The US & Europe will Lead in the Deployment of HEM Technologies, Lux Says

By Roy L Hales

A growing number of technologies ranging from smart thermostats and energy dashboards to whole-home control systems have emerged over the past decade. They are collectively known as  Home energy management (HEM) technologies. Utility companies are finding they can shave between 1.5% and 40% off their expenses using HEM devices and in the process add to customer engagement, competitive differentiation, and demand response.

“The last 12 months have seen a flurry of investment activity in the HEM space. California-based Nest Labs was recently acquired by Google for an astronomical $3.2 billion, and Control4 found sky-high valuation with its IPO last August,” pointed out Alex Herceg, Lux Research Analyst and the lead author of the report titled, “Master of the House: Cutting through the Hype in the Frenzied Home Energy Management Space.”

“These investments illustrate clear interest in bringing automation and the Internet of Things into the home, and the critical role it will play in energy markets,” he added.

The potential market is huge. Utility revenues are estimated to be as high as $265 billion in Europe, $370 billion in the US and $1 trillion in Asia.

Approximately 90% of HEM sales are from retrofitting existing homes, which means the largest immediate opportunities are in the developed world. There are 3,200 investor owned utility companies, seeking a competitive advantage, in the US. Pilot programs are running in the UK, Germany and France.

One of the appeals of HEM, over conserving energy by improving the building envelope (with better insolation and windows etc), is the immediate  real time measurement of savings. (Similar to what rooftop solar owners experience when their meters start running backwards.)

Many HEM companies are marketing directly to utilities. Some, like Opower and EcoFactor, are partnering with their “customers.” Opower has followed up its success in America by partnering with the German utility E.ON.

Companies like Deutsche Telekom and Google are also getting into the HEM mix.

The success of HEM will depend on three key factors – automated metering infrastructure, electricity rate structures and renewable energy supply mix through 2020. Asia is ripe for HEM but lacks a renewable mix and most nations are focusing on expanding the number of available housing units. European states are subject to directives to equip 80% of consumers with intelligent metering systems by 2020.

Though Finland and Sweden have shown the potential of advanced metering systems (AMI) and a liberalized electricity market, further growth is hampered by a small population. There are larger markets in Germany, France and the UK, ripe for HEM deployment.

The proliferation of HEM companies in the US has been funded by utility investments. Many of these new companies will fail. The more novel will hold their ground. As AMI unleashes the floodgate of data that utilities are poised to act on.

The United States and Europe will lead the development of HEM technologies, which will in turn inspire Japan and South Korea to start their own roll-out.

The report, titled “Master of the House: Cutting through the Hype in the Frenzied Home Energy Management Space,” is part of the Lux Research Efficient Building Systems Intelligence service.

(Chart at top of page courtesy Lux Research)

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