Small but notable steps are advancing the connected home for energy management. Coming from different industry stakeholders taking different approaches, they include:

• Smart Energy Profile 2 (SEP 2): The ZigBee Alliance ratified the SEP 2 standard, which paves the way for IP-based home area networks and devices that can interoperate over ZigBee, Wi-Fi, or HomePlug protocols.
• Wi-Fi-enabled Whirlpool appliances: The manufacturer introduced four appliances (refrigerator, dishwasher, clothes washer, and dryer) that can connect over Wi-Fi and be controlled with a mobile application.
• Collaboration between Ford Motor Company and KB Home: The automaker and leading home builder are jointly promoting the benefits of new technologies aimed at helping consumers lower their home energy bills and reduce their environmental impact.

Most consumers have little idea what SEP 2 is or what it could mean to their home energy management.  Nonetheless, ratifying the standard is a key milestone.  Products built on SEP 2 will be able to communicate over the Internet and share information.  For instance, smart meters, thermostats, and appliances will be able to share data for the purposes of control and energy efficiency.  SEP 2 also enables the control of plug-in hybrid electric vehicle (PHEV) charging.  Interoperability testing of devices with SEP 2 continues, with products expected to be commercially available later this year or in early 2014.

Whirlpool’s new products – part of its 6^th Sense Live smart appliances line – are not the first Wi-Fi-enabled appliances on the market.  Samsung demonstrated a Wi-Fi refrigerator in early 2011.  However, Whirlpool’s offerings signal new momentum for Wi-Fi in home appliances, given the company’s status as an industry leader and the fact it controls other well-known brands such as KitchenAid, Maytag, Amana and Jenn-Air.  It is reasonable to expect those brands will have Wi-Fi-enabled appliances in their product portfolios at some point, assuming the initial Whirlpool products find traction.  But momentum is likely to be gradual.  For now, Whirlpool’s new Wi-Fi appliances are only available in the Chicago area, with no word on when the company might expand sales to other regions.

Similarly, the Ford and KB Home collaboration is in its formative stage.  In April, Ford’s C-MAX Energi plug-in hybrid car joined KB Home’s ZeroHouse 2.0 model home demonstration project in San Marcos, California.  The effort also combines Ford’s MyEnergi Lifestyle initiative with KB Home’s vision of a net-zero energy home.  The idea is to show how electric-powered vehicles, solar power, smart appliances (from Whirlpool), and home design can synchronize around energy efficiency.  It’s a bold vision that brings together other key players, including Eaton, SunPower, Infineon, and Nest Labs.

Together these steps show that, after years of promise but little tangible progress, the energy efficient connected home is starting to emerge.  But, with a few exceptions (e.g., Oklahoma Gas & Electric and NV Energy), utilities have yet to engage on a wide scale.  And consumers will not be rushing to adopt the new products and services.  Appliance replacement cycles are long (e.g., about 15 years for refrigerators), and real-world examples of the payback must be demonstrated.  The connected home market is advancing.  But this is a long march.

As the concentration of carbon in the atmosphere reaches a level not seen in human history, it’s worth considering how much the conventional wisdom surrounding energy has changed in the last 5 years.  In 2008, domestic fossil fuel production (other than coal) was considered to be in permanent decline, with local debates on where to site natural gas import terminals.  Coal-based electricity generation was assumed to be as irreplaceable as it was undesirable.  Increasing energy costs and volatility were unavoidable, while renewable generation cost parity appeared within reach as the bar moved lower.  A nuclear power renaissance was effectively promoted as the only carbonless solution with the potential capacity to displace coal.  The dawn of transportation electrification seemed upon us, while the smart grid took a laser focus on peak load reduction.

Much has changed since then.  Conventional wisdom has caught up with the gas industry experts (including some of my Navigant colleagues), who foresaw how the shale gas boom would reshape the North American energy landscape.  With domestic oil and gas production up sharply, costs are expected to stabilize and volatility decrease.  Planned natural gas import terminals, while still locally controversial, are morphing into export terminals.  Natural gas generation is rapidly displacing coal, leading to significant carbon emissions reductions, though the enabling fracking technologies trigger new concerns.  Even as the cost parity goalposts keep moving, the cost of renewables continues to decline.  The Fukushima accident stalled a North American nuclear renaissance while driving Germany and Japan, at least notionally, to nuclear exits.  Home refueling of natural gas vehicles could replace electric vehicle charging stations in consumer imaginations.  Meanwhile, long-haul trucks, fleet vehicles, and even locomotives are adopting natural gas.  And the smart grid is becoming more important as a means of power resiliency in the face of hurricanes and superstorms than as a vehicle for peak load reduction.

Cheap Gas, Smart Buildings

This all came to mind recently when I moderated a panel discussion titled “The Future Direction of Energy in North America and the Impact on the Intelligent Buildings Sector” at CABA’s Intelligent Buildings Forum in Toronto.  CABA is the Continental Automated Buildings Association, a 25-year old organization dedicated to the advancement of intelligent home and intelligent building technologies (I am privileged to serve on CABA’s board).  The panel participants represented the perspectives of commercial property owner/managers (Cadillac Fairview), utilities (Ontario Power Authority), suppliers (Siemens), and technology researchers (CanmetENERGY).

So what do the major shifts of the last half-decade mean for intelligent buildings?  The panelists agreed that demand for improved energy efficiency remains strong, even if all the incentives for deploying the technology to deliver such efficiency are not always aligned.  Local codes and mandates may be drivers, but even lower-cost energy is not free energy.  Building-to-grid technologies and distributed generation may become even more important if natural gas enables local generation, which is becoming an intriguing option for the storm-ravaged Northeast United States.  Most importantly, all agreed that “cheap, abundant” natural gas is unlikely to spur new interest in dumb buildings.

