Ford Motor Company intends to become your home energy management supplier one day – or at least try to.  The automaker announced a new effort at the Consumer Electronics Show (CES) last week in Las Vegas called MyEnergi Lifestyle, and the ensemble of players Ford has brought together for this project is impressive.

The companies joining Ford in MyEnergi include Eaton, SunPower, and Whirlpool.  Nest Labs and chipmaker Infineon are two other firms rounding out the group.  The goal is to show how typical consumers can significantly reduce electric bills by combining smart home appliances, cloud computing, solar panels, off-peak pricing, and plug-in vehicles.  Besides the car, which Ford would sell, the package of goods necessary for MyEnergi to achieve its goal includes:

• Energy efficient appliances like refrigerators, dishwashers, and clothes dryers
• Hot water heaters
• Connected smart thermostats
• Rooftop solar systems

Ford quoted a Georgia Tech computer model that predicts a 60% decrease in energy costs and a 55% cut in carbon savings from a typical home that adopts MyEnergi Lifestyle products.

That sounds impressive.  But so is the estimated price for all the gear: a Ford C-Max Hybrid goes for $25,200, a new energy efficient Whirlpool refrigerator costs around $1,100, a new clothes dryer is around $500, a basic hot water heater sells for around $500, the Nest thermostat runs $250, and a rooftop solar system goes for around $10,000.  The total comes to $37,550.  How long for a payback on that investment?

Half a Century

A typical energy bill in the United States is $1,248 per year.  It would take around 50 years to pay back the equipment investment ($37,550 divided by $748.80, which is 60% of the annual bill).  These are averages, of course, and a homeowner could start with one or only a few products, so the initial investment would be less, but so would the savings.  The vision Ford has seems out of reach for typical household budgets today. Where it does make sense is for a family doing a major home remodel or building a new dwelling; but add to that a new plug-in car?

So while MyEnergi Lifestyle is an intriguing concept by Ford and its partners, it has major hurdles and this idea is probably ahead of its time.  First, plug-in vehicle demand remains sluggish; for example, Nissan sold fewer than 10,000 LEAFs last year, less than half the original estimate.  Second, electricity consumption is not expected to rise rapidly; the Energy Information Administration projects electricity use in the United States will increase on average just 0.7% a year for households through 2040; thus, with relatively flat consumption, prices aren’t likely to jump quickly either, and without a big spike consumers are not likely to feel much pain.  Third, it will take at least another 5 years to get significant numbers of people to upgrade to products like smart appliances or more efficient water heaters.  Color me skeptical at this point.  I need to see stronger market drivers and fewer, or weaker, inhibitors.

Honeywell, the dominant maker of thermostats, continues to flex its muscles in home energy management (HEM) as it tries to fend off upstarts like Nest Labs, EcoFactor, and EnergyHub.

Honeywell is building out its products and solutions in the ways that big companies do in order to maintain a lead when rivals threaten its turf.  For its utility partners, Honeywell recently upgraded its home energy assessment program with the launch of its Residential Energy Assessment Tool, a set of software that helps technicians show homeowners ways of finding more energy savings.  The tool enables a technician to immediately share audit results which can help drive speedier upgrades.

In thermostats, Honeywell launched one of its latest Wi-Fi-enabled models last summer, aimed at do-it-yourselfers.  And the company is planning to release similar devices with enhanced features in 2013.  In addition, the company continues to work with Opower on Web-connected programmable thermostats in order to help consumers save energy and reduce costs.  Early results from customers testing the Honeywell-Opower setup have been encouraging.

In addition, Honeywell continues to tinker with new ways of helping consumers cut their energy bills.  Its context-aware smart home energy manager (CASHEM) project is more than halfway to completion, and the early results are promising.  The energy monitoring system dynamically schedules home appliances and makes adjustments according to certain conditions and homeowner preferences. One family testing the system was able to reduce its monthly energy bill by $100.  The project is funded in part by a Department of Energy grant of $1.6 million.

Nonetheless, Honeywell’s competitors, Nest in particular, continue to make inroads.  Nest’s iPod-like thermostat has been a favorite among early-adopting consumers over the last year, giving Honeywell a headache that won’t go away.  The two companies are locked in a legal dispute over alleged patent infringement, and the outcome of that battle could be months, or even years, away.

Looking ahead at 2013, Honeywell will keep pushing forward on many fronts in home energy management (see Pike Research’s two recent reports, Home Energy Management and Home Area Networks) as it tries to keep upstarts at bay.  And though Honeywell may not always appreciate the push it is getting from rivals, the competition is good for the company and good for consumers.

Three new partnerships in North America seek to advance the use of home energy management (HEM) products among consumers – a market that so far has a lackluster track record.  Home security leader ADT has joined with Southern California Edison (SCE) in this effort; Verizon has teamed with Lowe’s to enable remote home energy functionality; and in Canada, the province of Ontario is working with HEM solution provider Energate on a project to stimulate consumer engagement.

