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Going home, part 4: Seven Ways for Utilities to Generate Cost-Effective Energy Savings from Home Energy Management Systems

Electric utilities have key strengths that they can use to promote the deployment of Home Energy Management Systems (HEMS) and strong channels to engage consumers on energy related topics. Utilities tend to focus less on understanding the market potential for and introduction of new products, though deregulated utilities (“retailers”) have some relevant strengths. Energy utilities have the most technical sophistication in energy management and have superior access to generation, transmission, and distribution data, which is needed to derive some forms of energy value from HEMS, especially demand response value. The following are seven design and operational elements, most beneficially delivered via a learning device or application, to promote the development of a HEMS market that achieves maximum benefit for utilities and their customers:

  1. Get the biggest bang for the buck: Nest has built a successful business model on the assumption that energy efficiency is important, but still ranks behind comfort and convenience on the list of selling points. To capture the distributed energy resource (DER) benefits of a smart thermostat, utilities must integrate the marketing of the financial savings for the consumer on their bill with the ease of automated programming of temperature setpoints and the ability to monitor and control performance from anywhere with an internet connection.
  2. Mine broader energy savings: Even if the HVAC system is the gorilla of residential energy, the comfort and convenience value proposition goes far beyond the thermostat. Most people interested in home automation want to control their home services as an integrated communications, media, security, convenience, and energy system, rather than just address the energy service component (see Figure 1). Utilities need to tap into the consumer interest in integrated home control to reap the energy savings that might not be cost-effective on their own. If there is already a smart hub able to control multiple devices, the pool pump and the electric water heater could be part of an integrated DR program. Someone who wants smart lighting to make it easier to get the right ambiance could then also be part of an EE program to adjust residential lighting to the level needed for the typical activity, potentially according to a schedule. A parent who wants remote control of their children’s use of home entertainment systems could also use the smart control to ensure that they system is off when no one is watching it, and not even drawing a “vampire” load for being on standby. Smart temperature controls that include a fan can turn it on to meet the first couple degrees of apparent cooling before turning on the AC.

Leo -blog chart

Figure 1: The Majority of Those in the Market for a Home Automation System Need It to Perform Multiple Functions

  1. Serve people, not places: Security systems provide a fantastic opportunity to provide all kinds of energy services when people are at home and need them, as security is among the most desired home automation services.[1] Even if the smart thermostat already has an occupancy sensor, the security system can provide additional data points and a more refined determination of when to turn on the “away” mode. A smart thermostat may wait an hour to decide that you have left the building (and might guess wrong), but a motion sensor alarm feature knows exactly when the house is unoccupied if you activate it upon going out, so you can start saving energy right away. More granular data about where people are in a home, provided by multiple occupancy sensors, allows zoned HVAC and lighting controls to turn systems off in parts of the home that aren’t occupied. This information can be processed within the home, so the occupancy information (and associated security concerns) doesn’t have to travel through the internet. Alarm systems can also provide information about when doors and windows are open, preventing HVAC systems from blowing hot or cold air outside.
  2. Talk amongst yourselves: Linking HEMS with entertainment, safety, security, or medical systems provides additional occupancy information and the opportunity for a joint control and communications platform. For example, the Nest protect smoke detector includes an occupancy sensor that informs the Nest thermostat Auto-Away algorithm. The partnership between Comcast and EcoFactor offers rich opportunities for linking telecom, entertainment, and energy services. The existing broad multi-device control systems like Insteon, Wiser, or Iris do not really focus on using devices as a DER, but the technology is primed to do so. The new Nest API allows developers to integrate non-HVAC devices with Nest, and Nest’s acquisition of Revolv (a multi-sector control system) shows the potential for integrating comfort, convenience, and energy management across more devices than just the thermostat. Energy use data can alert a health monitoring system if someone is inactive too long.
  3. “The medium is the message”[2]: HEMS opens up the opportunity to integrate behavioral change into the way the product functions. Behavioral program offerings to date are often passive and voluntary, requiring consumers to take action again and again in order to realize benefits. HEMS can automate a higher incidence and persistence of actions to achieve behavioral savings, by activating algorithms that achieve those actions either based on an initial customer opt-in (e.g., selecting an eco setting during setup) or as a default with the customer given the chance to opt out (e.g., a feature that can be overridden as it happens or unselected in settings or profile). One of the challenges of behavioral programs is to get people to think about their energy use on a regular basis, as it happens. An ACEEE meta-analysis of 57 studies found that providing households with feedback on their energy consumption reduces electricity consumption by 4 to 12%, with significant variation depending on how that feedback is provided.[3] By integrating HEMS with a broader home automation service, the resulting universal management interface, such as a smart phone, is more likely to be accessed regularly, and thus provides a better opportunity to interact with the user on opportunities to improve their energy management, than a single-purpose energy usage display that is likely to be ignored over time.
  4. Go beyond operations: There are many ways to improve and facilitate maintenance and home improvement decisions using detailed energy data, particularly when it is collected nearly continuously (like the Smappee monitor) as opposed to in 1-15 minute increments (like typical AMI data). HEMS can tell when an appliance is running inefficiently and needs maintenance, or advise on the payback period from investing in a new, more efficient appliance. The HEMS could additionally recommend local service providers or offer discounts on relevant products, based on an understanding of the household’s detailed, disaggregated energy profile. There is significant value in the data for the consumer, service providers, retail sales agents, and manufacturers.
  5. Capture provider value: There is value in selling HEMS devices and services (e.g., Alabama Power Appliance Centers sell a range of home products and offer maintenance), both in the basic profit margin and in the stickiness or loyalty that comes from providing a bundle of services with key elements that a consumer doesn’t want to lose. For example, telecoms providers profit from bundling internet, cable, and telephone services. From another perspective, retail (deregulated) electricity providers reduce customer churn by offering free HEMS as an incentive for consumers to sign long-term contracts.

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


[1] In an international survey by DNV GL, home security was reported as the #1 “must have” feature for HAS in 4 out of 6 countries (including the US), and among the top 3 “must have” features in the other two

[2] Marshall McLuhan.

[3] Ehrhardt-Martinez, Karen, Kat A. Donnelly, and John A. “Skip” Laitner. Advanced Metering Initiatives and Residential Feedback Programs: A Meta-Review for Household Electricity-Saving Opportunities. ACEEE. June 2010. http://www.aceee.org/sites/default/files/publications/researchreports/e105.pdf

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