Smart Homes: Regulation and the Market


Ed Butler, Conference Producer, Synergy

‘In failing to plan, then you plan to fail’. So goes the well-worn adage widely ascribed to Benjamin Franklin. Such trite phrases have a habit on falling on deaf ears. But, its application to the Smart Home agenda exposes serious shortfalls and raises some interesting questions. The all too familiar story of the Mr. Blogs driving home from work whilst simultaneously arranging the lighting, closing the curtains, putting the kettle on and running a bath for the Mrs. never fails to stoke the enthusiasm of its readers. Yet those same accounts consistently fail to explain quite how this scenario might ever be realized.

Writing in an article recently published on the Smart Home 2012 website Colin Calder, CEO of Passivsystems wrote, ‘’ Good policy starts from the future and works back. Our energy policy is starting with the past and stumbling forward’’. He was referring to the need to have in place a set of policies which can accommodate, support and encourage the development of smart energy provision into the home and thereby maximize the customer value proposition. For smart homes we have that end vision in sight, but if we were to plot the course of development starting from the end and working backwards how would that developmental path look?  Can it be expressed in such linear terms? Is it even possible? After all capitalist advancement is built upon technological innovation borne of a competitive market, and who can preempt what technological innovations might emerge over the next few years and where these will lead?

Though we may not predict what ingenious new gadgets will emerge, it may be possible to set down a regulatory framework with appropriate targets and subsidies which can train entrepreneurialism and innovation towards the government’s 2020/50 carbon reduction ambition. We’ve all witnessed the transformative effect regulation has had in Europe on cleaning up the energy industry. The carbon market, renewables subsidies and the subsequent explosion in wind and solar, the proliferation of smart metering are all borne to a greater or lesser extent from the need to meet the European 2020 targets. Similarly the US is on the verge of introducing laws to double the fuel economy of cars by 2025. Smart meters, to which Colin Calder was specifically referring, are now mandated to be present in every UK home by 2018. Without regulation to enforce this, such a statistic would be but a distant dream.

The home of the future, apart from anything else, can become a repository for energy storage, a means to balance the grid and to consume energy more efficiently. There is scant regulatory requirement about the need to ensure the inter-appliance connectivity of the home. Yet by enacting this, governments could perhaps take a lead in catalyzing the development of the smart home and in so doing help to realize national carbon reduction targets.  There is a moot point here which is about ensuring interoperability of appliances and open standards as opposed to closed loop systems which will inevitability create a fragmented and weak smart home movement. But, this aside, if governments were to state that by, say, 2016 all appliances had to be designed so as to be interconnectable then the ambition of reaching its own energy savings targets might come one step closer to reality.

Another side of the argument would say that centralized regulation of the smart home agenda is a fairytale vision at best and downright damaging in the worst case scenario. After all the EU has struggled long enough to harmonize the earth system in power sockets across its member states. Who can expect the EU to take a firm and responsible grip on such fast moving world of home connectivity and technologies such as IOT, the cloud, streaming etc. and still deliver an overall positive effect on the industry? As Morten Bremild, owner and founder of Axelerate, suggests ‘’ if governments take on the mandate of regulating the smart home, everything will freeze!”

In describing the way forward Bremild sees the process ahead more like a walk through fog. ‘’We can only see the path a few meters ahead, but it reveals itself as we take the next steps!’’. Consequently, he states, the important thing is not the future state of the industry (the ‘vision’), but the direction of the industry! ‘’And the direction right now is innovative connectivity platform solutions and not regulated smart homes”.

But, the government can incentivize without overly regulating and stifling innovation. Susan Furnell, Head of Smart Networks at NPower points to the example of the UK’s ECO and Green Deal financial mechanism.  ECO subsidizes some energy efficiency measures (entirely for certain specific groups of vulnerable customers), while the Green Deal provides reassurances that the cost of the measures should be covered by savings on the electricity bill over many years, with a loan attached to the house rather than its occupant.  In effect the government helps to create some useful parameters and incentives without meddling in market activity.  

As things stand smart home controls are mostly excluded from the majority of homes entitled to ECO and Green Deal. However there has been pressure on the government to change this. In a letter co-written by Calder of PassivSystems, alongside colleagues from WHEB Group and Honeywell, the point was made that smart controls ought to be separated from standard thermostats and receive a particular weighting in recognition of their positive contribution to correcting human behaviour and building performance.  Making this change would help significantly popularising smart, energy efficient homes.

As energy prices continue to rise so the golden triangle of consumer interest, government targets and commercial gain will naturally become further aligned. The customer will take added interest in sensory automated taps, lights and other appliances; the government would see a gradual improvement in energy efficient usage, and product providers would have a door wide open to an expanding and lucrative market. Here again the government might take the initiative by subsidizing certain appliances to facilitate their consumer uptake. The key to succeeding in this, as Peter Crayfourd, Group Head of Customer Experience Lifestyle at France Telecom states, is to couch the benefits in a pro-consumer, cost efficient way. In these straightened times acquiring low energy-consuming, cool-looking appliances may fall low on the agenda of most households. But with energy bills inexorably on the rise, these products will take on a new appeal with the initial outlay being increasingly justified by the potential savings.

Government leadership of the smart home agenda need not be driven by regulation or by financial stimulus. Simply by coordinating the movement a little bit more they could help pull all actors in one direction to deliver a cohesive effort. Perhaps unsurprisingly all industry experts interviewed for this article believe that commerce is best place to lead the smart home agenda. And indeed, the market functions best when unshackled by burdensome regulation. But it remains for the government to help shape the market arena, provide financial prompts, leadership and even coercion at times. If the smart home market were a yapping dog straining at the leash, then as the owner, the government has a responsibility to guide that dog in the right direction. The prime concern of the dog, after all, is to sink its teeth into a meaty bone. The owner, however, must look at the bigger picture.  

All people referred to in this article will be speaking at the 2012 Smart Homes conference taking place on 9-11 October in Amstersdam. Please visit for further details.