In recent years, home energy management systems (HEMS) vendors in the utility space have focused on demand response solutions; however, the landscape is expanding and new solutions with multiple value propositions are on the rise.
HEMS offerings have expanded to include dynamic pricing, collaboration with non-utility vendors, and the integration of more grid-edge technologies.
The main drivers of utility HEMS solutions today are demand response and energy efficiency. With the advent of the direct-to-consumer non-utility business model, the utility HEMS arena has benefited from increased consumer awareness of automation and energy-saving solutions. For now, the two market segments have a symbiotic relationship that will help vendors learn the right business model and also make customers more aware of HEMS and enthusiastic about having HEMS solutions in their homes.
The U.S. currently deploys a significant amount of reliability demand response (DR), which helps to reduce load during peak times. In the residential sector, reliability programs are mostly focused on control switches in air conditioners. However, economic-based DR is just now hitting its stride, thanks to a recent order from the Federal Energy Regulatory Commission. If these rules were expanded to include non-peaking events, HEMS could potentially offer more value to utilities.
As GTM Research discusses in the recently published report Home Energy Management Systems: Vendors, Technologies and Opportunities, 2013-2017, time-of-use (TOU) rates and tiered pricing programs can also help boost the economic value of HEMS solutions.
There is an interesting disconnect between baseload energy reduction technologies from energy management systems and temporary DR load drops. If households are paying for subscriptions that lower energy consumption by 10 percent to 15 percent (an offering category which we believe is poised to gain in popularity), then DR could become more difficult to implement without a new variable such as TOU pricing to help consolidate the differences in wholesale pricing issues and HEMS load reduction algorithms that are disconnected from the utility world.
While utility HEMS vendors wait for TOU options to expand, they are partnering with non-utility vendors to help drive revenue growth and open new market opportunities. The table below shows a number of major partnerships that have been established in the past year between well-known utility HEMS vendors and major automation and telecom companies.
FIGURE: Utility and Non-Utility HEMS Vendor Partnerships, 2012-2013
| Utility HEMS Vendor | Non-Utility HEMS Vendor | Deal Notes |
|---|---|---|
| Schneider Electric | Alarm.com | Schneider added its Wiser HEMS platform to Alarm.com's offerings, and now Alarm.com is taking care of all customer-facing work, from sales to support. |
| EnergyHub | Alarm.com | Riding on its successful rollout of more than 1 million customers, Alarm.com is expanding its vision and purchased EnergyHub for its energy management technology and utility industry expertise. |
| EcoFactor | iControl | EcoFactor provides the energy management component in iControl's platform; together, they approach potential telecom vendors, so far with great success |
| EcoFactor | Comcast and others | Comcast uses iControl in its home automation offerings, with EcoFactor offering the energy management component. The EcoFactor/iControl partnership extends to other telecoms beyond Comcast. |
| AlertMe | Lowe’s | AlertMe’s Iris platform is sold through a high-profile partnership with Lowe’s, making it one of the only successful partnerships with a major big-box retailer. |
| Powerhouse Dynamics | Ingersoll Rand | Ingersoll Rand invested in the eMonitor platform, and now Powerhouse Dynamics will be able to access Rand’s network of 8,000 dealers. |
Source: GTM Research's Home Energy Management Systems: Vendors, Technologies and Opportunities, 2013-2017
Last week, I spoke with a reader about the recently released HEMS 2013-2017 report, focusing on the future opportunities that non-utility vendors may have in the utility market. He made the astute observation that non-utility vendors, which can easily control hundreds of thousands of homes in regions with 1 kilowatt to 2 kilowatts of flexible load per home, could directly participate in wholesale interstate power markets regulated by FERC, bypassing local utilities that may not yet have strong residential DR or TOU programs in place.
While this type of virtual power plant idea is still in the future, it almost certainly will change the game if a company like Comcast can add or remove megawatts of load across a large geographic area at a moment’s notice.
Today's utility HEMS market requires well-planned economic analysis models to get utilities on board. And with such high overhead costs for hardware, strategies such as Opower’s all-software solution are sometimes the best way to gain a large utility customer base quickly. In order to get deeper savings, many argue that we need to take an integrated approach to HEMS economic analysis.
While we wait for more integrated solutions, companies like Opower have products that cost little to implement and quickly garner results. They also offer easy integration of new services. Indeed, Opower is doing just that, moving from the digital world and into hardware partnerships to offer its own demand response solution. It has a proven track record with utilities, and as such, it has a much easier time scaling its HEMS solutions.
OpenADR is also a helpful driver in HEMS adoption, with companies such as Honeywell designing new thermostat products to quickly get into the home and allow households to enroll in DR programs more easily. Other standards groups driving adoption include Z-Wave, ZigBee, and U-SNAP. These groups are trying to exist symbiotically, and they all have profiles that allow vendors to develop solutions with increased functionality, lower cost, and better integration with future standards.
Another trend is the use of behavioral psychology in the home energy management space. A number of firms are applying machine learning algorithms that help optimize software and hardware to change homeowners' behavior. Companies in this area typically adopt one of two approaches: full automation and manual control. Vendors have had success on both ends of the spectrum.
Future solutions include integrating weather forecasting into energy management, managing storage solutions and distributed energy such as rooftop solar, and complementing the use of microgrids. These are all an important part of enabling changes at the grid edge.
There are a number of directions in which the HEMS market could expand. Whatever area utilities and vendors choose to attack first, it is clear that the future is bright for the connected home of tomorrow.