smart thermostats will be installed across the U.S., GTM Research projects, and many of them will be in homes that are run by their owners’ vocal commands. 

The role for utilities 

GTM Research doesn't just cover the voice-assistant-enabled home energy market. This week's report includes everything from VC and M&A activity in the space, to the latest trends in grid-responsive home water heaters and networked lighting. It delves into the role that utilities have played, and will continue to play, in the smart home market.

Utilities have spent billions of dollars in rebates and incentives to push smart thermostats out to residential customers. They have also been key supporters for startups with software that can analyze granular energy consumption data, such as Bidgely, which raised $27 million in January, or incorporate connected devices into demand-side load dispatch, as Nest has done with Southern California Edison. Startups with online or mobile platforms that can increase customer participation in efficiency programs, demand response, or time-of-use pricing have also been targets of utility support. 

While utilities will never have the reach of Amazon or Google in the connected-home market, they can play an important role in deploying and tracking the activation of connected devices, through bring-your-own-device programs and utility-branded DER marketplaces, Wang noted. Utilities can also provide services required to install and maintain connected devices in households, as well as rebates or advantageous rate structures. 

But utilities will also have to adapt to the realities of this new market, Wang noted. “Cost, ease of installation and interoperability are the main factors determining the adoption rate of smart home technologies.”

For example, while utilities have deployed millions of smart meters with ZigBee radios meant to talk to in-home devices, "the current mass adoption relies on Wi-Fi connectivity," with only secondary roles for protocols like ZigBee, Z-Wave or other home area network (HAN) options, she said.

Likewise, "a non-DIY installation process deters technology adoption. Sensors in and around electric control panels and water heater controllers require professional installation services, and the value propositions for these solutions are often unclear to customers."