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Sunday, May 22, 2016

Top 10 Takeaways –Energy Providers Need to Rethink Smart Home Strategies

The smart home market can be described using two axes: control of the smart home system and monetization of the smart home.

The vertical axis describes the entity which controls the smart home system, how it is installed, what products, algorithms, apps, and user interface or interfaces are used. At the lower end of the vertical axis, the end user makes all of the decisions. Consumers get what they want, how they want it. The consumer chooses what products to purchase, when they are purchased, how they are purchased, what apps or subsystem controllers control those products, and what smart home platform, if any, they want. Consumers may acquire connected products over time, as they replace legacy products with new, smart products. Some consumers may proactively replace some products if they find the value proposition compelling.

At the upper end of the vertical axis, the service provider makes all of the decisions. Most smart home systems on the market today are closed to both new products and third-party app developers. Smart home service providers tightly control the ecosystem to assure that the user experience is positive; nonetheless, they know that a system open to both apps and products will beat a closed system in the long term. Today, business issues rather than technology issues create friction and slow down integration. To be successful in the long term, smart home platforms must simplify business transactions and make integration more scalable.

Monetization is represented on the horizontal axis. On the left side of the scale, the consumer pays for products and services directly, either in recurring or upfront fees. On the right side of the scale, alternative business models allow manufacturers and smart home service providers to generate revenue indirectly, from other industry players.

Smart Energy Summit featured executives from NRG/Reliant, CPS Energy, and Wright-Hennepin Cooperative Electric Association addressing opportunities for energy providers to dominate the smart home and energy management market. Top 10 takeaways from the session included:

  1. Energy providers who want to play a role in the smart home and energy management markets need to understand the dramatic market shift from one in which the provider is in charge to one in which the consumer has greater choice. At the same time, the market will shift from one in which the consumer pays to one in which external forces (be they the provider or other subsidy) pay for service.
  2. Energy providers who face less regulatory pressure and oversight—such as reporting to a board of directors—have more freedom to experiment with new services without facing bureaucracy and decisions halted by inertia. Municipal utilities and co-ops have more regulatory flexibility than IOUs to experiment with new programs and models.
  3. Branding is important. Those brands that resonate with customers have the ability to launch new services even if they stray from their core competency. The endgame is to prove that the provider is a partner with the customer.
  4. Security is currently the best entry point for smart home market.
  5. One key strategy is to partner with the best-selling product vendors.
  6. Load balancing is key for utilities.
  7. Brand and existing relationships with consumers are critical competitive elements for success in the smart home services business.
  8. The utility channel could very well lose out to other channels as the home energy management lead.
  9. The industry is just starting to look at distributed generation before building out new traditional transmission infrastructure.
  10. There are back-office challenges in integrating new business silos (home security and energy provider for example), such as billing and support.

For more information about Smart Energy Summit, or to download the Event Summary, Click Here.

Next: Parks Associates Announces Advisory Board for 8th-annual Smart Energy Summit: Engaging the Consumer
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