This is the sixth report in the Connected World Market Insights Series.
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What is the connected home?
In recent years, we’ve all been hearing a lot about the connected home, the smart home and the Internet of Things (IoT). Some of our friends and family may have talked about their smart thermostat that they can adjust using their mobile phone, and we saw media stories in 2014 about the $3.2 billion acquisition of prominent smart thermostat vendor, Nest Labs. We’ve heard of the coffee pot turning on when our home senses that we’ve gotten out of bed. We live in a world where Internet connectivity and smart phone ownership is near ubiquitous. Underlying and complementing these factors is the IoT. The cloud, mobile computing and social technologies make the connected home possible. Another key component, however, is energy. Not only the energy to power the interconnected devices that comprise the smart home, but more importantly, the energy that can be measured, controlled and managed. Home energy management is a service, a set of products and a market that is thriving due to all these factors.
The connected home is controlled by the user via a control hub that connects to and communicates with digital devices throughout the household. These devices can range from heating systems to wall sconces to automated door locks to appliances to thermostats to televisions, and more. The connected home is a package of services and solutions that collectively add value for consumers.
It is in this light that we review the market opportunity that is presented by home energy management (HEM), a subset of the home automation market and the connected home market. Due to its relationship to other markets, HEM is less likely to stand alone. Being a component of the connected home presents a unique set of opportunities and challenges for this market. This report examines HEM in detail.
The Internet of Things (IoT) market is projected to grow rapidly. Cisco Systems Inc., a global communications and information technology company, puts the value of the Internet of Everything (IoE) at $14.4 trillion (net profit) over the next decade.1 This growth is driven by connectivity. According to Gartner Research, the number of connected devices in the world will reach upwards of 26 billion by 2020.2,3 Some even estimate that this number will be closer to 100 billion.4
Analyzing the energy market a bit further, Navigant Research predicts that [inlinetweet prefix=”” tweeter=”” suffix=””]global revenue from HEM systems will grow from $512 million in 2013 to $2.8 billion in 2020[/inlinetweet].7 It also points out that the market will develop along a continuum, from paper bills to web portals to standalone HEM to in-home displays to networked HEM. Figure 2 illustrates how Navigant defines the segments in the continuum.
Home automation systems are increasingly popular as they enable an increase in comfort, savings in energy through intelligent energy management, and enhanced home security. A home/building automation system is a computer-based control system that is installed in order to integrate, monitor and control electrical and mechanical devices (i.e., the connected devices) within these buildings via a computer network that can be accessed remotely.
Rainforest Automation is an industry leader in energy feedback products (i.e., technologies that have hardware, in contrast with platforms that do not have a hardware component). Read the full interview.
Automation and control: A building becomes a neural network
Automation and control (A&C) is an established market, with new applications in the home and in utilities. Technological advancements in the automation industry (such as remote connection, Internet and wireless technology) enable third parties to provide monitoring, automation and control services.
To the customer, HEM is just part of a suite of services and benefits enabled by A&C. A&C adds the smarts to the home. This comprises embedded sensors, in-home displays, processing power and hubs that act like a neural network. Nevertheless, this network only works if all these components can communicate fluidly. Interoperability is key to the success of home automation.
Now we’re talking
Proprietary methods of communicating have left a mark on home automation—many connected devices simply cannot talk to each other. Open standards are breaking down some of these silos (for more on this, see the Connected World Market Insight Series reports, Game of Homes and The Evolving Digital Utility). Companies such as MMB Networks are also leading advancements in wireless technology, enabling third parties to provide home automation services using ZigBee (a communication protocol). MMB has developed a platform solution to address the challenge of connecting different proprietary platforms. MMB makes modules for consumer electronic appliance and device manufacturers to simplify the integration of ZigBee.
|MMB Networks’ RapidConnect is a hardware and software platform. It enables consumer electronics manufacturers to rapidly add ZigBee connectivity to their products with automated interoperability across major connected-home platforms. Read the full interview.|
Energy data: Developing standards beyond Green Button or standardized open energy access
To further facilitate device-to-device communication, or to really get the home to behave like a neural network, a new standard from the Consumer Electronics Association (CEA) has been approved. Called the CEA-2047/CE-Energy Usage Information, this standard gives users:
“…a more detailed picture of device-specific energy consumption [that can be communicated over a home area network]. Though not mandatory for [consumer electronic] device makers, the new standard sets up a framework for manufacturers to provide energy consumption data that could be fed to an energy management system or to an application and present it to consumers on TVs, PCs, or mobile devices. In essence, the standard enables devices to be energy self-aware and share that energy data with other devices. The new standard is also compatible with the Green Button initiative, an industry-led move to provide utility customers easier access to their energy consumption data.”18
Not only does this standard enable consumer electronic devices to communicate their energy usage information, it also enables these devices to optionally respond to basic demand and response commands.19
|Eyedro is a real-time electricity monitor: a piece of hardware that customers can install in different places. In factories, it can be installed on a machine. Landlords can install it for tenants. And homeowners can put it in their home. Read the full interview.|
The market players
In a US survey conducted by Lowe’s, the home improvement store, the company found that consumers ranked security as the highest benefit of home automation (see Figure 3).20,21 The results also indicated that [inlinetweet prefix=”” tweeter=”” suffix=””]70% of consumers would like their smart phone to be able to control appliances or devices in their home[/inlinetweet] while they are in bed, and that 44% wished to be able to adjust their thermostat remotely.
