Navigant Research Blog

Disruptors Welcome in the Future Energy World—Sort Of

— May 17, 2016

CodeThe future of electric power in the United States looks brighter than many might think, given all the wringing of hands in recent years about a supposed utility death spiral and lurking technology disruptors seemingly about to upset the old guard. I was reminded of this by two stories that crossed my inbox in recent days.

One was an intriguing piece by Tom Kuhn, president of Edison Electric Institute, the trade association representing investor-owned electric utilities. He notes the profound transformation taking place in the industry, and says, “At the heart of this transformation is the terrific progress that we are making today to deliver America’s energy future—a future driven by new and innovative technologies, developments in public policy, and changing customer and market expectations.”

Investments Increasing

Fair enough, and expected comments from an industry booster. But then Kuhn goes on to point out, “What you might not know is that just as all of the devices, gadgets, and services we rely upon are becoming smarter and more dynamic, the power grid is too. In fact, the electric power industry is investing $100 billion per year, on average, to build smarter energy infrastructure and transition to even cleaner generation sources. A record $108.6 billion in investments is estimated in 2015 alone.” That’s real money, and a sign of an industry not afraid to embrace change, though perhaps at a slower rate than Silicon Valley expects. And, finally, Kuhn embraces the competition. “We view many of the so-called ‘competitors’ or ‘disruptors’ to our industry as partners,” he says. “Today, we are working with hundreds of leading technology companies, including Tesla, Google, Apple, and Nest, as well as the startup community, to bring tomorrow’s technologies to customers today.”

Battle of Billionaires

The other was the contrast between energy billionaires Elon Musk and Warren Buffett. In a Las Vegas Sun piece, author Daniel Rothberg paints a picture of old-versus-new grid business models in an ongoing clash between Buffett’s NV Energy and Musk’s SolarCity and Tesla. Nevada is ground zero in this debate, with Musk and Buffett seeking the same goal, a carbon-free grid, but achieving it by different means. “Buffett wants to do that mostly by buying power that is centralized at large-scale plants,” Rothberg writes, while “Musk, with SolarCity, wants to integrate more decentralized rooftop solar and battery-storage technology with the grid.” The outcome means a lot to each businessman, of course, since both stand to win or lose depending on the model that emerges, and that will depend mainly on how the state’s energy policy is shaped in coming years.

This battle between Musk and Buffett is healthy and instructive. It shows there is more than one way to look at energy production and distribution. The combined debate and competition should yield a more efficient, cleaner, smarter grid in the long run, and it has implications for other states wrestling with similar issues. And I agree with Kuhn, the transformation and disruptors in the industry are welcome. It will be messy for a while as stakeholders—policymakers in particular—sort out the competing interests and business models. But a utility death spiral? Seems like that won’t happen. Utility transformation will, and it is already here.


Smart Home Products Resonate with Consumers, and Utilities Should Take Note

— May 9, 2016

AnalyticsAmerican consumers are ready for the next wave of connected products—or the Internet of Things (IoT)—for their homes. Their awareness is growing about how these products can bring benefits to their lives, according to research sponsored by Alphabet subsidiary Nest Labs. While this is encouraging news for hardware vendors and utilities aiming to capture the energy management component, the road ahead has some bumps (more on that in a moment).

First, the results from the two Nest-sponsored studies provide a positive outlook: 81% of respondents either own or are interested in buying a connected home product in the next year. They see the major benefits as increased convenience (54%), increased security (44%), reduced energy bills (38%), and boosted home values (21%). Enthusiasm for these products is on the rise as well, with 38% of respondents more interested today than they were 6 months ago. Asked which brands come to mind in the connected or smart home space, the respondents ranked them in this order: Nest (21%), Apple (12%), and Samsung (8%).

Increasing Awareness

The growing awareness is being felt and fueled at the retail level and among broadband service providers as well. Connected home products are among the fastest growing categories in the retail environment, according to one Home Depot executive. Sears recently introduced the first of a growing assortment of smart home products to be marketed under its Kenmore, Craftsman, and DieHard brands; each of these five first products is Wi-Fi-enabled.

Likewise, a new partnership between Comcast and Earth Networks’ WeatherBug Home highlights the growth in smart home technology and an increasing focus on energy efficiency. “The smart home is quickly becoming a reality, and when it comes to energy efficiency, knowledge is power,” says Bob Marshall, CEO of Earth Networks. “We are excited to partner with Comcast to extend the benefits of our unique home energy insights to Xfinity Home customers and the utilities that provide their energy services.”

Addressing Glitches

But looking beyond the smart-IoT-home hype, there is some reality to consider. Samsung has had to contend with some glitches with its SmartThings technology for the home. Nest has also been called out for problems with its thermostat. Consumers have issues, too. The vast majority (82%) are concerned about keeping personal information secure online, and nearly half (43%) worry that new home technologies will quickly become outdated, according to Nest-sponsored research.

For utilities and other smart home market stakeholders targeting energy efficiency products, the overall upward trend is still encouraging. In my research, I’ve found the market for these products to be growing, and they will likely go mainstream in coming years. Nonetheless, shrewd players will develop a strategy for getting beyond those pesky speedbumps.


Utility and Corporate Leaders Increasingly Embrace IoT Strategies

— May 5, 2016

CodeThere is new evidence that utility and corporate leaders are embracing the Internet of Things (IoT) trend with greater enthusiasm, meaning a more robust grid, energy savings, and lower costs in the coming years. That’s the hope, at least. The evidence comes from two recent surveys and a corporate report on the state of IoT.

