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Going home, part 2: Overcoming Obstacles to Deploying Utility Operational Expertise Behind the Meter

In the residential electricity market, utility operations have focused historically on the utility side of the meter: provide enough supply to match the current demand and make sure there are no transmission and distribution interruptions. Efforts to affect operations behind the meter, i.e., how consumers operate their home network, have largely been limited to behavioral tips: “Change your thermostat set point. Turn off your lights when you’re not using them.” There has been a limited market for residential load control, but many people remain wary of the utility cycling their home AC or water heater for them, regardless of the financial benefit to their energy bill. Instead, utilities have tried to limit residential demand primarily through energy efficient products: buy an Energy Star appliance, insulate your home.

The advent of home energy management systems (HEMS) changes the paradigm for residential energy management, by creating a value proposition and a market need for operational management of energy use behind the meter. Existing technology in artificial intelligence, big data, systems integration, and enhanced communication is not yet being seriously leveraged to provide residential energy management, but it could very soon create important, flexible, and intelligent benefits for both consumers and utilities. HEMS’ real-time information, automated pro-active adjustments, and learning from user actions and overrides can guide consumers to energy efficient behavior – or do it for them – much more effectively than bill inserts or an informational website can. In fact, today’s generation of HEMS effectively circumvents the need for many actions on the part of the consumer, in that it makes decisions in a “set-and-forget” manner so that household comfort and utility energy goals are achieved.

The promise of HEMS is undermined by numerous barriers: limited consumer awareness and understanding, fear of obsolescence, immature market standards, dependence on integrated action from multiple industry stakeholders, regulatory hesitancy, benefits that do not align with a clear consumer profile, Tower of Babel communication protocols, security concerns , and the low cost of avoided electricity in some areas. The transaction cost of addressing all these barriers has so far limited HEMS to a niche play for utilities, while the financial value of energy savings from HEMS may vary. To the extent that HEMS is gaining ground, so far it appears to be more because of comfort and convenience to the consumer than its energy management benefits.

At the same time as HEMS are making limited inroads into the market as a stand-alone tool, other home automation systems are delivering many of the technology solutions that can be leveraged to increase the value of HEMS. Consumers purchase home automation systems even though they provide little or no direct financial return for the consumer on the investment, in contrast to HEMS that offer energy savings. Improved control and automation of security systems, smart irrigation, automated lighting, networked entertainment, and healthcare are all expanding market share because they tap into comfort, convenience, security, and medical needs and desires that consumers are willing to pay for.

The market opportunity for HEMS expands significantly when it takes advantage of synergies with other home automation service areas, and integrates lifestyle benefits with financial and environmental value propositions. DNV GL conducted proprietary research amongst an online panel of respondents in the US to gain an understanding of consumer awareness of and interest in home automation. Our results show that while there is a significant consumer segment that wants a focused home automation product, a much larger consumer segment wants an integrated home automation product. Utilities can strengthen their residential value proposition by integrating their expertise in energy operations with other home automation services.

Cloud-based analytics can customize energy management and behavioral messaging to the thermal characteristics of each individual home and the weather of each individual minute, build trust by validating claimed energy savings, and customize recommendations for investments in home improvement to accompany optimization of operational management. Sensors in the home and locational awareness of occupants can ensure that energy is only used when someone needs the service, lighting activities and warming people rather than burning energy indiscriminately. Automation drops the transaction cost on many minor energy saving actions that add up to significant benefits. System integration allows devices to work together, like getting occupancy information from a security system, or making the electric vehicle battery and the appliances work together. Improved communications means that the utility’s demand response offering is more an ask than a tell: how much energy do you really need now? The common theme is that with improved control and automation, home energy management becomes desirable by optimizing energy use around what the consumer wants and does, rather than changing what the consumer wants and does to reduce energy use.

To learn more about HEMS, read the rest of the blogs in this series: onethree, four, five and six.

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