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Going home, part 6: The Future Role of Utilities in Home Energy Management Systems

Home Energy Management Systems (HEMS), and home automation more broadly, have the potential to transform how energy services are delivered and which energy services matter most. Energy service could stop being valued as a commodity that utilities supply to undiscriminating residential end-users. The individual control offered by HEMS, whether automated or manually operated, could make energy management the driver in consumer purchasing decisions around energy. It is an open question who will provide the management services, but the value derived from the management services could easily eclipse the value of the commodity that they manage. There are three key scenarios for the future of the home automation market:

  1. Security, Comfort, and Convenience Rule

While it is clear that the management services of home automation technology will become increasingly important, there is a real risk that the energy management component will not get built in optimally if the home automation market is driven by players without strong energy knowledge. Consumers may demand security, comfort, and convenience services with limited collateral DER benefits because they do not understand the energy management potential. If the home automation market gets established as a security, comfort, and convenience play with a limited energy component, it may be difficult for utilities to get a place at the table and bring in DER design elements.

  1. Utility as Commodity Middleman

Even if HEMS is successfully incorporated into the broader home automation market, the big names in the broader home automation market – which could be telecoms, security providers, tech and computing, or manufacturing and retail sales – may get credit in the consumer’s eyes for the whole package including the energy component. Utilities might hand out incentives, but third parties develop the market structure, provide the valued energy management services (possibly bundled with other services), and handle customer contact.

  1. Utility Growth

Utilities do not have to be shut out of the DER benefits of HEMS or lose their customer relationships. The opportunity is there for utilities to help develop the HEMS market so that it provides the full DER benefits that can be achieved through integration with non-energy features. Utilities can achieve goodwill and branding benefits through partnerships with home automation technology and service providers, who are driving the comfort and convenience value propositions, while utilities capture and measure DER impacts. For starters, utilities could promote the design of EE features and DR connections into more products so that they can be integrated into existing utility programs. An even bigger role for utilities is possible if they enter and build the market of actively helping residential customers manage their energy use through HEMS. Utilities already have lots of boots on the ground in neighbourhoods, call centers providing customer service, and technical experts evaluating technologies, so it is not such a stretch for them to include management of the home grid in their scope of service expertise and capability.

If utilities feel that they are being squeezed into a marketplace of shrinking revenue opportunities, home energy management is a new market, ready for growth, that utilities are well-positioned to enter. Helping customers select, install, and operate HEMS integrated with other HAS is an important and valuable service that utilities could offer in a variety of ways with a variety of different revenue channels: capturing DR benefits, some variation on the ESCO model to allow sharing of savings, on-bill repayment for installation costs, different rate or contract structures for HEMS customers in retail electricity markets, shared revenue from bundling with non-energy services (telecoms, security, etc.), monetization of data generated, and more cost-effective traditional EE incentive program delivery models.

A stronger role providing services in customers’ homes would also help with customer management of existing activities. For example, helping the customer understand and track their energy usage reduces the incidence of bill complaints. Better information and controls on real-time energy use helps prevent outages and restore power more quickly.

Putting all these home energy management benefits together, utilities would obtain value from significantly strengthening their customer touch and public perception if they brand themselves as the folks who do not just keep the lights on, but keep the right lights on at the right time. Action by utilities in how HEMS services are provided gives utilities control of potentially significant DER, and changes the utility from a distant commodity middleman into an integral provider of in-home services to the customer.

To learn more about HEMS, read the rest of the blogs in this series: one, two, three, four, five.

2 Comments Add your comment
Avatar WurfelIT says:

I like the concept of your post. Very creative post. Best of luck and waiting for some new ideas. As a marketing executive, I find this article very useful I am looking for such useful information and I found here a lot of it. Great job, thanks.

Avatar Mansha Brothers says:

In the area of home energy management, Microsoft and Google made two mistakes: failing to fully understand the needs of the application, resulting in “solutions” that offered limited real value; and abandoning this nascent market, which is destined to be a significant global opportunity for any vendor with a solution that satisfies the market’s needs.

A single word summarizes the status of the home energy management (HEM) industry today: pilots. Pilots are the best way for the industry to experiment with various solutions prior to implementing full-scale demand response programs for reducing peak demand (typically on hot summer days and cold winter days).

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