The Smart Home: Built by consumer pull

Pilgrim Beart, Founder Director, AlertMe

Engineering the Smart World, the road to 2020IET London, 8th March 2011

Agenda

• Setting the scene• Home Energy today• Consumers are key to a successful transition

• Seizing the opportunity• Consumer trends & journey• What does that mean to service providers?• Propositions• Technologies

• The view in 2020• Based on today’s trajectory

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Setting the Scene

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Home Energy Today - landscape

• Consumer:• Doesn’t think about energy

• Reliable supply• £1200/year average energy bill is quite painful

• 9% of disposable income• Zero visibility into where that money is going

• In same category as the mortgage/rent• A choice of energy supplier (but little differentiation)• Home is “dumb” – nothing connected

• Government:• Legal requirement to sharply reduce carbon

• Climate Change Act mandates 34% by 2020 (vs. 1990)• Renewables not coming on stream fast-enough - and are intermittent• UK becoming a large net importer of energy (energy security issues)• 50% of all UK energy is consumed directly by consumers (30% in homes)

• Utilities:• Forced to sell less energy• Energy retail is increasingly a low-margin commodity• Need differentiation, and other sources of revenue• Abroad, Smart Meter initiatives have yet to deliver much benefit

• Aimed at solving utilities’ problems, rather than bigger picture?

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Home Energy Today - the opportunity

• The UK has a unique opportunity to lead:• Starting Smart late-enough to learn from mistakes of

others• Deregulated market, so consumer matters

• Which means Telco’s can play, as well as Utilities• Consumer products & service bundles evolve fast

• Opportunity for rapid market-driven change (vs. “Soviet” approach)

• Addressing the demand-side can have big effects, quick & cheap

• Even just a simple in-home display can drive significant reduction

• It can start now (pre-Smart Meters)• …in fact, it already has• All major UK utilities are rolling-out online consumer energy

engagement programmes 5

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Does UK government “get” it? Positive noises…

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Consumers are key to a successful transition

…so worth understanding them!

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Consumers are key - psychology

How do consumers think?

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AbstractConsuming Energy

ConcreteUsing a washing machine

Motivation + Empowerment = Action

Motivation – Empowerment = Frustration

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Consumers are key - psychology

Motivation: Money! • Energy bills ≈9% of disposable income• 90% of householders concerned about bills• Standing charge is exactly the wrong model• Rule of thumb: 1W = £1/year

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Consumers are key - psychology

We are social animals• Motivated by Competition and Collaboration

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1.2pper use

3000W

£49 per year

£87 per year

29p per use

varies

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Consumers are key - empowerment

What empowers consumers?• Today feel un-empowered - view energy bill as outside their

control• Like mortgage or rent

• Need to bring energy costs into the here-and-now • Per-use• Associate cost with use

Visibility Tangibility

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Consumers are key - empowerment

Analytics – beyond kW and kWh• from Data into Information

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Seizing the opportunity

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Consumer Trends

• It’s all about being connected• 100% of people have mobile phones• 70%+ of homes have broadband• Therefore, enter the Connected Home

• Usage:• Fixed PC is largely dead• Web 1.0 only a subset

• Web pages don’t work well on mobile• Consumers too busy to visit portals just for the sake of it

• Web 2.0: Apps & Social• SmartPhones, Tablets, IPTV• Whereever, whenever

• At home, at work, on holiday, in the kitchen, the living room,• Even in bed!

• Increasingly: “if it’s not online, it doesn’t exist”

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Consumer journey

• Price of energy will rise and energy consumption will get more complex with TOU tariffs, DR and micro generation

• 8%-10% of the average disposable income is spend on energy ( £1200 p.a.) and approx 20%-25% of consumption is waste

• Provide awareness through real time visibility, control & automation, enabling consumers to reduce energy use, cost and CO2

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Overall home energy usage and bill over time

Identify appliances using most energy

Better tariff

Smarter use

Use appliances more cost effectively

Turn off standby

More efficient appliances

Sustained usage levels “Free” energy contribution - self generation (eg. Solar panels)

Establishing Active Behaviour Change Self-Generation

Reductions necessary to offset likely future consumer energy price rises

Diagnostics

“Usage Shock”

Likely Future Unit Energy Price Trend

Stages of Behaviour Change

Possible Net Bill Position

Driven by the cost of investing in smart

grid and low carbon power technologies

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What does this mean to service providers?

