Navigant Research Blog

Smart Thermostats Power Residential Demand Response

— July 26, 2012

Old-fashioned thermostats are morphing into smart thermostats, also referred to as programmable communicating thermostats (PCTs), which enable residents to manage their energy usage more effectively and actively, and at a much more granular level than ever before.  These devices have also made it increasingly easier and more convenient for consumers to participate in utility demand response (DR) programs.  Continued software enhancements, along with connectivity to the Internet, is turning smart thermostats into mini-PCs that the utility customer can access remotely from a smart phone, iPad, or website.

Having used smart thermostats for some time already to enable DR in homes, U.S. utilities are increasingly relying on these more advanced devices as the technology of choice in supporting their direct load control as well as dynamic pricing programs.  Smart thermostats that support two-way communications allow the utility to execute load management automatically by sending a signal to the thermostat to adjust the temperature in the home by a few degrees (agreed to by the customer in advance) to reduce the use of an air-conditioning or heating system for a certain period of time during peak demand.  For their part, customers can program a smart thermostat to adjust the temperature in the home  when rates become high in order to reduce their utility bill.  Most important, this technology helps utilities engage their customers more effectively in DR programs by offering them a device that makes such involvement easy, convenient, and even fun, while at the same time be able to save money.  Some smart thermostat vendors claim that they can help consumers save at least 20% or perhaps as much as 30% to 50% on their energy bills.

A wide variety of smart thermostats is available in the market, but Honeywell’s UtilityPRO thermostat has gained attention lately because of its rich functionality and its many software features – thanks to its reliable operation and smart grid capabilities, developed in partnership with Cooper Power Systems.  A touchscreen programmable thermostat exclusively designed for residential DR, the UtilityPRO is currently one of the company’s top-selling advanced thermostats, and has so far been installed in about 600,000 homes and small businesses in North America.  The UtilityPRO can communicate via paging signals, or via wireless technology based on the ZigBee Smart Energy communication standard.  ZigBee communication enables consumers to program the thermostat online from any location at any time.  It also allows utilities to communicate with the thermostat to automatically regulate heating and cooling systems to curtail or shift peak demand.  At the same time, the utility can verify that the thermostat is able to respond when it receives a DR event or price signal.  Because UtilityPRO has a backlit display and messaging capability, utilities can also deliver near, real-time usage and billing data to residents.  Honeywell has estimated that in 2011 UtilityPRO gave utilities combined control of more than 500 megawatts of peak energy use.

In the years ahead, smart thermostats will continue to develop to offer even more advanced capabilities. It is quite possible that PCTs will become a serious competitive threat to the in-home display units that some vendors are trying, with limited success, to push in the market.  As consumers increasingly assume the role of home energy manager, they would most likely choose a device that is inexpensive and easy to install (no hard-wiring) but also offers a user-friendly web interface along with access to data and information that motivate them to take action with respect to their energy consumption.


Europe’s Smart City Initiative Links Energy, Transportation, & IT

— July 25, 2012

The European Commission has launched a new funding program that will help drive smart city innovation through the closer integration of energy, transportation and IT.  The Smart Cities and Communities European Innovation Partnership (SCC) extends the Smart Cities and Communities Initiative that was launched in 2011.

The initiative already has funding for 2012 of €81 million ($100 million), and the initial demonstration projects will focus on transportation and energy.  With the launch of the new partnership, the budget for 2013 has been increased to €365 million ($450 million), and IT has been added to energy and transportation.  Significantly, every demonstration project financed under the scheme will now have to combine all three sectors.

The accompanying communication from the Commission highlights the specific challenges facing European cities.  New building represents only around 1% of housing stock, and less than 10% of vehicle stock is newly registered each year.  So there’s limited opportunity for greenfield development in cities and the adoption of new technologies is slow.  It’s therefore essential that European cities find cost-effective, repeatable, and pragmatic solutions if they are to meet their environmental goals and drive economic growth.