As intelligent energy management technology has evolved, it has expanded considerably beyond the initial systems and platforms designed to help enterprises manage energy in their facilities.  We’ve seen some energy management players – from enterprises to utility customers – reorient their offerings to serve as a demand-side management tools.  Others have decided to specialize in certain high-value applications such as demand response.

One of the newer frontiers in intelligent energy management is the integration of energy management and facility management technology.  At first, it might appear that these two services have little to do with one another.  The former is concerned primarily with monitoring and reducing energy consumption and consumption, while the latter is focused on a range of issues affecting interior spaces (such as space planning, mail management, catering, janitorial services, and security).  However, several of the IT systems used to monitor and govern many of these facility management services also create data relevant to energy management.  Thus, they create opportunities to build additional applications onto the same IT backbone.

Yin, Meet Yang

One of the best examples of this integration is Jones Lang LaSalle’s IntelliCommand offering, which is a white-labeled version of Pacific Controls’ energy and operations management software.  The tools provide Jones Lang LaSalle’s commercial real estate customers with a suite of applications, such as energy visualization, energy management, and demand response, that help reduce energy costs while maintaining (or improving) building operations and the quality of the interior environment.  In addition, the system ties directly into Jones Lang LaSalle’s existing workflow management system, which its customers are already familiar with, an advantage over similar offerings that have independent user interfaces and functionality.  Meanwhile, IBM’s acquisition of facility management software firm TRIRIGA in 2011 and Ameresco’s acquisition of FAME Facility Software Solutions in 2012 also demonstrate the rapid integration of facility management with business operations and energy efficiency offerings.

The Jones Lang LaSalle model, which integrates energy management into a broader facility management offering, would appear to be the inverse of the IBM/Ameresco model, which adds facility and asset management capability to energy management systems that offer a multitude of energy-related applications.  Rather than arguing that one or the other is the “right” model, I will say that both models will likely coexist within the building industry for years to come.  This yin-yang effect – with facility management nested into energy management and vice versa – will ensure that customers have options that suit their priorities, budget, and existing building IT infrastructure.

Nest Labs, maker of the Nest learning thermostat, wants to shake up the residential demand response (DR) market.  Nest is taking a three-pronged approach to drive adoption of residential DR services and, of course, sell more of its thermostats:

• Naming:  First, Nest is not describing its services as demand response, a utility industry term lost on most consumers.  Instead, its DR program is called “Rush Hour Rewards.”  It’s an opt-in procedure whereby customers agree to have their Nest thermostats adjusted automatically during times of peak usage – for example, on a hot summer afternoon when AC usage spikes.  Customers can override the auto-settings whenever they choose.  By naming DR something else, Nest aims to highlight the consumer benefits and ease of use, and shift away from a utility focus.
• Utility partners: Nest has formed key partnerships with major U.S. utilities that will offer Rush Hour Rewards and related services, including NRG Energy subsidiaries Reliant and Green Mountain Energy, National Grid, Austin Energy, and Southern California Edison.  Combined, these utilities provide service to some 12.3 million customers.
• Pricing: Finally, Nest and its utility partners have developed aggressive pricing schemes designed to drive adoption.  Rush Hour Rewards participants can earn $20 to $60 per season, depending on their energy provider and other factors.  Also, there are substantial rebates on the Nest thermostat itself, which is pricey otherwise; for instance, National Grid is offering a $100 instant rebate on a Nest thermostat purchased through its website, lowering the cost to $149; and Green Mountain Energy customers who sign up for its Pollution Free Efficient plan receive a Nest thermostat for free.

A related Nest service, called Seasonal Savings, is a program in which the Nest thermostat and its cloud-based calculating engine (called Auto-Tune, like the audio processor) combine to make slight temperature adjustments early in the heating or cooling season.  These fine-tuning adjustments take place automatically in the background, but they can also be overridden by the user.  Nest’s own studies show Seasonal Savings participants can reduce energy use by 5% to 10%, with 80% of trial members opting to keep the suggested schedules.

Can Nest and its utility partners move the needle on residential DR with these new offerings?  Navigant Research’s consumer survey data suggests it is possible, but there will be resistance.  Nearly half of the respondents in our most recent study say they are unwilling to give up thermostat control to their utility (49%), and only about one in five (23%) are prepared to do so.  The challenge will be in convincing enough of the willing to actually go along.  For many people this is completely new customer behavior.  For Nest and its partners to find success, they will need to spend time and money on a sustained marketing campaign that explains the customer benefits.

Willingness to Allow a Utility to Control Thermostat, United States: 2012

(Source: Navigant Research)

Subsidizing the price for the high-end hardware in exchange for some DR should sway some customers.  Another plus is having utilities endorse the product and support the related user-friendly services.  Customers may grumble about their energy utility, but they still view energy providers as a valued source of energy management options such as these.  In addition, the marketing muscle the utility partners provide is a key asset.  As a startup, Nest’s marketing has been good so far in reaching early adopters.  With deeper-pocketed utility partners along, the ability to reach reluctant mainstream users should be quicker and more sustained.

Competitors are not standing still.  Rivals like Honeywell and Carrier are likely to develop competing products and services, and will be looking to set up similar partnership deals with utilities if the Nest scheme proves fruitful.  Other startups in the DR-energy management space, such as EcoFactor, Opower, Tendril, and EnergyHub, have compelling products, as well.  Still, credit Nest for driving innovative outreach to give this segment some fresh momentum.