Utilities hold the key to unlocking the real value of the smart home
As the smart home market heats up, digitalization, changing customer demand, and innovation in home energy management technology has opened the door for electric utilities to get in on the game. While tech companies’ access to the home remains siloed to the device level, utilities have the power in the home — literally.
Utilities own the missing piece of the smart home puzzle — real-time, whole home energy data. This, along with the trust of their customers, a connection to every home, and their large capital resources, gives utilities everything they need to make a winning play in the smart home.
So, what is keeping the majority of utilities from making their move? Misperceptions.
Dissenters say that the smart home is a losing market for utilities. They tell utilities to take a back seat and just provide subsidies and incentives. This approach, while easier to implement, leaves the utility with no long-term connection to the customer and essentially abdicates the relationship once the rebate is paid. But there is another option. Now, utilities can leverage this data and keep the customer’s attention, while creating an energy-driven smart home.
The smart home market — a lost cause for utilities or a hidden treasure?
One of the great innovations in the 20th century, almost everything we do today is powered by electrification, which was brought to us by electric utilities. However, once electricity made its way into every nook and cranny of our lives, utilities moved from a driver of innovation to a provider of a basic necessity that needed to be maintained. Because of their shift from innovation driver to basic service provide, many may be under the mistaken belief that utilities don’t have the market or brand power that a technology company has — framing utilities as the “luddite” industry.
What’s worse, some utilities are effectively capitulating to this belief, opening themselves for deep disintermediation from their residential customers. For example, some utilities provide rich rebates for smart thermostats, capturing energy and demand savings required by law and regulation and maybe receiving a small bump in customer satisfaction in return. But in this scenario and others like it, it is tech companies that create those smart thermostats, not utilities, that are forming enhanced customer relationships and capturing the related customer data of these devices.
To further complicate matters, utilities are fragmented with about 3,100 electric and 1,500 gas utilities spread across the country, and each on its own may feel overwhelmed by the prospect of competing for a true seat at the smart home table. They may feel powerless or inadequate to properly frame and solve the problem of how they should help residential customers easily optimize their energy use for their own benefit — balancing cost, comfort, security, as well as utility desired grid management?