Home Energy Management Moving Past Early Phase
May 16, 2012
[ back ] [ comment ]
The once-hyped home energy management (HEM) market has struggled to gain traction in
recent years, even as deployments of smart grid infrastructure have accelerated. The
idea was that a smarter grid would soon provide the tools and incentives for consumers to
use energy (primarily electricity) more wisely. People would save money and utilities
would not have to spend capital as quickly on new power-generating plants thanks to lower
overall consumption. However, despite these benefits, the HEM market has been stuck in
near neutral as both skittish utilities and a glut of vendor solutions have failed to convince
unmotivated consumers. There have been numerous trials but only a few cases of
industry-led deployments or consumers voluntarily taking up the cause. Today that view is
starting to change. Over the next 8 years, this nascent market will move past its early
But it will not be a land rush. Instead, Pike Research forecasts modest growth since
market-driving forces take time to have a significant impact. Toward the end of the
decade, growth will quicken as winning solutions emerge. Vendors of HEM products still
standing at that time will have endured a shakeout. Only those vendors that deliver solid
results will succeed. Those results will be evident to utilities and consumers who see
efficiency gains from tools like more intelligent consumption reports, web-access controls,
smarter thermostats, in-home displays, and connected smart meters and appliances.
Home energy management is not a single thing, but a combination of hardware and
software that enables both utilities and their customers to better manage energy resources.
According to a new report from Pike, some of the key drivers of HEM market growth will be familiar since they coincide with the
aim of the smart grid, which is to improve efficiency and reliability of electric services.
Among them are the following:
- Need to save money: The rising cost of electricity is spurring interest among consumers
beleaguered by a weak economy
- Mandates: Public utility commissions and other governing bodies around the globe will
continue to push for higher energy efficiency targets. HEM solutions will be counted on
to help deliver those gains.
- Variable pricing schemes: Utilities that move to variable pricing schemes will prompt
greater interest in HEM as cost-conscious consumers get on board.
- Desire to be green: A portion of consumers will look to HEM offerings as a way to be
good environmental stewards while also saving money.
Strong market forces in the other direction will shape the HEM market going forward, as
well. These include the following:
A Market Continuum
- Consumer indifference: Although some consumers will be motivated by rising electricity
costs, many others will see little reason to adopt HEM tools because the payoff will seem
negligible. Slim savings of perhaps 3% to 5% may not be enough for them to change.
- Cost of new gear: Most consumers will have a hard time justifying initial investments in
HEM hardware that can cost $200 or more.
- Standards or a lack thereof: HEM systems (HEMS) often have to embrace several
technology protocols for communications, be those ZigBee, Z-Wave, Wi-Fi, powerline, or
something else. Interoperability issues will pose a challenge for a few years.
- Crowded, confusing market: With so many vendors and technology choices in the
HEM space, consumers will not be sure which route is best for them.
- Tepid utility support: Utilities have tested various HEM solutions for years, but many
utility managers are risk averse and will be reluctant to move beyond pilots.
Home energy management is an unwieldy marketplace in many ways, with solutions that
occasionally overlap. Therefore, in order to better understand and forecast this market,
HEM products can be organized into five groups, or segments, along a continuum.
Starting with the one that generally yields the least amount of energy savings and moving
up from there, these five segments are:
- Paper bill: A mailed statement from the utility showing a customer's energy usage as it
compares to households nearby and suggesting tips for improving efficiency or
- Web portal: A website that a customer visits to monitor energy usage, see comparisons
to nearby households, and discover tips for improving efficiency and conserving energy.
- Standalone HEM: A hardware-based system that estimates energy consumption and
has some device-level tracking (e.g., switches and lights) and automated device control
capabilities. These systems may or may not have a connection to a home's electric
meter, and that meter need not be a "smart" version.
- In-home display: A hardware device visible to residents in the home that shows time-ofuse
(TOU) pricing signals, meter-based consumption, and bill-to-date information.
- Networked-HEM: A combined home area network (HAN) with hardware that has autopricing
Response capabilities, demand response (DR) load control, and home automation
According to Pike, shipments of standalone HEM systems will grow from a quarter million in 2011 to nearly
4.7 million at the end of the forecast (2020), showing a compound annual growth rate
(CAGR) of 38.3%. Most buyers will be in North America, Western Europe or Asia Pacific.
Regulatory pressures to better manage energy consumption in these regions will have a
strong influence, as well as a growing consumer awareness of the tools and the savings.
Combined revenue for all HEM segments will grow from a base of $93 million in 2011 to
more than $2 billion in 2020 at a CAGR of 40.9%. By segment, Networked-HEM revenue
will see the strongest growth (76.8% CAGR) due to the fact that the equipment carries the
highest average selling prices (ASPs). Moreover, some utilities will drive volumes of
Networked HEM systems in order to make DR and TOU pricing schemes feasible.
Source: Home Energy Management by Pike Research. Excerpts reprinted with permission.
Please note: By posting a comment, you agree to our Terms & Conditions.