In our previous connected home blog, we explained why we think smart thermostats will lead the connected home energy market in the UK and the Netherlands.
Where the UK and Dutch heating markets are almost exclusively boiler markets, Germany and France aren’t, although boilers still make up a large share of the heating market. They have a large penetration of direct electric heating, of communal heating systems and they also have a significant heat pump market.
In France, most connected home providers quite understandably decided to first focus their efforts on one type of heating system. For example Qivivo, Netatmo and Nest focussed on the gas boiler market in France. The two first are now moving towards heat pump and electric heating. Schneider Electric developed an electric heating ready solution only.
In Germany though, some of the most successful companies are focusing their efforts on the heating emitters and not directly on the heating system. For example EQ-3 and Danfoss have a connected radiator TRV system to control the heating room by room. Tado remains the only smart thermostat provider – which controls the boiler – showing early signs of success.
If the potential of these markets is similarly strong, the dynamics surrounding the energy supply industry in each country are very different.
- In Germany, many utilities are under a lot of pressure from challenges in the wholesale market, and some are trying hard to grow new revenue streams through services (and churn rates are also rising). RWE saw an opportunity to achieve part of this through the smart home and was one of the early movers in this market, pushing its smart home solutions hard - which partly explains the quicker growth of Germany compared to France today. Others like EnBW and Vattenfall decided to join the Qivicon platform – led by Deutsche Telekom – who offers a connectivity gateway where partner devices can connect to – but these utilities haven’t yet spent lots of effort on promoting these connected home products.
- The French energy suppliers are close to monopoly suppliers (GDF Suez with gas and EDF with electricity) and therefore customer switching rates are very low – removing one strong driver for them to develop connected home services. Consequently the energy suppliers have taken moderate steps and are not yet really driving the market.
So what are the key drivers for growth in these 2 countries?
- We believe telcos may play a bigger role in France and Germany than in other countries. Orange and mostly Deutsche Telekom have already made their first move into the energy side of connected home and it may not be long before they start to achieve an interesting scale, as they look to grow new revenue streams outside of their core business.
- Germany’s heating control market has always been considered as one of the most advanced one in Europe – boiler controls are pretty advanced compared to other countries. Attention therefore shifts to connected TRVs which we expect to have a strong penetration over the next few years, led by EQ-3 – who is working with both RWE and Deutsche Telekom – and the more traditional manufacturers such as Danfoss, who has a strong market share of heating controls in Germany.
- New build regulations (RT 2012) have been the centre of the attention and can be interpreted as forcing each of the 300,000 annual new property to be installed with smart heating controls. This didn’t happen yet though due to the lack of clarity and the fact that most buildings built in 2014 were under the previous regulation. However there will be more and more new builds that will have to follow the RT 2012, therefore installing one of the solutions offered by the likes of Schneider, Delta Dore, Hager, Legrand and others.
As we are diving into Sweden and Denmark, we are seeing very different stories – but not less fascinating – from all the markets looked at so far. These will be the next countries published under the Delta-ee‘s Connected Home
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