The forces transforming the utility ecosystem are well known. From the plummeting prices of solar energy and the rise of distributed generation, to the growth of smart home technologies that give consumers control over their energy use, the traditional utility business model is under assault from all sides.
Some have invoked the term utility death spiral to describe todays transformation. While that may be hyperbole, the telecom industry provides a cautionary tale. In the 1990s, seemingly invincible telecom companies faced widespread disruption from cellular technologies. The telcos that survived integrated a range of new technologies into valuable fresh products and services, ranging from long-distance calling to new optical fiber. Critically, the survivors didnt resist cellular technology---instead they integrated new technologies into networks that are flourishing today.
While some utilities are fighting tooth and nail against technologies like distributed solar, forward-looking utilities are embracing a more dynamic approach by developing and deploying innovative new products and services. Smart thermostats are the latest tool in the arsenal for utilities to stay relevant with customers.
Those forward-looking utilities have already started evolving by supporting technologies like solar and electric vehicles. Several utilities have joined the solar revolution, with programs like community solar gardens that allow consumers and businesses to reduce energy costs by purchasing shares in a utility-owned PV array. Programs like this put utilities in the drivers seat for new technologies that strengthen customer relationships. In Minnesota alone, new utility community solar programs are expected to catapult its solar industry from 14 megawatts today to 100 megawatts by the end of 2015.
Other utilities, such as Southern California Edison, have embraced electric vehicles. SCE customers lease or own more than 12,000 plug-in electric vehicles (about 10 percent of national EV sales), and SCE has partnered with automakers to boost EV adoption further. Not only does this bring utility customers an innovative, cost-saving new product, but it also provides the utility with better control and visibility into energy use across the grid. SCE can deploy programs to improve grid reliability by coordinating charging times within neighborhoods, avoiding peak-load spikes that could affect the entire grid.
Like solar and EVs, smart thermostats can help forward-looking utilities deliver value to their customers while making a significant impact on energy use. Home heating and cooling is responsible for up to 50% of home energy bills, in many cases the largest use of energy in the home. And consumers have already shown that they love the comfort, convenience and control of smart thermostats. In just four years on the market, Nest ramped up to sell 50,000 smart thermostats per month when it was acquired by Google in January 2014.
While smart thermostats can play a powerful role in a utility energy efficiency or demand response programs, so far theyve been largely a consumer plaything. So whats holding utilities back?
For one, utilities prioritize reliability and security above all. Technology companies tend to focus on usability and integration first, with security as an additive sub-benefit. Theres a natural disconnect: Many products on the market today, while terrific for consumers, arent compatible with the high standards for security to which utilities must adhere.
Secondly, many utilities havent figured out how to integrate smart thermostats within their existing home energy management system, which is critical to connecting with comprehensive programs that create a magical, connected experience throughout all aspects of the home and also drive savings. A smart thermostat on its own is just a comfort tool; within a HEMS, it becomes a master switch for energy reduction and a means to (finally) giving homeowners insight into just how much energy goes to heating and cooling.
Technology companies are beginning to design products with the utilitys priorities top of mind. For example, some companies are beginning to raise their product security standards as a matter of course. (Full disclosure: My company, CEIVA Energy, just reached ISO/IEC 27001:2005 Management System certification.) Other technology companies have also recognized the importance of meeting the utility on their level of customer security and privacy, and are innovating to meet the high standards required to unlock utility participation.
Additionally, technology companies are beginning to realize the importance of integration with existing utility systems. Much as quad-band cell phones work on multiple mobile standards, we must design utility devices to work flawlessly on every system under the sun. Farah Saeed, principal consultant at Frost & Sullivan, commented in a recent release, increasing integration between forward-thinking thermostat and HEMS companies has the potential to make a significant impact on home energy management.
Several pilot programs are starting to integrate smart thermostats across a broader home energy management platform. Look at National Grids Smart Energy Solutions program, which is the largest smart grid program in the Northeast and the blue print for Massachusetts state mandated grid modernization plan. Customers in the program receive Carriers smart thermostat, smart plugs, CEIVAs gateway/in-home display and access to real-time smart meter data---all integrated, all at no cost to them. This gives National Grid a powerful energy efficiency solution while boosting convenience and comfort for consumers, achieving the ultimate utility win-win.
The smart thermostat surge is starting to catch fire. Consider that Carriers 200,000 installed smart thermostats throughout the United States are equipped for integration in utility home energy management programs, amounting to a powerful energy reduction capacity that just needs to be activated. Opower is also testing a smart thermostat platform that works across multiple networks and enables utilities to run integrated home energy management programs.
Many have warned that utilities are at risk of being relegated to dumb pipes in contrast to the new, innovative energy technologies disrupting the energy market. Yet just as solar energy or electric vehicles have proven they can bring key grid reliability benefits, smart thermostats are poised to become powerful weapons to combat the perceived utility death spiral.
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