A flurry of new announcements and interesting articles on the end user aspect of home energy management initiatives. First, via Earth2Tech, a look at whether there is a bubble forming in the space:
From my perspective,, there is one clear area of the smart grid that is seeing too much investment from venture capitalists, specifically — home energy management tools — but much of the smart grid investments coming from IT firms and the federal government just represent the first phase of funds that will help build a potentially huge market. At this point I don’t see unreasonable amounts of money being invested into many other areas of the very nascent smart grid sector.
First off, it’s hard to make such blanket statements about the smart grid as a whole. It will be made up by many types of technologies (both hardware and software) that have various attractive and not-very-attractive business models. We know we’ve been guilty of using the general smart grid term in headlines (that’s the problem with having a word-count limit) and lumping the billions of smart grid stimulus funds together, but the infrastructure will actually be very complex. At the moment a lot of companies are just starting to scratch the surface when it comes to discovering possible areas of innovation.
But venture capitalists have clearly been flocking to the home energy management space. It’s a favorite for VCs partly because they can easily understand it — it looks (and is) about connected gadgets, software and wireless communications. At this point the amount of VC-backed companies is really starting to get out of control. Earlier this month both home energy management dashboard companies Tendril and AlertMe raised multimillion-dollar rounds; last week home energy management startup EcoDog raised $4.6 million. Here are 10 startups that are offering home energy management tools and another that is using open source to make the products even cheaper (and result in lower margin for the companies that make the tools). Never mind the huge, blue chip companies that are also building these tools, like GE.
Ultimately a lot of these home energy management ventures are offering very similar options, typically a ZigBee-based wireless sensor kit that connects energy data from a meter (smart or not), and possibly appliances, to a viewing device, like an energy dashboard or a PC. This market is either a consumer electronics play (difficult in terms of scale and margins for a startup) or a utility partnership play (less to do with the tech and more to do with the relationships created.)
Some companies are trying to differentiate themselves by offering only the software management piece, and there could be some successes for those that can seal strong partnerships, like that of Lixar SRS and Cisco. But Google’s free PowerMeter will make a pure software play pretty difficult as well — a startup’s software had better be significantly better than what a team of Google programmers can create, which costs the user nothing.
So basically there are a lot of new, young companies trying to sell the same things. That could be beneficial for consumers (more choice) but will not be beneficial to the companies themselves. Expect a lot of these new firms to get bought up cheaply or even fold.
Other areas of the smart grid are maturing. Cisco entered the smart grid space to tackle end-to-end communications networking, while Silver Spring has turned into a well-established, well-funded firm in that sector. But end-to-end communications networking hasn’t yet produced a bubble, not by any means. Utilities and power companies are still moving relatively slowly to upgrade the power grid, and the communications portion of the smart grid could still grow to be worth as much as $20 billion a year over the next five years, according to Cisco.
There are even some areas of the smart grid that haven’t seen much investment. Smart-charging software, which would manage the rate at which electric vehicles charge, comes to mind. One of the only companies that’s developed a product in this space is V2Green, and it was quickly bought up by GridPoint. If we’re all going to be plugging our cars into the grid, there’s a huge untapped opportunity out there.
Second, via Wired, a report that Microsoft is jumping into the space:
Microsoft Wednesday unveiled its Hohm website designed to help residential power consumers save money and reduce their environmental impact by conserving energy.
Microsoft has been selling technology to the energy industry for years and is now targeting the home power market as the weak economy forces consumers to find ways to save money and the government prepares to mandate the use of renewables and energy efficiency to curb carbon emissions.
“Conservation is the cheapest source of energy,” Troy Batterberry, product manager for Hohm, told Reuters. If consumers use less power, he said, utilities will not need to build as many new polluting power plants. Everyone saves money.
Hohm uses complicated algorithms to analyze information provided by consumers and participating utilities to help them better understand their power usage, get recommendations and save money.
Those recommendations can include replacement of a thermostat, purchase of a new refrigerator and, maybe in the future, the installation of solar panels on the roof.
Batterberry estimated consumers could save about 5 percent to 10 percent on their energy bills, depending on how many recommendations they follow.
Microsoft Hohm is available for free to all 120 million households in the United States, whether their utility is a partner or not. Microsoft is partnering with utilities and meter vendors to capture information about consumer power use.
Google this year rolled out a similar program called PowerMeter, which is available to a limited group of customers served by partner utilities. Google plans to expand PowerMeter this year.
Microsoft said all meter providers, technology companies and consulting firms could be both partners and/or the competition for Hohm.
In the short term, Microsoft expects there to be potential to make money through advertising. If Hohm recommends a furnace upgrade, the site could provide a link to furnace vendors. The vendors would pay Microsoft for the ad or referral.
In the future, Microsoft hopes Hohm will make money as a scalable demand-side management tool. Demand-side management programs pay consumers to reduce power use, especially during grid emergencies and times of very high demand, like summer heat waves when air conditioning usage stretches generation.
Demand-side management can also help utilities meet renewable and efficiency goals by offsetting the intermittent nature of renewables by reducing consumption when the wind stops blowing or the sun is not shining.
To get started with Hohm, users input household information over a secure website — www.microsoft-hohm.com — or, if their utility is a partner, they can upload their energy usage data.
Microsoft has partnered with Xcel Energy Inc, Puget Sound Energy, Seattle City Light and Sacramento Municipal Utility District, and plans to name more partners soon.
The more information the homeowner provides the more relevant the recommendations will be. As a default, Hohm will base recommendations on local and national averages.
Microsoft has been working on Hohm, code named Niagara, for about two years. The company did not disclose how much it spent on Hohm or how much it expects to make from the venture.
In about six to nine months after receiving feedback from users and refining and improving the application, Jon Arnold, managing director of Microsoft’s Worldwide Power and Utilities Industry, told Reuters, Hohm should exit the Beta version. Ultimately, Microsoft wants Hohm to go international.
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