With the increasing number of residential energy assets in Europe, home energy management (HEM) is becoming particularly interesting. HEM brings value to residential owners and companies offering the solution but also to the wider electricity systems, by enabling a variety of use cases, from time-of-use or self-consumption optimisation, to flexibility.
In the home energy management space, different companies - and types of companies - must act in synergy
HEM systems have an inherent complexity, as they involve multiple types of companies, operating at different stages of the value chain. For instance, the appliances used within a HEM system are provided by different assets manufacturers: HVAC, chargepoint, battery manufacturers, etc. But then, optimising the energy flows between these assets is usually done by a different company, typically an integration/optimisation specialist. Finally, the company offering the HEM proposition to the end-user – or providing the flexibility services to the grid – can also be a separate player.
To summarise, there are at least four stacks to the provision of a HEM system (see image) and most companies do not cover all of them.
On top of having a complex value chain, HEM remains a space with a lot of technical constraints
So far, there has been no standardisation of communication protocols or of assets integration processes. In fact, the integration of loads and the optimisation of energy flows is becoming increasingly complex as HEM covers more and more use cases and appliances. There are different strategies emerging to build compelling HEM systems and some of them are getting good traction:
- Players willing to roll-out their solution faster, at lower cost and complexity tend to prefer the cloud-API integration of assets. This approach enables them to integrate loads already present in homes without requiring the installation of additional hardware. Companies with an existing large customer base, such as energy suppliers, find this solution particularly appealing.
- To build more complex solutions, covering more use-cases and requiring higher reliability, some players are focusing more on the local integration of loads. This technique requires the installation of hardware on-site, leading to additional costs and complexity for the HEM provider, and the end-user. However, in this situation, the optimisation of energy flows is more reliable – notably because the system does not rely on the internet connection – and allows to control non-connected ready appliances.
The technical complexity of HEM is pushing a lot of companies to outsource the development of their solutions to integration specialists
Standardisation of HEM is not going to happen in the next few years. While some actors are trying to develop interesting solutions - such as the plug-and-play environment promoted by the EEBus Initiative - these solutions are still at their early stage. Filling the gap left by the lack of standard, some B2B companies have built an expertise in the development of HEM solutions. They provide services and products to asset manufacturers, utilities and all players willing to have a share of the HEM values.
- This is for instance the case of Tiko, which provides hardware and software to companies and delivers added value through its virtual power plant.
- Similarly, Kiwigrid’s products and services support companies in the delivery of their projects, from the business model development, to the installation and operation of the systems.
In the coming years, we believe that the role of integration specialists will become even more important, as companies are increasingly willing to gain value from HEM. This is clearly shown by large utilities investing in this space. For instance, in 2019, Centrica and Engie invested respectively in GreenCom Networks and Tiko.
Providing HEM to end customers is a valuable business to many, but who will win the customer interface?
A lot of the HEM values stem from the customer interface. On top of selling new products to customers, it is also a mean for companies to improve their relationship with customers and use demand side response as a new source of revenue.
- Currently, energy suppliers are the best positioned and the most willing to become leaders of the HEM ecosystem. Suppliers are conscious of the central role they occupy, between the grid and the customer. They have the potential to extract a lot of values from HEM and, hence, exhibit a strong will to leverage their existing customer base.
- Electrical OEMs are also already present within the home, notably by providing the electrical switch board. They could also highly benefit from this central position to be the leading controlling party of HEM ecosystems.
- Asset manufacturers tend be less present in the HEM provision space, to the exception of start-ups – such as Sonnen, Moixa or Myenergi – and of a few very large companies with significant resources, for instance Bosch and Nibe.
There are many unsolved technical issues with the development of HEM systems. Despite the efforts of the likes of EEBus, standards are unlikely to be widely accepted in the coming years by the many kinds of players involved in HEM. Therefore, the HEM market will require specialising companies to develop solutions enabling the integration of assets and the optimisation of energy flows. Only the future will tell which companies will win this battle, and the battle for the customer interface.
To discuss Home Energy Management further, contact us.