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The interactions between HEM, the electricity system and energy communities

As my colleague Alix Weil explained in her blog, a strong growth is expected in the market of Home Energy Management (HEM) and we believe over 2.3M homes will be equipped by 2023. This is mostly driven by the optimisation of self-consumption and of dynamic electricity tariffs.

We defined HEM as optimising the energy flows in the home, and this is only a part of a wider trend towards a more distributed, democratised energy system. Particularly linked to HEM, two other elements of the energy transition can see huge benefits from managing energy in the home:

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Home Energy Management in Europe: a rapidly evolving market with a growing potential

The European Home Energy Management (HEM) market has been quite slow to develop in the last decade, only reaching around 300k installations to date. But this is going to change.

By 2023, we expect the market to reach 2.3M units installed. While the overall HEM European market will grow, the highest potential for growth will continue to be in the Nordics in terms of relative penetration and Germany in terms of absolute numbers. France, the UK and Italy will remain behind even though we predict their HEM markets sizes will increase faster. With its high penetration of solar PV, one may have expected Belgium (and to a lesser extent the Netherlands) to be an interesting market, but its net metering system is clearly a barrier to HEM. Finally, Spain, and its interesting geography for sun power, could have been better placed, but there is a lack of incentives for customers to install and self-consume solar PV.

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The Home Energy Management market is ready for take off

We have been analysing the Home Energy Management (HEM) space for over a decade at Delta-EE, and the market has come a long way.

10 years ago, energy suppliers were providing energy monitoring devices (or in-home displays) to their customers, in a hope to make them understand their consumption and save energy as a result. That’s what the industry called HEM at the time. History told us however that customers quickly lose interest for these devices, as once you have the information, there isn’t much you can do on an ongoing basis with it.

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Could Home Energy Management be the next big connected home opportunity?

 Potentially.

Delta-ee first published a study on Home Energy Management (HEM) back in 2010. We didn’t know it yet but this was the dawn of the connected home market, with companies like Nest starting to get some momentum in the US, and Alert Me who would later be acquired by Centrica.

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The connected home party is getting started: what do the numbers tell us?

In my first blog of this series, I explored whether the connected home “party” is just hyped up for the industry or whether consumers are coming to the party too. 

In the second blog, I discussed the impact of social media on customer interest for connected homes.

In this third blog, I will give an overview of the energy offerings that are selling today and describe some of the players trying to get a piece of the party cake.

We recently published the first report of the Delta-ee Connected Home Research Service, the annual ‘State of the European Connected Home Market’. It analyses the role of key players, the types of offerings that the customer is currently buying and why some countries are getting traction while others are a step behind. For this study we consulted over 50 key stakeholders in the connected home sector.

Several offerings are gaining traction

While energy used to play a small role in the connected home, the number of offerings has quickly increased in the last few years. Our research highlights that some solutions start to be successful and that others show promising signs. Below is a summary of a few examples:
  • Remote heating control – replacing a traditional programmer with a new remote control system, is the leading European offering today with several hundred thousand installations reported in last winter. These products are accessible to a wide range of end-users (costs are rarely over €300), who start to understand the convenience brought to their daily life through heating apps.

  • Time of use tariff optimisation – through connected controls – is getting a lot of interest, especially in Scandinavian countries where residential time-of-use tariffs are available. Heat pump manufacturers are starting to take advantage of this by integrating smarter controls which will pick up the tariffs in advance. The heat pump will then automatically establish a heating pattern that will be the most economical for the end-user without affecting the level of comfort. See the Delta-ee Heat Pump Research Service study on smart heat pumps for more info.
  • Microgeneration monitoring, optimisation and electricity storage is also a hot topic of the connected home covered in our research. Although this remains a niche market today, it is generating a lot of interest, particularly in the social housing sector. 

Diverse players are getting involved

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Connected home: are consumers coming to the party too?

In my last blog I explored whether the connected home “party” is just for a hyped up industry or whether consumers are coming to the party too.

 In this blog I’ll look at consumer interest from another angle. In a conversation at the Delta-ee coffee machine, a colleague told me he’d been at a party at his parent’s house and overhead a group of people talking about the Nest thermostat. A simple anecdote, but unlikely to be the only case of conversations about smart thermostats entering the mainstream. In Germany, there’s similar awareness of RWE Smart Home offerings through their “Smart Friday” promotions, which provides heavily discounted bundles on a number of days throughout the year.

Whilst we haven’t yet carried out a detailed consumer study on this topic in the way we have done for low carbon heating appliances in different European countries, we’re seeing more and more promotion of smart home / smart heating controls. A simple look at social media provides some interesting insights.

  “Likes” on facebook and Twitter followers are crude measures of consumer intereset, but let’s see how many “likes” and “followers” different brands have, and to set the bar, let’s look at some companies with really desirable, mainstream products. Beats Audio clocks in at over 7 million likes and over half a million followers.  Netflicks has 6.2 million and 800k followers. Nespresso at 3.5 million. Sonos, the wireless music player, comes in at 292,000. These two have 50-100k followers.

 Nest surprised us – over 200,000 likes, and nearly 100k followers - close to Nespresso and Sonos. The next batch are down at a few thousand followers and modest “likes” - Philips Hue, the wireless lighting product from Dutch giant Philips, coming in at 37,000 likes. Further behind are Tado with 16,000; RWE Smart Home, at over 8,000. Hive, the new brand created by British Gas, has a mere 2,500 likes.

 What is interesting is that large corporations such as Philips, British Gas, and RWE, have created specific consumer brands around their smart home products. They’re able to drive interest in these sub-brands, using social media such as facebook. When we looked for facebook pages for the likes of Honeywell’s EvoHome product; and Nefit’s (a Bosch heating brand in the Netherlands) impressive “EasyControl” product, we couldn’t find any facebook page specific to their product.

 For smaller start-ups, many are relying on finding channel partners for their product – and hoping that these channel partners will promote their offering. Some still have a facebook page and twitter accounts – Climote, the Irish-based company, for example with 1,000 likes and hundreds of follower;  Owl just scrapes in with a facebook page and 69 likes and nearly 2,000 followers, and Passive Systems has no facebook page and nearly 900 followers.

 Building a successful connected home business is going to have to have a strong element of generating consumer interest and pull. The simple exercise we carried out in this blog provides one perspective on which companies are generating consumer excitement and passing the test of generating conversation at a party. It’s a topic we’ll be drilling much further into as part of our Connected Home Research Service.

 (In case you’re interested Delta-ee has 775 followers and no facebook page!)

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