Navigant Research Blog

IoT and Millennials

— March 24, 2017

The much studied Millennial generation has some issues with Internet of Things (IoT) devices. A new survey says this cohort of young American adults—ages 18 to 29—is the least likely to own an IoT product. This trend presents a challenge for utilities attempting to promote programs like demand response that can link to IoT products such as smart thermostats, air conditioners, or appliances.

According to the study conducted by the Association of Energy Services Professionals and strategic marketing firm Essense Partners, 85% of Millennial respondents do not own IoT devices. The percentage of non-IoT device owners in the other age groups is as follows: 79% for ages 30-44; 81% for ages 45-59; and 84% for the 60 and older group. The study was conducted among 2,700 consumers.

Among respondents who do own IoT devices, the Millennials also represent the least likely cohort to take part in utility programs. They participate at half the rate of those in the 30-44 and 45-59 age groups, and almost a third of the rate compared to the 60 and older set.

Of course, the main reason for lower ownership of IoT devices among Millennials is they are less likely to be homeowners. Therefore, they are not as likely in the market to buy IoT devices that can help manage energy usage.

But there is another reason lurking around the edges: they are worried the most about the devices being hacked. In a survey conducted by KPMG, 74% of Millennials say they would use more IoT devices if they had more confidence that the devices were secure. Among the other age groups, 63% of Generation Xers hold the same view about device security and nearly half of Baby Boomers (47%) say the same.

Part of the Solution: Device Security Standards

One way to boost confidence among consumers and drive adoption of IoT devices is for industry stakeholders to agree on security standards. An effort that has surfaced recently is being spearheaded by Consumer Reports (CR), which is promoting a digital consumer protection standard, along with its cyber expert partners (digital privacy tools provider Disconnect; privacy policy researcher Ranking Digital Rights; and Cyber Independent Testing Lab). The CR privacy standard has four key features: products should be built to be secure; products should preserve consumer privacy; products should protect the idea of ownership; and companies should act ethically. The full standard is in its first draft, and CR expects stakeholders to help shape and improve it going forward.

The need is evident for IoT device security standards such as CR’s and others like NIST’s Cybersecurity for IoT program and UL’s Cybersecurity Assurance Program. Navigant Research applauds these efforts to create standards, as noted in its report, Emerging IoT Business Models. Utilities would be wise to get behind these efforts as well to ensure that their customers, including skeptical Millennials, gain the confidence to adopt devices like smart thermostats and feel more willing to take part in demand-side management programs.

 

European Utilities Are Moving toward New Energy Platforms at Different Paces, Part 2

— March 22, 2017

The energy industry is experiencing a profound transformation as the sector moves toward more intelligent, more distributed, and cleaner use of energy. Utilities’ traditional business models are being challenged by disruptive firms offering new services that leverage more advanced technology, as described in Navigant’s Energy Cloud analysis in its Navigating the Energy Transformation white paper. In the first post of this blog series, I described six new energy platforms underpinning the energy transformation. In this post and in the next post, I will show that some European utilities have been more active than others in partnering with, and investing in, companies offering new energy platforms. Finally, I will argue that in order to be successful in the transition toward a smarter, more digital energy future, utilities will need to strategically adopt the most relevant new energy platforms.

I analyzed the level of activity for eight of the largest European energy utilities engaging with companies offering new energy platforms. Partnerships, which often take the form of exclusive contracts, and investments, which are characterized as direct capital into companies, were grouped and assessed. Note that only partnerships and investments announced in 2015-2016 were included in the analysis; any previous announcements do not appear. The analysis also excludes any internally developed products and services that may fit in the new energy platforms.

(Source: Navigant Consulting)

The matrix above provides a high level overview of the major European utilities’ strategic positioning within and across the six energy platforms. Distributed Energy Resources (DER) Integration and Electric Mobility are the two energy platforms with the highest level of activity from the major European utilities. Internet of Things (IoT) and Smart Cities are platforms where European utilities are more moderately active, while Transactive Energy and Telecommunications Networks feature the lowest level of activity. Of the eight European utilities covered, ENGIE, Total, and E.ON/Uniper are most active in DER Integration, while Enel, RWE/Innogy, and Vattenfall are most active in Electric Mobility. ENGIE also stands out as being particularly present in IoT and Smart Cities. Although Centrica and EDF appear to be relatively less active in new energy platforms, one should recognize that they have been developing new products and services internally rather than externally—an element that is not captured in this analysis.

The relative activity in partnerships versus investments varies across energy platforms. Electric Mobility activity consists almost entirely of partnerships—where companies prefer signing agreements with automakers and charging infrastructure developers. In contrast to some of the other platforms, utilities may not consider Electric Mobility to be a core business and so are less prone to directly invest in this new platform. This is the case of Enel with Nissan and RWE with Volkswagen. On the other hand, almost all of the European utilities’ activity with the IoT platform has been through investment. For example, Centrica acquired water leak detection and flow monitoring company FlowGem and added it to the Connected Home portfolio Centrica offers to British customers.

In the next post of this blog series, I will show that the majority of partnerships are with companies located in Europe, while most of the investments are made in organizations based in North America.

