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Going home, part 5: Nine tactics utilities can use to promote beneficial growth of Home Energy Management Systems.

Getting different home appliance and other devices to talk to each other in order to achieve energy savings, along with other important benefits, is a major challenge, and certainly not one that utilities could be expected to achieve on their own. On the other hand, the current attempts to build integrated home automation have largely left energy management benefits as an afterthought. Home automation has been a luxury good, which provides a mismatch between energy savings it can produce and the consumer segment that cares most about that savings: $100 of annual energy savings is not going to move the upper end of the market to demand HAS that capture the DER benefit. As home automation has become more mainstream (e.g., more affordable options like Iris from Lowe’s and Staples Connect), $100 in annual energy savings that comes from a product that captures the DER benefit of home automation could be a differentiator for low to middle-income market segments, versus products that leave this money on the table. There are a variety of ways that utilities could step in to help integrate energy management benefits into home automation systems.

  1. Assemble tailored systems. NV Energy put together their own tailored smart thermostat program, selecting white label hardware, software as a service (SaaS) for cloud-based analytics and control, and contractors to provide installation. Utilities can use their energy expertise to find the optimal configuration for EE and DR. This model overcomes the customer’s lack of trust that the energy savings will be realized, because NV Energy assumes that risk when they offer the device for free in exchange for the right to capture the DR benefits. Ongoing EE savings and bill credits for DR participation incentivize customers to stay in the program. On the other hand, a utility is unlikely to assemble a system that goes beyond energy management, so there is a limit to the service integration potential of this model absent partnerships with other industry sectors.
  2. Vet devices and service providers. Austin Energy set requirements for HEMS to participate in its residential DR program, and any manufacturer has the opportunity to become certified and enter the program. In this “Bring Your Own Thermostat” (BYOT) approach, utilities use their technology assessment to provide a stamp of approval, translate energy saving claims into a rebate on the purchase of the HEMS device, and assume the risk of achieving claimed savings. Utilities can also validate that certain service providers are capable of providing HEMS in a way that achieves real energy savings, in the same way that they promote trade allies for other energy efficiency measures. This approach opens up the opportunity for devices that provide integrated energy and other services to capture benefits from the energy savings, but it doesn’t actively push the market to bring in those integrated services or capture energy benefits beyond the HVAC system.
  3. Drive deeper DR benefits. Currently, HEMS DR capabilities focus on day-ahead events, which are an important part of DR, but not the sum potential. Utilities can use their technical expertise and detailed understanding of distribution network needs to help device manufacturers build voltage control and possibly frequency regulation into HEMS. They can also analyze localized capacity constraints and target DR events only where they are needed within the grid. Bringing these underutilized aspects of DR into the benefit side of the equation, while targeting DR to just where it is needed, greatly expands the value proposition. These additional components of the DR picture become especially important to maintain grid stability and performance as more variable and distributed generation (primarily wind and solar) comes online. Time of use rates, as a way to reshape demand curves and properly value the contribution of distributed generation, could be more attractive to customers and acceptable to regulators if HEMS can optimize operations automatically. Furthermore, while day-ahead or longer-term DR can be outsourced to third parties, it makes more sense for utilities to control the shorter-term DR and capture its benefits.
  4. Identify energy savings opportunities to build into controls. As the widget-based, low-hanging fruit of EE programs gets baked into baseline assumptions, utilities will need to shift to more challenging operational controls and integration of different devices and systems in order to find new energy savings. Utilities have an excellent understanding of the order of EE opportunities and can help HEMS designers build in the most cost effective integrated controls in a way that utilities can incorporate those devices in their EE program offerings. Utilities can guide how to leverage non-energy features of home automation for energy benefits. The tech sector often has the ability to make those connections through control devices, but may not know which connections would be most valuable for developing DERs.
  5. Communicate with customers. In many areas, the utility is a trusted res ource on energy management with strong energy-focused communication channels to customers. Utilities can use that position to guide and simplify customer decisions not just on HEMS, but more broadly on home automation systems. A recent survey by DNV GL found that 37% of those willing to purchase a HAS state that they would be more willing to purchase it if their energy utility endorsed the system (see Figure 4). Utilities can use this consumer influence to encourage customers to purchase HEMS that have real energy benefits, to operate those systems in a way that maximizes energy benefits, and to encourage providers to build real energy benefits into their systems in order to garner utility approval (for specific products, specific features, or categories of products).

Leo S blog graphic

Figure 1: Many in the Market for Home Automation Systems Are More Likely to Purchase with Utility Endorsement

  1. Earn customer trust. In a world of big data and increased incidence of related security breaches, utilities need to show customers that they are ahead of the curve when it comes to protecting privacy of the customers’ personal information, and educate customers how to get energy management advice and automation benefits without compromising their privacy. Implementing best practice data security standards, anonymization protocols, and limiting data access to only what is necessary can all demonstrate to customers that the utility understands the risks and will properly handle the detailed data captured by HEMS. Similarly, if utilities are incentivizing HEMS and positioning themselves as trusted advisors on a complicated technology, they must demonstrate confidence in the technological capability of the devices, including the friendliness of the user interface, e.g., through testing facilities and pilot projects. Technology companies often criticize utilities for moving slowly to adopt new technologies, but a systematic and disciplined evaluation process is needed to earn and maintain customer trust. Utilities will need a carefully planned, pro-active effort, rather than waiting for utility commission mandates.
  2. Validate savings claims. Utilities regularly evaluate the EE and DR benefits of various DERs, which helps customers to understand which measures to implement and regulators to understand how to create regulatory frameworks that promote cost-effective measures. There are many ways that utilities can test and communicate what energy benefits a consumer is likely to achieve from using different HEMS devices, which builds customer confidence in the value of HEMS and promotes widespread deployment.
  3. Promote capital projects. HEMS focus on operational optimization, but they also provide a lot of valuable data on what capital investments to make. Utilities already have programs to help consumers understand and pay for energy efficiency investments, from appliances to insulation. Utilities can build HEMS data into virtual audits that guide customers on a very individualized basis to the capital investments make the most energy sense for them, instead of generically advising everyone to buy a more efficient air conditioner. Once the investment is made, the utility can use the HEMS data to confirm whether promised savings were achieved for each individual investment, building more customer confidence in the utility’s recommendations and its EE incentive program. Previously, detailed monitoring and verification of energy savings could only be achieved from expensive and intrusive metering studies based on samples and non-continuous data.
  4. Provide energy as a service. Because HEMS provides unprecedented access to monitor and manage home energy use, it is conceivable that utilities could use those capabilities to provide energy as a service rather than a commodity, as HEMS technology advances and matures. A utility could offer to heat, cool, and operate appliances in the home to certain performance standards for a certain price, indexed to certain usage characteristics (e.g., temperature setpoints), rather than charging for kWh and therms delivered. The utility would make decisions about capital investments, repairs, and operating parameters to optimize the system. This service would be transformational, and it is worth considering how utilities can move in this direction, even if full implementation is unlikely in the foreseeable future.

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

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