These numbers reflect key drivers in the home automation market—that is, once consumers are participating in automation for the purposes of security or convenience, they will then engage in consuming energy more wisely. Lowe’s is leveraging this through its home automation platform, Iris. The platform connects devices from diverse vendors such as Honeywell, Schlage and First Alert through a hub on the home’s broadband network. Available initially free of charge, which sets it apart from its competitors, Iris is included in the purchase of the smart hub and related items such as smart thermostats and door locks. For a monthly fee, users can upgrade Iris to tap into more features.22
Perhaps unsurprisingly, in the Lowe’s survey, consumers indicated they’d prefer to be able to install the additional products or features themselves, without the monthly fee.
Communication companies such as Rogers, Bell and Telus, and home security companies such as ADT and AlarmForce, can provide products and services for the connected home and home automation. They hold an inherent advantage due to their existing connectivity and wiring infrastructure in the home. Energy utilities can become involved if they wish to recapture some market share from the new players entering into what was traditionally a utility market. Smart thermostats, in-home displays, mobile phones and other networked devices are the tools customers can use to increase energy savings and comfort—tools which tend to be purchased for entertainment, comfort and home security reasons.
Ecobee makes WiFi connected thermostats that control your heating and cooling system. Read the full interview.
More than a billion smart phones (iPhone, Android) have been sold since 2008. One of the key drives of success for Apple and Google’s business models resides in the implementation of app stores, which allows innovators to create applications at a rapid pace, leading to a plethora of available apps. Can Apple and Google, and similar companies such as Amazon, replicate this success with the Internet of Things (IoT)?
With Apple, as long as it is an Apple product (smartphone or tablet), you can automate your home using whichever device you prefer. This echoes the Apple Store/iTunes business model. At the same time, Google is giving away its OS (operating systems) at $40 a prototype. Both companies are creating the marketplace and motivating others to innovate within that space. In future, Apple may feature a store dedicated to connected home products. The business case is already proven—Apple would just be applying it to the home.
In June 2014, Apple released Homekit—a home automation platform that allows a variety of smart home vendor technologies to be managed through one application on one of Apple’s devices. This is part of a broader strategy for Apple to enter into the IoT and connected home markets. Apple has a history of success in harnessing entrepreneurs to bring value to the devices it seeks to sell. Homekit could be Apple’s attempt to recreate their success with the Apple Store, and apply that model to the IoT.
Similarly, in January 2014, Samsung, the global electronics giant, unveiled its Smart Home platform. This platform lets users connect and control their home using their Samsung devices through one app via their Samsung Smart TV or their smart phone.23 According to Computerworld, “The company claimed it will ‘collaborate with third-party partners to make the Smart Home service extendible to their products and services,’ but it will doubtfully support its competitors’ products.”24
Samsung has partnered with a Toronto condo developer to offer its smart home service as a built-in feature. This service enables condo owners to control their access to the building and their unit, their comfort, and, for an additional fee, their appliances and entertainment systems.25 This building project is set for completion in 2017.
|Liricco has developed an energy management platform called Valta that consumers can use to automate their devices to fit their devices to fit their lifestyle. Read the full interview.|
As of October 2014, Google did not yet have a competing platform (like Homekit), but with the acquisition of Nest, it has positioned itself as a key contender (see Figure 4). Like Apple in the smart phone market, Google has shown its ability to harness the crowd as well as developers’ ingenuity to create a multitude of apps and devices.26
Nest has partnered with Airbnb, providing users with free access to MyEnergy, its energy monitoring service in 2013. According to Greentechmedia’s Stephen Lacey, this strategy brings “thousands more customers onto the platform…a great way for Nest to gather more information on how people are using the devices and saving energy, while potentially pitching more services like residential demand response as the company expands utility partnerships.”27
In its 2014 report, visionmobile said it best: “the evolution in mobile in the past 6 years holds a clear lesson for the Internet of Things. To realize its full potential, the fledgling Internet of Things industry needs to follow IOS and Android’s recipe of market-creating innovation.”28
Gigaom’s Katie Fehrenbacher wrote in 2011 about Microsoft’s Hohm and Google’s PowerMeter and how both companies had pulled their online energy tools pulled from the market. Fehrenbacher noted the reasons as:29
opt-out programs being more effective than opt-in programs at driving adoption. (Note: this is why utilities are such an important partner in HEM. They are one of the few types of companies that can run an opt-out program [i.e., you are in until you opt not to be]. This type of utility partnership is key to Opower’s success—they are part of a utility opt-out program.)