 

European Utilities Are Moving toward New Energy Platforms at Different Paces, Part 1

— March 15, 2017

The energy industry is experiencing a profound transformation as the sector moves toward more intelligent, more distributed, and cleaner use of energy. Utilities’ traditional business models are being challenged by disruptive firms offering new services that leverage more advanced technology, as described in Navigant’s Energy Cloud analysis in its Navigating the Energy Transformation white paper. In the first post of this blog series, I describe six new energy platforms underpinning the energy transformation. In the next two posts, I will show that some European utilities have been more active than others in partnering with, and investing in, companies offering new energy platforms. Finally, I will argue that in order to be successful in the transition toward a smarter, more digital energy future, utilities will need to strategically adopt the most relevant new energy platforms.

(Source: Navigant Consulting)

Integrating Distributed Energy Resources (DER) into a single automated system allows utilities to manage resources more simultaneously and optimally than traditional network operations. DER include distributed generation (mostly solar PV systems and combined heat and power plants), energy storage (which can be used as both load and generation depending on the need), EVs (which act as a mobile battery), and demand response (i.e., adjusting customer load in response to a grid signal).

Electric Mobility refers to the electrification of transport and includes bikes, cars, buses, and trucks. The use of electricity as a substitute to traditional fuels requires the deployment of an electric charging infrastructure covering major routes and endpoints—both homes and offices. In addition to decreasing carbon footprint as compared to internal combustion engine vehicles, EVs can be used as a mobile battery providing capacity and flexibility services to the electric grid.

The Internet of Things (IoT) allows remote monitoring and control of objects connected together via a digital network. It provides new services in energy consumption intelligence and optimization for end customers. Residential customers can benefit from a connected home and commercial and industrial customers can benefit from a more intelligent building.

Smart Cities encompass a combination of services in energy, transport, water, and waste management. Such services are enabled by the three abovementioned platforms—DER Integration, Electric Mobility, and the IoT. City managers can benefit from a reduction of the city’s energy consumption and carbon emissions, improvement of residents’ quality of life, and resilience against catastrophic disasters.

Transactive Energy is a more granular approach to exchanging electricity. Traditionally, electricity is generated by large power plants and sold on a central wholesale market to retailers that in turn sell electricity to the end consumer. Transactive Energy leverages peer-to-peer trading technology such as blockchain and allows a more localized exchange of electricity at the individual level. Consumers with onsite DER such as solar PV and battery storage become prosumers and sell the excess electricity to neighboring consumers at a mutually agreed price.

New Telecommunications Networks based on wide-range technologies enable IoT and machine-to-machine communications. Traditional energy and telecommunications companies are competing in deploying and expanding these new networks that are complementary to existing communications systems.

These six new energy platforms require entrepreneurial creativity that is more likely found in a startup environment rather than a traditional utility. This is why several energy utilities—including the largest European utilities—tend to partner with, or invest in, recently created companies focused on some of the new energy platforms. In the next post of this blog series, I will show that some European utilities have been more active than others in partnering with, and investing in, companies offering new energy platforms.

The Energy Cloud

 

How IoT Can Improve Airports

— March 15, 2017

Airports are busy, crowded places, and navigating through such large and complex buildings can be confusing. The flow of passengers through different checkpoints can go smoothly or stand still for hours. Around 23 million bags are mishandled (either lost or delayed) every year. However, thanks to the Internet of Things (IoT), this experience can be transformed. Sensors and connected devices, combined with intelligent analytics, are allowing airports and airlines to make rapid advancements toward a better passenger experience and reducing operational costs.

Sensors are expected to enable airport management to have a real-time understanding of what is necessary to improve traveler experience, such as dispatching additional staff at the check-in counter. This data will help speed things up and streamline numerous processes within an airport. Sensors aren’t the only IoT-related technology being applied to airports. Travelers with smartphones will be able to take advantage of location-based apps to help guide them to their gate. In fact, in the context of digital transformation across all industries, customers are demanding innovations that enable customization—whether it be ordering a coffee or booking an airline seat. Smartphones and mobile applications are the main channels for facilitating customization.

Based on a survey of 225 leading airports, the 2016 Airport IT Trends Survey found that around one-third of airports have incorporated IoT into their IT strategy, while an additional 43% have plans to do so over the next 3 years. 80% of airports in India are expecting an IT budget increase in 2017. In China, 29% of airports included IoT in their strategy in 2016, and that number is expected to rise to 82% by 2019.

IoT Use Cases in Airports

Miami International Airport (MIA) is one of the pioneers employing IoT technologies in airports. The airport’s mobile application, MIA Airport Official, provides flight information, wait times, baggage tracking, the weather, and boarding pass information. It also provides an indoor map with geolocation to help passengers navigate through the airport to restaurants and gates. The GVK Chhatrapati Shivaji International Airport in Mumbai has also launched an airport navigation app, the Mumbai T2. Based on Bluetooth Low Energy (BLE) beacons and technologies, the app provides interactive navigation assistance.

One of the biggest pain points for travelers is baggage collection, and there are IoT technologies to help with that. In particular, radio frequency identification microchips (RFIDs) address mishandling during transfer from one flight to another by ensuring that airports and airlines keep track of bags at every step of the travel. The technology also supports the International Air Transport Associate’s Resolution 753, which requires member airlines to maintain an accurate inventory of baggage beginning in June 2018. In 2016, Delta Airlines spent $500 million to deploy RFID baggage tracking technology at 344 stations around the world, the largest investment in baggage tracking solution yet. The RFID-enabled tags look just like regular barcode tags, but with tiny chips inside that are able to provide real-time tracking of luggage during travel.

There is little doubt that further proliferation of the IoT advancements will affect the air travel industry. With IoT devices and analytics, the airline industry is poised to achieve greater efficiency and better customer service.

 

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