Briefly, here are details of each alliance:

• In Southern California, SCE customers who also purchase ADT’s Pulse home management system will be able to connect it to their home’s smart meter to see energy consumption data, daily bill estimates, and energy savings alerts.  The aim is to enable users to adjust consumption and lower their electric bills.
• U.S. customers of Lowe’s Iris solution can now remotely monitor and manage their thermostats or smart plug-connected appliances over Verizon’s wireless network; a USB modem connects to the Iris smart hub, allowing a user to control devices via a smartphone or a tablet without needing a wired broadband connection.
• In Ontario, Energate and the provincial government are in the midst of an 18-month project called the Consumer Engagement for the Smart Grid (CESG).  Energate is deploying home energy dashboards, smart thermostats, web portals, and mobile applications to more than a thousand homes across Ontario, aiming to spur customer engagement with tools that extend the smart grid into the home.

All three efforts are evidence that the struggling HEM market is about to gain some new traction, and not all of the effort is coming from utilities.  The involvement of Lowe’s, Verizon, and ADT shows that adjacent players see opportunities to combine smart grid technologies with their own innovations.  Others, particularly broadband providers such as Comcast and Time Warner Cable, have jumped in recently as well with home energy management products and services.

This upward trend for HEM products was noted in two recent Pike Research reports, Home Energy Management and Home Area Networks, but our view is this market in North America will grow at a modest pace rather than a dynamic one.  Not enough consumers are motivated at this point to take action.  It was only a year and a half or so ago that Google and Microsoft abandoned their effort in the HEM space.  For this market to really heat up, it will take an energy price jolt, which is possible but not imminent, or a regulatory stick to move the masses to adopt.  Partnerships like these, though, provide a visible sign of the potential for HEM services.

There’s been lots of dissecting of the slide in venture capital investments in the smart grid sector recently.  According to the “Q2 2012 Smart Grid Funding and M&A” report from Mercom Capital Group, worldwide smart grid investments are weak, with just nine funding deals at $66 million.  The Mercom study notes, “Funding levels continue to be extremely weak in the smart grid sector, a reflection of shifting business models as the industry continues to struggle to understand customers [sic] needs and address customer misconceptions along with security concerns among other issues.”  The average deal size has diminished as well, from $25.4 million in Q2 2010 to $7.3 million in Q2 2012.

However, a closer look at the investments makes me wonder if someone forgot to tell the venture capitalists that it’s too hard to figure out these customers.  Investments in consumer energy management companies Tendril, Navetas, and GreenPocket totaled $23.7 million – almost 36% of the overall investment dollars.

A single point of commonality exists in these companies’ products: the application of behavioral science.  Behavioral science attempts to understand an organism’s (in this case, a human’s) activities and interactions in their natural environment in order to understand their decision processes.  If the natural environment is the home, behavioral science examines the behaviors related to the human use of energy along with the activities that lead to its usage, and draws conclusions about how to help the energy consumer change their energy use.

Inducing consumers to adopt new behavior is never easy, especially when they have anxieties and worries about things like privacy and security.  Many companies are trying, and some seem to be gaining traction.  For the sake of this discussion, let’s consider these recent investments.  What makes investors think that Tendril, Navetas, and GreenPocket have something worthy of millions of dollars?

The Power of Community

Tendril, based in the United States, picked up an $11.3 million investment in Q2.  The company has developed a suite of consumer engagement programs based on its Connect platform that emphasizes an interactive web portal connected to the smart meter and in-home devices.  The platform provides personalized consumer information and recommendations, goal-setting incentives, and social media that include gaming and collaboration with peers.  Customers can take actions, such as choosing savings goals, and receive feedback along with personalized recommendations, expert advice, and social recognition.  Using the power of the social community, the system’s recommendations can be validated and discussed through a dynamic forum.

Navetas, headquartered in the United Kingdom, took on an $8 million strategic investment from Sensus.  Navetas’ product allows consumers to monitor their energy habits through a variety of devices and delivery mechanisms.  The goal is to help consumers understand how their home environment uses energy and how their behavior affects this environment, by providing in-context, highly granular information about energy use in the home.  The technology monitors in-home appliance activity over a period of time, and automatically disaggregates the energy consumption by the appliances in real-time.  Disaggregation is especially powerful, as it enables the consumer to avoid the tedious, inconvenient (and sometimes inaccurate) process of turning their appliances on and off to identify the usage profiles of their energy loads.  Navetas leverages its algorithms to fully integrate the energy management experience into the consumer’s everyday activities.

GreenPocket, based in Cologne, Germany, gained $4.4 million from a Series B funding round.  GreenPocket has developed what it calls the Energy Expert Engine, which interprets and visualizes smart meter data for both residential and business consumers.  Inputs into the analytical engine include weather data, purchasing information, consumption data, and household size.  Energy consumers can control their chosen actuators or sensors through tablets, smartphones or a web portal.  Part of the solution is an application that provides social media linkages, including “social metering” contests that are designed to motivate users to reduce their energy consumption.  Instead of just providing consumption feedback, GreenPocket incorporates interpreted information that is designed to engage the consumer at a personalized level.

Without remarking on the successful likelihood of any of these ventures, I do believe that companies that care about the quality of the interactions between consumers and their understanding of energy use can deliver products that will truly engage consumers in making sustainable choices about their energy use.  Energy management products that help people align their goals, beliefs, values, ideas, and desires will drive action.  Behavioral science may be the bridge that closes the gap between customer intention and sustainable customer action.