It’s been over three years now since Fehrenbacher made these observations. While still heavily fragmented, and with no clear market winners, the connected home market is maturing. Utilities are beginning to come around: the Green Button program has been launched by utilities across North America, with over 60 million customers using the standard, and participation continues to grow. With this program, utilities are no longer as wary of the large influx of data and the broadband entailed. As well, they maintain control over consumer energy data and consequently retain their customer relationships.
|Ecotagious helps utility companies meet their energy conservation targets by breaking down smart meter data into insightful and useful information for customers. Read the full interview.|
With more and more consumers investing in smart home technology, utilities actually gain a market opportunity. Market research firm Gartner reports that utilities can leverage consumer investment in smart home technology to better engage with their customers. For example, utilities can bundle HEM technologies with energy service plans. This connection to the customer goes beyond the issue of customer retention—it also fulfills the utilities’ business objectives. Utilities can access the customer’s home (with permission) as part of a demand management strategy, and later coordinate renewables and other distributed resource integration.
In Ontario, in addition to the smart meter roll-out, participation in the Green Button program, time-of-use pricing and an explicit strategy from the province to move forward on the smart grid, utilities are also required to achieve 7,000 GWh (7 TWh) of energy savings. This savings must be achieved between 2015 and 2020, and the utilities have been proposed a budget of $1.8 billion dollars to do so.30 Ontario’s Long-term Energy Plan allocates $4 billion to meet the conservation targets it sets out.
A key path to reach this robust goal could be to enable companies such as Rogers, for example, to use the Green Button standard to formally participate in the 2015-2020 Conservation Framework and to drive conservation savings. Currently, if a third-party company drives savings through consumer engagement, there is no mechanism for the utility to count those savings toward their targets, and, subsequently, it cannot pay those companies for the conservation. However, should third parties and their conservation solutions be eligible to capture a portion of this funding through payments from Ontario’s utilities, then such a strategy would help grow Ontario’s HEM market.
|Energent Inc provides state-of-the-art energy management information system solutions. Read the full interview.|
As discussed, energy conservation is not a strong market driver in home automation. The key drivers are security, comfort, entertainment, and features geared for an aging population (see Table 1). Home energy management as a service can piggyback on these other services for which consumers are willing to pay.
Market players, including startups, are creating and pitching a need for HEM in order to develop the consumer market. At the same time, large US companies such as Comcast, ADT, Verizon and AT&T “have added energy management as an option that can be bundled with home security, automation, or Internet access,” says Neil Strother, a senior research analyst with Navigant Research. He explains, “the uptake of home energy management by consumers is still relatively low, but these service providers are seeding a market that has reasonable potential over the next several years.”31
Whoever can control demand in significant quantities can essentially act as a utility. “If a company touches a device in a user’s home through a Lowe’s application, SmartThings, Revolve or Nest, they are essentially now a utility,” comments Daniel Moneta of MMB Networks, in an interview for this report. “That company is able to buy and sell demand on the grid. They have a customer base that is larger than any single utility, and that’s going to be an interesting shift in the market within the next decade.”
There is a battle underway for domination of the HEM market. As of 2014, the winners are not yet clear. The HEM market is young and fragmented, and a key piece—simple, intuitive UI/UX— is still largely missing.
[download url=”https://www.marsdd.com/wp-content/uploads/2014/10/Oct28-MaRS-ConnectedWorld-ConnectedHome.pdf” type=”pdf”]The Connected Home: Home automation enables home energy management[/download]
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2. Armstrong, L et al. (2014, July 17). Game of Homes. MaRS Discovery District. Retrieved from https://www.marsdd.com/news-and-insights/game-of-homes-connected-world/
3. Middleton, P., Kjeldsen, P., & Tully, J. (2013, November 18). Forecast: The Internet of Things, Worldwide, 2013. Gartner Research.
