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Smart Home

The Role of Utilities and Builders in Home Energy Management

This growing emphasis on smart home solutions and interoperability comes as utilities are amid an enormous transition changing how energy is generated and delivered. Driven by a massive shift to renewable energy sources, growing demand, and an aging grid, utilities are moving towards a distributed renewable energy environment after over a century of central station generation.

The “utility of the future” is very real and a very different concept than that of utilities of yesterday, which is changing how they engage with their customers.

Similarly, home builders are seeing growing demand, and new opportunities, for the addition and integration of sophisticated smart solutions in the home and communities they construct. More than 50% of large-scale builders in the US consider high energy-efficiency features to be the most or second-most valuable feature to add to their homes. 

Drivers for Home Builders:

  •  Increasing homebuyer familiarity with and demand for smart tech, fueled by a desire for security, safety, convenience, and comfort
  • Builders seek to increase the perceived value of their products
  • Some builders seek to drive revenue through increased sales price
  • Builders need to differentiate their products in competitive markets
  • Technology costs decreasing
  •  Smart speakers and security systems provide a unified experience
  • Ubiquitous Wi-Fi and Bluetooth enable easy, affordable endpoint solutions

While the shift to renewables and the integration of new connected solutions offer great potential, the challenges are not trivial – and often start at home construction, with solar and EV chargers new considerations as new features for homes. Builders and utilities can partner to ensure the right technology solutions are in place, but among the challenges are how the utility should partner with its end-user customers to help meet renewable energy goals while maintaining reliability and rate stability. This is an opportunity for the utility to “partner” with their customers in becoming their “trusted energy advisor,” especially as consumers become more aware and active of their energy consumption and resources.

The Smart Energy Consumer

The utility industry is moving aggressively towards building its renewable energy portfolio, and consumers are gaining interest in renewable sources of energy and energy management. Downward pricing pressure on solar panels, batteries, and smart home devices are contributing to the growth of the “smart energy consumer.”

Younger respondents express a stronger preference for clean energy as well as a stronger willingness to pay more for it. They are growing up in a world where renewable energy and climate/environmental concerns are top of mind.

Nearly half of all households in the US desire to be independent from the grid. While this sentiment is likely rooted in feelings of energy insecurity in emergency circumstances, the reliability of distributed energy resources is still a way off from enabling most energy consumers to be truly “off the grid.”

Smart Products Help Build Stronger Customer Relationships

In general, integration with smart home solutions delivers four key benefits to utilities and energy providers: increased consumer engagement with energy management programs, facilitation of smart product integration in demand response programs, increased adoption of smart products for use in energy management, and increased program awareness through cross-marketing efforts.

To maintain its position as a trusted energy advisor, the utility must move more aggressively to serve the energy management needs of its consumers. The utility can deepen its relationship with its customers by empowering them to save energy or offering energy-saving programs. Stronger customer relationships open the door to diversified revenue opportunities as the utility business model is adjusted to reflect the competition for distributed generation.

  • ~ 40%+ of US households used a special energy program in the past, such as time-of-use or tiered pricing. No one program has adoption greater than 20%.
  • Incentives are key to securing consumer participation in utility programs, and a $100 annual credit generates the highest interest among consumers, where they are willing to allow utilities to control their thermostats during peak times.

The convergence of technological advances, energy awareness and concerns, and growing demand among consumers and on the grid is driving the adoption of smart home solutions that can deliver new solutions in this energy sector. Industry players and especially energy providers and builders recognize the benefits of incorporating smart products into their offerings. Most of the early efforts were geared at reducing the friction for consumers to acquire these products, but the next successful step is in enabling a new, unified experience to the consumer.

Forward-thinking utilities are investigating strategies to integrate multiple devices and aggregate data across industries/use cases to deliver a truly comprehensive and actionable picture to consumers of their energy consumption at home. These offerings will help build positive consumer engagement, open avenues to expand service portfolios, and ultimately generate new revenues, even as energy consumption is reduced.

This is an excerpt from Parks Associates whitepaper, Next Frontier of Smart Energy Management, published in partnership with SmartThings, addressing how energy management and advanced home controls, with implications for utilities, device and EV makers, solar and HVAC companies, and home and multifamily builders. 

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