Once a useful offshoot of the earliest smart meter deployments in the mid-2000s, home energy management (HEM) has morphed into a broader set of products and services. The latest tools for controlling energy in homes now encompass areas such as demand response (DR), customer engagement, load disaggregation, and the smart home, and they are often bundled with home security systems, writes Neil Strother, principal research analyst Navigant Research
Since the early days of utility smart meter deployments, HEM technology and the market have shifted dramatically. While smart meters and the data they generate still matter to HEM, newer types of hardware and services are more accessible. Homeowners can now choose from a variety of smart thermostats (e.g., Nest, ecobee, Honeywell’s Lyric) that give them greater control of HVAC systems and can help lower energy bills.
Similarly, residential lighting products are more intelligent and feature more flexible controls for managing energy consumption. Products like the Philips Hue, or connected bulbs from LIFX or Cree are now widely available. Though prices for these advanced lighting products tend to be higher compared to legacy products, the price points have declined and more mainstream consumers can afford them. Smart appliances have entered the market as well and can be programmed to operate at lower cost during off-peak hours in utility service territories that offer time-of-use rates. Another product category, smart plugs, has become a popular option for controlling individual plug loads.
Voice assistants and HEM
However, no product category has been more disruptive in homes than voice assistants such as Amazon’s Alexa or Google’s Home. Over the course of a few short years, voice assistants have spawned smart home ecosystems that connect a range of devices related to HEM that have altered customer expectations. People at home no longer have to use a smartphone app to control a smart thermostat. They now simply ask Alexa or Google Home to change the thermostat and then the AC or a furnace kicks on.
This new behind-the-meter home environment has forced utilities to change how they interact with residential customers regarding HEM. Utilities can no longer operate from the old-school mindset of centralized energy distribution. Many utilities have adopted (or are in the process of adopting) a much stronger customer-centric model. Ongoing customer engagement is taking place via mobile, online, voice, and social network channels. Utilities now have numerous touchpoints to stay engaged with customers with timely and relevant information related to saving energy. Customer engagement has become a strategic imperative for utility executives. To that end, vendors like Uplight (formerly Tendril), Oracle’s Opower, and Bidgely have upped their digital products to help utilities improve customer engagement related to HEM.
HEM solution examples
The following examples illustrate the current activity around customer engagement from the utility perspective:
AEP Ohio wanted to improve its engagement with customers and provide them with hardware and software tools to better manage their energy consumption. The utility selected Powerley, a HEM platform provider, to set up AEP Ohio’s branded solution called It’s Your Power. The solution features a mobile app that enables users to monitor and control energy in their homes. For homes with a smart meter, customers can request a bridge device that acts as a hub and enables real-time energy management. Customers can also buy a smart thermostat for controlling HVAC systems and can participate in the utility’s DR events. The results of the deployment were more than 10,000 downloads of the mobile app in the first 3 months after rollout and a conversion rate of approximately 80%.
London Hydro, based in Ontario, Canada, sought to help its residential customers access smart meter data so they could better manage energy consumption. London Hydro selected Bidgely, a software startup, to transition from using home energy reports to a load disaggregation and communications approach. The solution enabled the utility to deliver itemization and personalized savings recommendations to its consumers, targeting loads that can provide the greatest chance for energy savings. The result has been savings of about 2.25% on energy spending for the typical customer. Consumer engagement has also improved, with the email open rate rising to 53% and nearly 40% of mobile users engaging multiple times a week.
A new standard for HEM
Another key driver of change in the HEM market is an emerging standard—at least in the US. Until recently, standards for HEM and smart home products have been relatively loose or nonexistent. That is changing with the US Environmental Protection Agency’s (EPA’s) ENERGY STAR program’s effort to develop specifications for smart HEM systems (SHEMS). EPA officials and industry stakeholders have been working for about 1 year to define a combination of smart devices and services that could boost home energy savings. The new SHEMS standard is close to a final version and will be launched by ENERGY STAR either by the end of 2019 or by early 2020. Navigant Research anticipates this standard to have a significant long-term impact on the HEM market.
Despite the momentum, some stubborn obstacles remain a hindrance to wider adoption of HEM solutions. Utilities tend to operate with a long sales cycle, meaning the more advanced HEM solutions take time for approval and deployment. Solutions often get caught in lengthy trials, delaying their usefulness to residential customers. Another hurdle is the price consumers must pay for HEM products. The more advanced HEM devices and services cost more than traditional ones, and that means residential customers are likely to pass on purchases until prices moderate. Lastly, demand for HEM products is still lukewarm. Some customers are motivated to reduce energy consumption via HEM products or solutions, but many are not, given relatively stable energy prices. They see the added expenses involved and are uncertain of the ROI.
Still a growing market
Even with the obstacles, Navigant Research foresees a growing market for HEM, as noted in its recently published report, Home Energy Management Overview. Global HEM revenue is expected to grow from nearly $4.4 billion in 2019 to more $12 billion in 2028, at a compound annual growth rate (CAGR) of 12.3%. In North America, HEM technologies have an established foothold, and revenue in this region is expected to increase from $2.3 billion in 2019 to $4.6 billion in the final year of the forecast, at a CAGR of 8.0%. Europe is forecast to have the next-highest annual totals, with revenue growing from nearly $1.3 billion in 2019 to almost $3.6 billion in 2028 at a CAGR of 12.1%.
As the HEM market has shifted to a broader set of solutions, utilities and vendors have adapted to the demands of residential customers. Stakeholders should note these trends and continue to innovate and integrate the HEM hardware, software, and services that drive adoption and help people lower their home energy costs.
About the author
Neil Strother is a principal research analyst contributing to Navigant Research’s Buildings service, with a focus on the Internet of Things trend, smart metering technologies, and home energy management solutions. Strother has an extensive background in market intelligence (more than 16 years) focused on emerging technologies.
Strother is a frequent speaker at industry conferences and is regularly quoted in major publications including The Wall Street Journal, The New York Times, The Economist, and Bloomberg. Prior to joining Navigant Research, Strother was practice director of mobile services at ABI Research. He previously held senior analyst positions at Forrester, and NPD. He was also the managing editor of ZDNet AnchorDesk. Strother holds an MS from Northwestern University and a BA from Whitman College.