Who pays for home energy management? That’s an issue we pondered in a recent article. It’s also an open question for dozens of startup vendors struggling to get momentum selling home energy management hardware bundles costing $300, $500 and even more (see our free HAN taxonomy for a quick sampler of vendors in the space). For instance, although you can walk into any Best Buy and get a Control4 home theater bundle (that includes energy management), it will set you back a few grand by the time you get it installed by the Geek squad, get the big flat-screen TV of your dreams, and home theater surround sound -- and in all likelihood, the latter are the real reason for your purchase. In the Best Buy Control4 scenario, energy management is an add-on feature, value-add, so to speak, not the chief reason why you slap down your credit card.
Although the average Best Buy only sells a few Control4 systems a month, I think they are on to something: embedded energy management (Control4 also recently inked a partnership deal with established smart grid leader Silver Spring). In fact, if you look at broader trends within the ever-expanding domestic digital footprint, embedding energy management into other “stuff” makes a lot of sense.
What matters is not the HAN hardware; what matters is data (about consumption) and control (i.e., automation). The endgame should focus on building intelligent, automated energy management, not filling the home with a slew of new, narrow-purpose HAN devices. Clearly, the overall trend is toward feature convergence -- more goodies on a few broad-purpose digital platforms. Look at today’s smart phones. Most include GPS, motion sensors, Wi-Fi, cameras, audio players, and you can load almost any clever app you can think of. They are a platform for innovation. Is home energy management an innovation platform or an innovation to add to other platforms? Seems to me we’ve got quite a few platforms already, and they are pretty darn good already.
Take the gateway. Because it is still early in the communication standards game, HAN vendors have their own expensive gateways that support multiple protocols. There is ZigBee Smart Energy Profile for energy-related communications and commands (that’s one communication chip), ZigBee Home Automation Profile or Z-Wave for home automation and remote control (chip two), and Wi-Fi, of course (chip three). The trouble is, pretty soon, you have an expensive dedicated energy management gateway costing hundreds of dollars. Appliance manufacturers like GE are caught in the middle since they need to pick a standards horse to ride on.
Wouldn’t it make more sense for Cisco to offer a Wi-Fi router with a $20 add-on ZigBee feature? Why not double-down and turn it into an (always-on) platform by tossing in some storage and processing?
The system savings would total around $100.
How about dedicated in-home displays? Prices for high-end devices can rival the iPad; in fact, that is what some vendors are pushing: tablet computers for the home. Instead of swimming upstream against the current of 14 million iPads shipped in 2010 (and counting dozens of competing tablets on the way), it is probably time to do an about-face and support mainstream tablets. Energy management is one “app” and one USB communication chip away. A $25 add-on sounds a whole lot better than $250 to me. Plus, consumers get to interact with the device of their choosing. This is exactly what a lot of HAN companies are doing: adding iPad, iPhone and Android apps to complement their expensive consoles.
Of course, home energy management already exists in most homes in the form of thermostats. With advances in embedded operating systems and low-cost microprocessors, there’s little reason why the programmable controllable thermostat of today couldn’t, or shouldn’t, extend to be the energy management control center of tomorrow. Honeywell and Radio Thermostat of America already sell hundreds of thousands of units annually (note also that Honeywell is partnering with EnergyHub to expand outward from its thermostat). And while we’re at it, do we really need multiple smart thermostats (for homes with more than one zone), or just a bunch of temperature sensor-zone control slaves with one master unit? The master controller may cost a little more, but savings for additional zones would be significant.
True, some homeowners may want a rugged, easy-to-use dedicated controller, but it should dock at, and be symbiotic with, the thermostat. At least that’s what Energate is thinking with its integrated thermostat docking station/home energy controller pairing, which currently in the works.
Next up, smart plugs. Shouldn’t energy management be included in every new device with a power cord? The resulting volume shipments would drive costs down quickly from $20+ per chip to $10.
One of our columnists, Rob Day, recently pointed out that the value of a network increases as the number of nodes increases and the intelligence on each grows. Over time, this is exactly what we expect embedded energy management to deliver. More managed devices at a lower cost per device, with more intelligence. Everything is going digital anyway. Why not engineer energy management in, as opposed to adding it through an expensive dedicated aftermarket device?
In fact, that is exactly what we assume in our five-year HAN market forecast -- that energy management becomes embedded as a value-added feature -- and that the number of managed devices grows, as does the number of households with networked energy management capabilities. We forecast that 10 percent of owner-occupied homes in the U.S. (around 6 million total) will have networked energy management by 2015. We also predict that energy management will converge with IP in the living room, and with home broadband, driven in part by new partnerships.
One word of caution though: the market will not be huge -- not at the future prices we are predicting. Limited spoils and a crowded market will drive a market shakeout soon, with lots of strategic shifts along the way. The outlook is a tumultuous market characterized by partnerships, acquisitions and, in some cases, vendors that quietly exit.
This article is based on analysis and data from the GTM Research report Smart Grid HAN Strategy Report 2011: Technologies, Market Forecast and Leading Players. For information about the report, go here.