I’ve been doing a little premature pontificating that smart home technologies could be a threat to building product manufacturers. Based on some secondary data and some of our Energy Pulse 2014 data, I’ve hypothesized that if people believe they’ll save 10% on their energy bill with a smart thermostat (both Nest and Honeywell have issued white papers claiming that level of savings) and they can achieve that for $250, why would they spend $2,000 to add extra insulation or several thousand for an HVAC upgrade or new windows?
I’ve also hypothesized, again based on some of our data points, that if a utility customer purchases a smart thermostat from someone other than their utility, that customer could then be “lost” to that utility. I’ve imagined that action would open a Pandora’s box of non-utility behaviors – that he/she would continue to buy products and services from someone other than the utility and eventually ascribe the “trusted energy adviser” role that utilities so want to own to a host of other players. Ultimately, they would buy as little as possible from the utility.
According to the data just coming in from the field from this year’s Energy Pulse, I was wrong on one front and right on the other.
Smart home technologies/smart thermostats are – broadly – not seen as a better solution to energy efficiency than traditional energy efficiency measures:
- Only 36% of Americans planning a new home purchase prioritized a smart thermostat as a feature for their new home (compared to 50%+ who want ENERGY STAR appliances or a high-efficiency HVAC).
- When asked, “Of the following home improvements, prioritize the top three things you believe have the greatest impact on making a home more energy efficient,” only 9% chose a smart thermostat (matching insulation at 9%, so there is a competitive threat there). Far more chose traditional features like replacing an HVAC system or windows.
So … it’s not a threat to traditional energy-efficient product manufacturers as a replacement for traditional energy efficiency measures (though I’m a bit worried about the insulation industry), but it is another shiny new thing people can spend money on vs. spending on energy efficiency improvements.
The bigger threat is to utilities. As we’re digging into the Energy Pulse data, it appears 10% of the American market is what we’d call “Home Technology Enthusiasts.” These folks …
- Want their new homes to have “a home automation platform with an app for controlling the smart thermostat, lighting, blinds and security system from my phone”
- Prioritize spending money on their home to make it more automated/technologically advanced
- Already own a smart home device(s)
- Are also home energy efficiency enthusiasts
Most importantly, 47% of these folks would change their electric utility if given the chance, and 56% of them would choose a non-utility provider for their electric service.
The people who are Home Technology Enthusiasts are also highly engaged in energy efficiency and open to new energy alternatives. If they don’t buy their technology from utilities, other sources will have a foothold to market/sell energy efficiency solutions, ultimately weakening the utility-customer relationship and pushing utilities further out of the equation.
The one silver lining for utilities: electric utilities are more trusted with home data/usage information than Internet or cable providers or manufacturers (but less so than home security companies).
So what’s the bottom line? Partner, partner, partner. If you’re a building product manufacturer or a utility, establish partnerships in the tech space and start bundling home technologies in with energy and water efficiency offerings. You should seek to be the channel, the concierge who connects the consumer with the right bundle of solutions, and you should get brand credit for it. That opportunity is wide open today, but I’d say the window will be closed within the next 24 months, given how rapidly this space is evolving. We’ll see who the winners are …
Expect more on this and many other smart home technology projections and insights in our next special report – coming in January.