Navigant Research Blog

Technology Issues in Smart Devices Can Cause Major Problems for Consumers

— January 29, 2016

close up of man hands touching tablet pc screenOver the past few years, there has been an explosion of devices that have the potential to revolutionize our daily lives. Smart devices promise to help us piece together a smart home, manage our energy consumption, and track our health and fitness at the push of a button. My 82 year-old grandmother has an iPad Air, which she uses every day to play games that keep her mind sharp, browse movies online that she can send to her entertainment console, and track her vitamin and medication intake. She once casually commented, “I don’t know what I would do without my iPad now.”

While embracing smart devices can lead to a bright future of connectivity and convenience, the technology may not be developed enough for us to so readily welcome them into our homes. Lately, there have been several cases showing that these so-called smart devices sometimes have serious flaws.

Out in the Cold

For example, the Nest Learning Thermostat—a smart thermostat that can be monitored and adjusted via a smartphone app—recently experienced a software glitch that left many of its customers in the cold. This may seem like a somewhat trivial issue—unless you are elderly, have an infant, or fear your pipes may burst. Nest reported that the issue had been fixed for 99.5% of customers, yet the fix involves a complicated nine-step manual restart (to Nest’s credit, it does offer to send an electrician to your home for assistance), and 0.5% of customers still did not have a solution.

Though Nest is arguably one of the best smart thermostats on the market, its technology issues don’t stop there. In January 2016, it was reported that Nest Learning Thermostats were leaking ZIP codes over Wi-Fi, meaning that any person walking or driving by with the right equipment could intercept that information. While leaked ZIP codes are probably not the most serious security concern, it does lead back to one of the main issues around smart devices today: are these devices secure, and can consumers trust them?

Nest is not the only company experiencing technology issues. Researchers who discovered the Nest ZIP code leaks also found the Sharx security camera and the PixStar photo frame were sending unencrypted data that could potentially be intercepted. The Honeywell Lyric, a rival smart thermostat to the Nest product, was reviewed as having glitches in its flagship geofencing feature. In April 2015, Nick Bilton—the New York Times writer who covered the Nest glitch—also reported on the security flaws he had experienced with the wireless fob for his Prius. Finally, the Fitbit, a fitness/health-focused wearable, was recently hit with a class-action lawsuit over its supposedly inaccurate heart rate monitoring.

A Growing Market

Pointing out these technology issues is not meant to scare consumers away from buying a smart thermostat, a keyless car, wearables, or any other popular smart device. These devices will inevitably become a part of our lives. Navigant Research estimates that the global market for communicating and smart thermostats (and their respective software and services) alone will reach $2.3 billion by 2023. The point is that it is our responsibility as consumers to not only understand and be aware of the risks associated with connected smart devices, but also to demand that these devices be safe and secure if we are going to embrace them.

 

IoT Momentum Is Building—Even if Trend Is Overhyped

— October 12, 2015

Momentum keeps building for the Internet of Things (IoT) market—even if the concept is overhyped. Recent moves by market stakeholders point to significant investments and noteworthy strategies. In addition, there are important implications for the utility sector, particularly the residential segment.

Google’s strategy combines hardware and software elements for connecting things in the home. The company is expected to release Brillo, a slimmed-down version of the Android operating system designed for smart home applications, by year’s end. Brillo will be coupled with Weave, a protocol developed by Nest Labs, which is to be integrated into OnHub, a router that can control IoT devices. As part of Nest’s initiative with Weave, General Eletric (GE) and Procter & Gamble will be partners in the effort.

Comcast has made the IoT a key part of its strategy over the past year. Executives with the cable giant have said they want to become the conduit, or highway, that carries all the data back and forth among IoT devices. Also, the company’s Xfinity service is being positioned as a platform for IoT functionality, with the company having announced partnerships with Nest, August (locks), and Lutron for lighting.

Also, Intel is acquiring chipmaker Altera for nearly $17 billion with the aim of enabling new classes of products “that meet customer needs in the data center and Internet of Things (IoT) market segments,” according to a release. Altera is an attractive buy for Intel because its chips are used widely for networking and wireless applications. Similarly, United Kingdom-based Dialog Semiconductor, which supplies chips to Apple, announced in September its acquisition of Atmel for $4.6 billion in a deal to strengthen both companies’ efforts to compete in the IoT space.

Furthermore, the Smart Grid Interoperability Panel (SGIP) says it will expand its cooperation with the Industrial Internet Consortium (IIC) to focus on technologies and testing to promote the adoption of the IoT in the energy sector. The two organizations plan to identify ways members can take part in an array of new and established testing activities.

Among utilities, Commonwealth Edison (ComEd) in Illinois has a partnership with Comcast to leverage the interconnectedness of smart thermostats in a demand response program. The program, similar to other bring-your-own-thermostat (BYOT) setups, is a basic example of linking things, thermostats in this case, with as service that can increase energy efficiency.

With this kind of momentum, it seems clear the IoT trend has legs, but there are hurdles that could inhibit market adoption. First, there are many protocols in play, such as ZigBee, Z-Wave, Bluetooth, and Wi-Fi. These present interoperability issues. Second, many IoT devices are more costly than current alternatives, such as high-end smart thermostats. Third, some consumers have real concerns about potential loss of privacy or security breaches when so many devices are interconnected.

