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23/06/2012

The Smart Home : the wave of the energy box

In the nineties home automation 1 were announced as a real revolution : however expectations were not met. However recent environmental concerns and the emergence of a new kind of electricity grid - the smart grid - have led to large-scale distribution of « Smart-home » concepts. While most gas and electricity suppliers are fighting a war to offer their products at the lowest possible price, some actors are developing smart home offers. They want to distinguish themselves in a competitive market where they product in question - energy - is trivialized.

Uniting telecommunication, IT and energy, the smart home is a symbiosis of technologies allowing dwellers to control their energy use and interact with their devices. However, do these new "smart home" offers, mainly visible in the form of "energy boxes", really respond to the ecological worries and budgetary needs of consumers? What are the needs of the consumers to really choose for these solutions? Are these solutions profitable for the consumers or rather for the companies offering services?

The scheme below depicts an example of how an energy box installed with a client can work.

From a functional point of view, the majority of the energy boxes offer the consumer precise control of their energy consumption of the house or some specific devices (most often energy consumption but also natural gas or water). The boxes use different technologies to interfere with the user - television, computer, smartphone, tablet, etc. The information is presented to the user, and like home automation, some devices such as heating, lighting or climatisation can be controlled.

Many different actors are actives

Implying different technologies in its development, the smart home has risen the interest of large concerns as well as start-up companies. They can be energy suppliers, manufacturers of electrical device, telecom operator or even IT-specialists and home automation-experts. There is growth and differentiation ongoing in this sector, however it is difficult to value. Recently two projects were abandoned: Google PowerMeter and Microsoft Hohm. Consumer interest was not satisfactory, so both IT-giants decided to abandon further development in energy-control tools.

Besides a lack of interest, it is probable that certain consumers didn't want a company like Google, already very present in their daily life, has access to information about their energy consumption. Management of personal data has become an increasingly important theme since social networks have become more and more common. The Mountain View company didn't want to insist, also because they don't want to diversify their products too much. Nowadays Google focusses on key products such as Google+ and Android. The reasons for the exit of Microsoft are similar.

But if the interest of the IT-giants seems to fade, is there room for the energy suppliers?

Unite to innovate

Rather than developing very specific energy services such as Google PowerMeter, the large operators such as GDF SUEZ or Bouygues Telecom don't hesitate to set up strategic alliances with complementary actors - telecommunication actors, utility companies or IT - to propose to the customer multi-service offers using intermediate intelligent boxes. These boxes are directly coupled to the energy counters and allow to distribute this information to different devices in the household. Partnerships of complementary actors allows innovation in technology as well as in marketing but also a cost reduction on different levels of the product value chain (logistics, fabrication, communication, ...).

On the Belgian Market, the most remarkable introduction of smart box systems is Electrabels Smart Energy Box. The technology was developed by Electrabel in cooperation with Fifthplay (a subsidiary of Niko, a company delivering electrical installation device).

The French market is a bit more mature: nowadays five boxes are available.


Main suppliers of Smart Boxes in France (Source: Sia Conseil)

Contrary to the products offered by Google and Microsoft, these boxes don't limit themselves to a daily follow-up of the energy consumption combined with communication tools to get personalized advise to limit the energy consumption. These boxes also offer different detection systems: water leakages, icing of the tubes, doors and windows not closed, camera observation and movement detection. One can say that these products offer - or will offer - distance control of certain electrical devices using the client's terminal.

Difficult to convince the clients

Nowadays, only a limited number of consumers use the energy box. There are no more than a few hundreds of them. Even though the suppliers want to diversify their products, they don't manage to fully exploit the market potential and seem to be confronted with low enthusiasm from the consumers, as was the case for Google or Microsoft. Most consumers are curious at the beginning, but later abandon the functionalities and contracts are not renewed.

Many raisons can be found for the lack of enthusiasm. The majority of the consumers doesn't seem to care much about its ecological footprint. Consumers are not willing to pay for an extra service, even if it could reduce their impact on the environment. Budget seems to be the most important aspect. Today, they are not willing to spend more than a few euros on educational services that could help manage the energy consumption of the home. The benefit that should be underlined is a possible significant reduction of the energy bill. It is estimated that this budgetary aspect is to become more and more important since the economic crisis continues to be around and the energy prices are estimated to rise.

But which functionalities really reduce the energy bill ? Are these functionalities also interesting for the energy suppliers that make profit precisely from energy consumption?

Lowering the energy bill by relieving the electricity grid

From the above it is clear that the consumer above all wants to reduce his energy bill. An option could be to profit from functionalities of moving consumption in time (e.g. the washing machine). In this way consumption is done in off-peak hours when energy prices are more attractive. This functionality is already offered by certain of these devices.

Another possibility that is studied - and probably is integrated in the next generation boxes - is the diffuse shut down of consumption. It consists in allowing a network operator to cut the consumption of certain electrical appliances, especially heating installations, during peak energy consumption.2 These cuts, that last no longer than a few minutes, have no influence on the comfort of the consumers and should take away some stress from the electricity grid by reducing the peak consumption and in this way avoiding the activation of thermal power plants, avoiding extra costs and CO2 emission. This consumption cut leads to a production in each house of "Negawatt Power" (a theoretical unit of power representing an amount of energy (measured in watts) saved. On the national or regional level, this leads to a significant cost reduction for the electricity suppliers.

The challenge for the consumer, now « consum-actor », is to know what is the added value of these "Negawatts" and thus the amount saved on his electricity bill. Although many experiments on diffuse shutdown of consumption are on-going, none is capable of given a good estimation at the moment. It remains to be hoped for that the diffuse shutdown leads to a win-win situation both for the consumer and for the supplier, both on the energy consumption and on the energy bill. This requires a real impact of the box on the market. Then the diffuse shutdown of consumption can have an impact on the electricity grid and be a tool to respond partly to environmental challenges.

Sia Partners

Notes :
1 Collection of technologies (information, telecomuniction, ...) allowing the automated improvement of work done at home, in offices, etc.
2 The peaks correspond, for a given geographical area, to the moments where electricity consumption is at its maximum. In cold periods, the French electricity consumption peaks around 7 p.m. (source: RTE).

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