The Commission rightly sees the integration of technologies across sectors as one area in which this can be achieved.  If the smart city concept is to be more than a veneer of hype over business-as-usual, it needs to drive new ways of connecting different aspects of city operations.  Without such a holistic view we will continue to build technology stovepipes and fail to realize the real potential of new IT platforms and new ways of using data.

It’s also encouraging to see the EU putting transportation at the heart of its smart city agenda.  In our recent Pike Research webinar, Smart Cities and the Future of Transportation, Lisa Jerram and I explored why transportation is so important to the smart city vision.  Clean, smart transportation is crucial to meeting the three core objectives of the smart city: sustainability, economic development, and citizen well-being.

We were joined on the webinar by Arturo Corbi Vallejo from Schneider Electric.  Arturo detailed Schneider Electric’s SmartMobility Integrated City Management (ICM) solution, based on the company’s new smart city platform.  SmartMobility ICM is another example of suppliers that are developing integrated, platform-based solutions for city operations.  Schneider Electric’s approach is one of the first examples of a smart city platform concept to emerge from an infrastructure provider rather than from the IT world.


Consolidation of Charging Networks Will Accelerate EV Adoption

— July 24, 2012

One of the keys to driving the adoption of plug-in electric vehicles (PEVs) is the deployment of a robust public charging infrastructure that gives drivers the confidence that a recharge is only a few minutes away.  In the United States, the rollout of charging stations is progressing, but currently the market is too fragmented in charging equipment manufacturers and networks to satisfy most EV owners.  (Pike Research detailed many of the business challenges around EV charging business models in its 2011 report, Electric Vehicle Charging Equipment, and we are currently working on an update to that report.)

Consumers want to be able to plug in at any station, charge their car and pay with the simplicity of filling up with gas.  Today, there are more than two dozen companies in the U.S. providing charging stations or operating charging networks, and for PEV drivers, this can require signing up for multiple payment accounts and learning the subtle differences in how the equipment operates.  For these reasons, the news that two of the largest EV charging services companies could be merging should be considered a welcome event.

Publicly traded CarCharging Group, based in Miami, said it will acquire 350Green, a privately held Los Angeles-based rival.  Both companies have had considerable success in growing their networks during the past year, and the combined entity should provide a more consistent experience for consumers as well as consolidating resources to compete in an industry that is quickly evolving.

As Pike Research  predicted last year, EV charging services companies such as these two have been winning many of the contracts to install stations.  For example, CarCharging  won a deal with Ace Parking Management, while 350Green has installed hundreds of charging stations in Pennsylvania, California, Indiana, and has a large project in Chicago.

Neither CarCharging nor 350Green manufactures equipment, unlike competitors such as Ecotality and Coulomb Technologies that make the stations and operate the networks.  The charging equipment hardware business is very competitive and has experienced falling margins due to the numerous competitors and slower than expected sales of PEVs.

EV charging networks will probably follow the same path as the mobile phone industry, which saw extensive consolidation during the past decade.  Similarly, you’ll see multiple hardware vendors’ products offered by a service provider, but payment systems and network management will consolidate.  GE recently announced a deal that will enable drivers to use PayPal to pay at its charging stations.

Which companies will be the EV charging services equivalent of Sprint, Verizon, AT&T and T-Mobile remains to be seen.  EV charging services are challenged by the lack of PEVs on the roads today to create a revenue stream, as well as the uncertainty surrounding how much consumers will pay for public charging, and what types of plans (subscription fees versus pay-per-use) will be of most interest to consumers.  CarCharging Group has seen its stock price collapse from a high of $70 in 2010 to its current price of $1.30.  350Green is also being scrutinized for the slowness of the Chicago rollout, according to the website The Expired Meter.


Hailing a Cab, Smartphone in Hand

— July 23, 2012

Anyone who’s ever tried to hail a cab on a rainy evening in Manhattan at 6 p.m. knows that finding a taxicab can be a challenge, especially if you’re in unfamiliar territory.

