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Utilities and Home Automation

By Posted on February 4, 2016

Dave Hurst
Director, Market Analysis

There has been a lot of interest in home automation (HA) and connected home devices recently. The HA market is anticipated to grow to 1.8 billion devices worldwide in 2019 according to Business Insider forecasts. Certainly, this year’s Consumer Electronics Show (CES) provided evidence as to just how big a force this market is in technology development, featuring a huge number of new automation devices and services. While this market is still fragmented and chaotic, the growth coincides with interest from utilities and retail energy providers in distributed generation, energy storage, and in-home devices and signals a natural intersection for the HA market and energy suppliers.

Of the current sectors that have a connection into the home: cable, broadband, utilities, security systems, and phone services, each of these, with the exception of utilities, has explored to some degree the HA market. Utilities have started to test the water for HA through interaction with home energy management systems (HEMS). Smart thermostats are the tip of spear for utility interactions with HA systems. While demand response programs have tested offering thermostats to customers in small numbers, a relative new phenomenon is being tested to capitalize on the growth of the consumer market for smart thermostats by connecting consumer-owned smart thermostats to the utility programs. Navigant Research recently hosted a webinar on “Bring Your Own Thermostat” (BYOT) programs, and according to Navigant, households with smart thermostats (or communicating thermostats) interacting with utilities will reach about 1.5 million customers in the U.S. by 2020.

On February 24, I will be speaking to the challenge of “Interoperability, Integration, and Energy Management” on a panel discussion during the Smart Energy Summit in Austin, Texas. This issue has taken center stage as many research firms have noted the multitude of “standards” in the HA market. Indeed, the huge number of new devices breeds complexity as noted by Moor Insights on Forbes, which is compounded as utilities and grid operators get involved and signals have to be understood by smart grid systems.

Yet, as utilities get more involved at the device level, the failure modes of energy devices inside the home will become increasingly critical as well. Utilities, who are used to getting fined for power outages, seem unlikely to take the lead on HA systems that could leave people literally out in the cold as thermostats shut down turning furnaces off rendering homes dangerously cold. Other high-energy systems, refrigeration, lighting, consumer electronics, could also be targets for services with utilities, but increases complexity and further raises the risk for ungraceful failures. The significant investment in smart grid technology has been designed from the get-go to protect utilities from failures. While the devices in consumers’ homes generally don’t ding utilities with regulators, the court of public opinion is a different challenge.

The HA market is slowly waking up to three key issues: the obvious complexity with the communication between devices to get stuff to work together, the challenge of failing gracefully, and security. Certainly, the device market is well ahead of any standards, and as such a lot has been made of the first and third challenge with home devices. As utilities and distributed energy resources (including energy storage) grow within the HA market, expect to see more emphasis and services that address the failure modes as well.

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