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Energy Industry

Investing inEfficiency

Smart MeteringSmart Grid

The Energy industry is undergoing significant technological change driven by • The need to provide certainty and security of supply

• De-carbonise supply to meet challenging Governmental/Regulatory targets

• Respond to customer and regulatory pressure on pricing

• Brings operational efficiencies to the utility - reduce overheads, billing and collection efficiency, smoothing demand, flexible pricing

• Need to tap into consumption related efficiencies (Time of Use Tariffs, Demand response)

Capital Cost(passed to consumers)

Consumers must believe and see that there is a tangible benefit to them

Smart metering/smart grid holds considerable promise

“60% of the business case for smart meters lies in operational benefits, 40% consumption related ”

Boston Consulting Group, April 2010

CONSUMPTION RELATEDthrough Consumer engagement

OPERATIONAL EFFICIENCIESthrough technology deployment

… the 60% … the 40%

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Propositions

• Generally:• Hide the technology• Turn data into information• Bring information to the customer• Make it REALLY easy to use (esp. installation)• Enable different Modes of use (web, phone)• Remember we are all different.

• Avoid “Home Automation” pitfall:• Has a (deservedly) bad reputation, e.g. X10 for rich people & geeks• Instead, offer simple, complete, propositions which “just work” out

of the box and immediately solve real needs (e.g. saving money)• Creative consumer-oriented service business models, e.g.

• Advice showing where energy spent, help budgeting & reducing• ESCO• “Buy this fridge and get its first year of energy free”• C2C energy trading?! 17

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Places to deliver the UX

• Phones (dumb & smart)• Tablets• In-home displays• TV’s• Virtual real-estate

• iGoogle• desktop• Social apps

All of these are increasingly online

Can’t predict all the places we might deliver a future UX

But can predict they will all be online 18

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Examples (already on the market)

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Electricity + Gas + Microgen

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Examples (already on the market)

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Technology – In-home Connectivity

• For end-devices (cost £’s, and have to last years on a tiny battery)• For appliances (cost £10’s or £100’s, generally mains-powered)• Today

• >70% of homes have always-on IP connection (broadband)• >46% of homes have WiFi ‘dialtone’ [Ofcom Q1 2010]• >95% of homes have cellular access

• Ultimately…• It’s a heterogenous world, with a range of constantly-evolving PHY’s• ZigBee SE, HA, Mbus, WiFi (low power), powerline, 3G & 4G…• It’s all ultimately IP, would be nice not to obsess about the PHY

• However…• UK Smart Meter PHY is in a quandary• No-one (Govt, Utils, Tech providers) wants to be seen to be “picking a winner”• Everyone will benefit if we do pick a winner (not least the Consumer)

• …even if it’s not perfect• Whatever is chosen will go out of date (but that’s not a reason not to pick one!)

• e.g. 10base2 Ethernet spawned a huge market, even though no-one uses it today• Or by delivering online we could avoid PHY issues entirely

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Technology – the Home Hub

• Gateway and local agent• Platform for multiple Connected Home services

• Home Energy, Heating & Cooling, Peace of Mind, Telecare, …

• Online (but acts locally too, for latency/reliability)• Initially a new device in the home (for ubiquity)• But ultimately embedded:

• Smart Meter (if “thick”)• Broadband router• STB (IPTV)• Femtocell• … HOME

CLOUD

Operating System

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App

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UX

Operating System

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App

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UX

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HYBRID

Operating System

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UX

The view in 2020

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UK Home Energy in 2020

• Thinks of energy services like other home services:• Broadband, TV, mobile, …• Energy is a part of broad service “bundle” from many providers• Energy services (e.g. e-commerce, switching etc.) available

separately from energy retail• Has a Smart Meter (with Time of Use tariff, DR just starting)

• (and 3rd-party services can help manage it)• Has several HANs (WiFi + others), with some white goods

on them• Is one of the 5%(?) with microgen (PV, thermal, CHP)• Is one of the 5%(?) using an (PH)EV (= 3 houses!)• Has a choice:

• Between more complex, more expensive (+60%?) home energy• Or simpler, cheaper if they opt-in to letting it be managed

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The Consumer…

Thanks for listening