Despite these hurdles, the IoT market drivers seem strong, and important companies are placing big bets on it. Navigant Research expects global revenue attributed to residential IoT devices to grow from $7.3 billion in 2015 to $67.7 billion in 2025, based on our own focused definition on the built environment of things. For those interested in learning more about the IoT market, Navigant is hosting a webinar highlighting IoT trends on October 20 at 2:00 PM EST. My colleague Ben Freas, senior research analyst, will bring his building automation perspective, and we will be joined by Matt Smith, senior director of utility solutions at Silver Spring Networks, who will discuss the utility’s role in the connected IoT home.

 

Thermostat Studies Show Benefits of Being Smart

— February 16, 2015

This month Nest announced several studies that have been conducted on its learning thermostat.  One was conducted by MyEnergy, a Nest subsidiary that analyzes residential energy information. The others were conducted by the Energy Trust of Oregon and by Vectren Corporation, an Indiana-based holding company. The results boost Nest’s claims that the thermostat can pay for itself in only a year or 2.

Across the studies, evaluators found average annual reductions in electricity use between 13.9% and 15% for cooling and 10% and 12% for heating loads.  For natural gas, the Vectren study confirmed an average annual reduction of 12.5%.  In terms of cost savings, Nest states that adopters showed an average of 9.6% savings on their gas bill and 17.5% on their electric bill.

Last year, competitors EnergyHub and EcoFactor released third-party studies that indicated reductions in electricity use of 6% to 17% after thermostats controlled by their back-end platform were installed in users’ homes.

The Limits of Studies

Smart thermostats have become increasingly numerous in recent years. According to Navigant Research’s report, Smart Thermostats, North American household penetration of these devices is expected to exceed 20% by 2023. Until recently the market was concentrated in warm weather states, but adoption across colder climates is becoming more common, and utilities are becoming interested in smart thermostats for year-round energy efficiency and demand response (DR) programs.

Regardless, the high prices—$150 to $300 for the device alone—are still a barrier. Hence, smart thermostat vendors have trumpeted third-party studies that indicate positive return on investment (ROI) through energy bill savings. Analyses of products from EcoFactor, EnergyHub, and now Nest indicates annual energy savings in the 8% to 15% range.

But such studies can be interpreted in several ways. The most obvious conclusion is that the chances of incurring similar savings are good given the variety in the studies’ methodology and sample populations. On the other hand, factors like the locations of households, weather varying, and simultaneous energy efficient behaviors all affect study results.

Your Results May Vary

For states where heating and cooling are a small part of the utility bill, the savings from a smart thermostat will look different than those in an area where the costs are high. In such cases the results could be misleading.

The MyEnergy study included households from all over the country in its sample, and Nest claims that it is fairly representative of their adoption base—but is that representative of U.S. consumers as a group? The average reported savings might not fall in the middle of the spectrum of all consumers, so someone using this information as a basis for purchase of the $250 device could be anywhere from greatly or slightly disappointed to slightly or very pleased depending on how similar they are to the majority observed that indicated decent savings.

And if the consumer doesn’t really care enough to break down this information in the first place, much less nitpick findings from a variety of disparate studies? These types of adopters might be drawn to purchase the device simply for its user delight qualities. Nest has created an iconic device that by most accounts works really well and that has a lot of informational features designed to trigger more energy efficient behavior. That would be a great outcome.

 

With Developer Program, Nest Raises Questions

— June 30, 2014

This week Nest Labs introduced its Nest Developer Program, which integrates smart devices for both home and lifestyle uses.  The results suggest that energy efficiency is going mainstream without most people even knowing it.  This program, which has already enrolled partners such as Mercedes-Benz, Whirlpool, Jawbone (UP24 maker), LIFX, and Logitech, allows communications between smart devices in order to influence and optimize their overall functionality.  For example, the Nest thermostat could receive better information on a homeowner’s sleep/wake cycle, whereabouts, and habits from data transmitted through the UP24 bracelet.  It can then incorporate this information into its intelligent algorithm for determining household heating and cooling patterns.

But that’s only a small part of it.  Nest has already taken a stab at utility-scale demand response (DR) through its Rush Hour Rewards program for climate control, but the program can now enroll other energy-heavy appliances, such as washers and dryers, in the same DR events.  Following device trends in electric vehicle charging, where smart communications are increasingly integrated and relied upon, it’s fair to speculate that this type of developer program has the potential to solve a lot of the problems utilities are currently facing as growing renewables penetration causes instability along the distribution grid.

Privacy Pushback

The potential to optimize energy usage will grow significantly as cloud-based home energy management advances technologically and adds functionality.  But the market is likely to experience setbacks as privacy issues are raised.  Nest and Apple have both created privacy guidelines for data as it is communicated between devices, but protection and control over this information will still be an issue for customers.  As public utilities incorporate software platforms for managing connected devices, it’s unlikely they will be able to avoid the type of pushback (seen here, here, and here) that has hindered the deployment of smart meters.

Another question inherent in this move to a connected life is how the interaction between devices and software will take shape.  Nest and its associated partners have built value propositions off the premium quality of their networked thermostats and the software that controls them.  But competitors like EcoFactor and EnergyHub build value off the ability be flexible in the devices they connect to – asking if premium devices are really all that necessary to realize the same gains.  When you involve multiple customer demographics (with different levels of income and values) and budget-conscious public organizations, different needs and limitations will require different solutions.  There’s no denying that people become emotionally connected to well-made, well-designed hardware – and they will pay a premium for it.  But, as the cellphone industry has shown, there are limitations in terms of hardware development.  So how long will the novelty last for thermostats?

 

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