A large global survey sponsored by Schneider Electric found that three out of four (75%) of business executive respondents are optimistic about IoT opportunities in this year alone. Additional results from the survey of 3,000 business leaders in 12 countries include:

  • 63% plan to use IoT to analyze customer behavior in 2016, with faster problem resolution, better customer service, and customer satisfaction among the top five potential benefits
  • Nearly half (42%) say they plan to implement IoT-enabled building automation systems within the next 2 years
  • Two out of three (67%) plan to employ IoT solutions via mobile applications in 2016
  • 81% say intelligence gathered from IoT data is being shared effectively throughout the organization
  • 41% expect cyber security threats related to the IoT to pose a critical challenge for their businesses

Asset Management

Similarly, a global survey of electricity, gas, and water utility executives from ABB reveals a strong belief in the benefits of an IoT strategy. Nearly 58% of respondents either have or plan to have a strategy that leverages IoT for asset management, and 55% say the importance of asset management has increased over the past 12 months. In a recent release, Massimo Danieli, ABB’s Managing Director of Grid Automation, notes: “Now more than ever, utilities see the need to bring together once disparate technologies and systems to better understand their increasingly complex asset base and share those insights with the people across the organization, in order to improve planning, productivity, and safety.”

Finally, Verizon’s latest report on the state of the IoT market says “companies across all industries now have IoT squarely on their radar.” Moreover, the report states that Verizon sees IoT applications ranging far and wide, and that the company focuses on key segments which include smart cities and energy. It also notes how past regulatory decisions have resulted in millions of installed smart meters, a leading IoT device.

These examples demonstrate a rising IoT tide among utilities and other corporations. As noted in the recently published Navigant Research report IoT Enabled Managed Services, now is the time for utilities to deploy a sensible IoT strategy. They must remain competitive and take advantage of the opportunities the latest technologies afford for smarter and more nimble grid applications and services while also recognizing the challenges these changes present.


Officials Push Support of IoT as Trend Accelerates

— April 6, 2016

??????????????????Your neighbors and mine might not recognize the Internet of Things (IoT) trend just yet, but signs of market acceleration continue to abound. Even politicians are awakening to the value of increasingly connected devices—and not just officials in the United States. At the same time, tech companies persist in their efforts to harness the trend.

A bipartisan group of four U.S. senators recently issued a statement through the influential Consumer Technology Association (CTA) website calling for “a more comprehensive and robust national strategy that encourages development of the Internet of Things and enable our government to be leaders in adoption of these new tools.” The four senators—Cory Booker (D-NJ), Kelly Ayotte (R-NH), Brian Schatz (D-HI), and Deb Fischer (R-NE)—are seeking “comprehensive federal policies that balance stakeholder concerns with connectivity, innovation, security and privacy concerns.” The senators are doubling down on a resolution they passed last year that called for “a comprehensive strategy to spur growth of the Internet of Things.”

In India, too, politicians are seizing the moment to push the IoT. Cabinet members in the state of Andhra Pradesh have approved a first-of-its-kind policy that calls for turning the state into an IoT hub by 2020. The officials envision active participation with private sector companies and the creation of 50,000 jobs in different IoT verticals.

Increasing Interoperability

Among technology companies, ongoing activity paves the way for greater interoperability among IoT products and services. Heavyweights Microsoft and Qualcomm recently joined the Open Connectivity Foundation (OCF), an industry standards body aimed at creating IoT solutions and devices that work seamlessly. The OCF is the new name of what used to be called the Open Interconnect Consortium (OIC). Qualcomm joining this group turned a few heads, since the OIC (now OCF—keeping up?) was cofounded by rival chipmaker Intel. It would appear the two chipmakers have come to some sort of peaceful coexistence, which bodes well for reducing IoT silos. Nonetheless, fragmentation will persist, as key players such as Amazon, Alphabet (Google/Nest), and Apple are not among the current 167 OCF members.

Another important group, the Bluetooth Special Interest Group (SIG), has unveiled details of a new specification for IoT devices that would allow them to communicate with greater energy efficiency. The Bluetooth SIG said its new Transport Discovery Service (TDS) could be used for conserving battery life in a device. This might appear to be a small step forward, but when billions of devices—many of them operating on batteries—join the IoT ecosystem, saving energy becomes critical to success.

Connected Consumers

Consumers themselves see the value of connected devices, even if they don’t recognize them as part of the IoT trend. Among respondents to an online Harris Poll of 2,225 adults, 11% said they owned a smart thermostat, and 9% said they had a smart, wireless home security-monitoring system. Moreover, one of the hotter in-home IoT devices is Amazon’s Echo. Exact sales figures for the Echo are not available, but some estimates indicate it has outpaced speakers sold by rivals. Apple cofounder Steve Wozniak is a big fan, calling the Echo the “next big platform for the near future.”

For utilities, harnessing the IoT trend presents a growing challenge that many have yet to face. As customers adopt IoT hardware and software solutions behind the meter, utilities need a strategy for services that can keep them relevant and not just bystanders. Navigant Research’s new IoT Enabled Managed Services report provides some context and an IoT strategy for utilities to follow. There’s no point in being like those neighbors who just get sucked along and miss out on the opportunities.


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