Some new alternatives to hailing a cab in the street or standing in line at a taxi rank are becoming available in some cities.  Uber is one such service that operates in some major North American cities, including Boston, New York, Chicago, Los Angeles, and Toronto, as well as European cities such as London and Paris.  Uber is not a transportation company as such, and does not own or operate any vehicles for hire; it contracts with existing car service companies, particularly those operating limousines and luxury vehicles, and connects them with customers looking for transport.

Uber has a website for those that can plan ahead, but it is really designed to be used via an iPhone or Android app.  Those without a smartphone can use the service via text.  The app uses the phone’s built-in GPS to identify the current location, and the nearest vehicle is dispatched for pick-up.  A text is sent to the customer with details of the vehicle and driver along with an estimate of how long the wait will be.  When the journey is complete, the cost is automatically billed to the customer’s credit card, including a tip.

Although the cost is typically higher than a traditional taxi, many people are willing to pay for the convenience and comfort.  The limo hire companies enjoy the extra business, and Uber is developing data from its local experience to identify where are the best locations for vehicles to wait when they are not carrying passengers.  Beginning with limos and luxury SUVs, Uber is now introducing hybrid vehicles in some markets to attract the more environmentally conscious traveller who also appreciates lower rates thanks to the better fuel economy of these vehicles.

The Politicians Object

Of course introducing a new service is rarely straightforward, and in some U.S. cities there has been some reaction from traditional taxi companies and local politicians.  In some large cities, a taxi license is both expensive and valuable because it prevents unauthorised drivers competing for business and maintains standards for customers.  Limo companies are typically licensed to operate on a fixed fare basis and are not allowed to charge by distance or time.  The local success of Uber led to a proposal by the city council in Washington D.C. to legislate that the company must charge a minimum fare of 5 times the drop rate for taxicabs.

Uber, understandably, then decided not to introduce its new hybrid service in D.C.  Faced with public and media outrage, the council amended the regulations to eliminate the 5X factor, but still requires that the time and distance rates are higher than those charged by conventional taxis.  Local travellers are still upset that politicians are trying to pass laws to block new, more efficient services that compete with an incumbent industry that has a reputation of not being very customer-focused.

Another U.S. service is Taxi Magic, which says it works with 85 taxi fleets in 45 cities across the United States.  A taxi can be booked via a smartphone app (or text or online) and a map shows the location of the vehicle assigned to pick you up.  Payment can also be made through the app.  The company is also launching another service similar to Uber’s.  Called Sedan Magic, it is currently only operating in New York.  Another competitor, Cabulous, has based its business on effective use of fleet telematics.  It claims to be active on three continents.

It’s not just taxi services that are looking for new ways to attract business.  The car OEMs are also developing new products, such as BMW’s joint venture with Sixt, DriveNow.  Daimler is behind car2go, a city car-sharing service in North America and Europe, and has begun testing some new features in regions around its home city of Stuttgart.  car2gether is a ride sharing service that connects people who are traveling in the same direction and can suggest that two individuals share the cost of renting from car2go.  Daimler has launched a pilot project it calls “moovel” that aims to optimize travel by calculating the best way from A to B considering buses, trains, ride-sharing, and taxis.  Volkswagen introduced its Quicar car sharing in Hannover in late 2011.

Car sharing has been around for many years, mostly with informal agreements between people who either live or work near each other.  With the advent of telematics and smartphones, new businesses are starting up to help individuals rent out their vehicles that would otherwise not be used in the weekdays if they commute using public transport.  RelayRides has been growing for the last 2 years and now offers its service to the owner of any GM vehicle equipped with the latest version of OnStar.  But there is potential for vehicle manufacturers to use this type of service as a marketing tool.

The concepts of car sharing and alternative taxi services offer an opportunity for OEMs to showcase their vehicle technology.  Whether via new in-house services, taxi companies, public car sharing, or traditional vehicle rental firms, allowing people to experience the benefits of new technology is a valuable part of the sales process.  Taxi companies can benefit from reduced fuel cost, especially in the stop-start traffic typical in most cities.  OEMs also have the opportunity to gather valuable service data as they introduce new powertrain features, and can also canvas drivers and passengers for feedback about what they like and dislike.


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