4. Morgan, J. (2014, May 4). A Simple Explanation Of ‘The Internet Of Things’. Forbes. Retrieved from http://www.forbes.com/sites/jacobmorgan/2014/05/13/simple-explanation-internet-things-that-anyone-can-understand/
5. Vidyasekar, A.D. (2014, April 28). Connected Living: Connected Homes, Work, and Digital Cities to Create a $731.79-billion Market Opportunity by 2020. Frost & Sullivan.
7. Navigant Research. (2014, March 5). Home Energy Management Systems Will Reach $2.8 Billion in Annual Revenue by 2020. [Press release]. Retrieved from http://www.navigantresearch.com/newsroom/home-energy-management-systems-will-reach-2-8-billion-in-annual-revenue-by-2020
8. Middleton, P., Kjeldsen, P., & Tully, J. (2013, November 18). Forecast: The Internet of Things, Worldwide, 2013. Gartner Research.
9. Morgan, J. (2014, May 4). A Simple Explanation Of ‘The Internet Of Things’. Forbes. Retrieved from http://www.forbes.com/sites/jacobmorgan/2014/05/13/simple-explanation-internet-things-that-anyone-can-understand/
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17. U.S. Energy Information Administration. (2014, January 10). Frequently Asked Questions. Retrieved from http://www.eia.gov/tools/faqs/faq.cfm?id=97&t=3
18. Strother, N. (2014, June 9). Internet of Things Reaches the Smart Home. Navigant Research. Retrieved from http://www.navigantresearch.com/blog/internet-of-things-reaches-the-smart-home
19. Consumer Electronics Association. (2014, August 5). Public Project Overview: R7SC8WG2 — ANSI/CEA-2047 — CE Energy Usage Information (CE-EUI). Retrieved from https://standards.ce.org/apps/group_public/project/details.php?project_id=93
20. Lowe’s. (2014, August 27). Cost, Confidence and Convenience: Lowe’s Survey Reveals Americans’ Attitudes On the Smart Home. Retrieved from http://media.lowes.com/pressrelease/cost-confidence-and-convenience-lowes-survey-reveals-americans-attitudes-on-the-smart-home/
21. St. John, J. (2014, August 27). What Americans Really Want From Their Smart Homes. Greentech Media. Retrieved from http://www.greentechmedia.com/articles/read/What-Americans-Really-Want-from-Their-Smart-Homes
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24. Niccolai, J. (2014, January 5). Samsung Smart Home aims to control TVs, refrigerators with a single app. ComputerWorld. Retrieved from http://www.computerworld.com/article/2487299/personal-technology/samsung-smart-home-aims-to-control-tvs–refrigerators-with-a-single-app.html
25. CBC News. (2014, July 10). Samsung smart home system to be built into Toronto condo. Retrieved from http://www.cbc.ca/news/business/samsung-smart-home-system-to-be-built-into-toronto-condo-1.2703113
26. visionmobile. (2014, June). IOT: Breaking free from Internet and things. Retrieved from http://www.visionmobile.com/product/iot-breaking-free-internet-things/
27. Lacey, S. (2014, September 4). Nest’s New Partnership With Airbnb Is About More Than Energy Savings. Greentech Media. Retrieved from http://www.greentechmedia.com/articles/read/nests-new-partnership-with-airbnb-is-about-much-more-than-energy-savings
28. visionmobile. (2014, June). IOT: Breaking free from Internet and things. Retrieved from http://www.visionmobile.com/product/iot-breaking-free-internet-things/
29. Fehrenbacher, K. (2011, July 1). 5 reasons why Microsoft Hohm didn’t take off. Gigaom. Retrieved from https://gigaom.com/2011/07/01/5-reasons-why-microsoft-hohm-didnt-take-off/
30. Ontario Power Authority. (2014, June 24). Conservation First Framework Update: Presentation to SAC. Retrieved from http://www.powerauthority.on.ca/sites/default/files/page/Conservation-First-Framework-Update_0.pdf
31. Navigant Research. (2014, March 5). Home Energy Management Systems Will Reach $2.8 Billion in Annual Revenue by 2020. [Press release]. Retrieved from http://www.navigantresearch.com/newsroom/home-energy-management-systems-will-reach-2-8-billion-in-annual-revenue-by-2020
The Connected World Market Insights Series will cover such topics as:
We’ll highlight the innovators in industry, academia and government throughout this series. In fall 2014, we will cap the series with HomeConnect 2014. This event will feature some of our companies, alongside major industry players, as they showcase their technology and solutions.
Accessing data is key, but we think that being able to format and analyze that data is where the real value can be found. During this series, MI will delve into the market opportunity now becoming available due to progress in opening up datasets, and the development of infrastructure and analytics that are creating new services and products and bringing them to market.