The Smart Home Paradox: Where’s my Utility?

by Nov 2, 2017

In 2015 we released an Energy Pulse special report on smart  home perceptions and technology adoption, noting that thanks to concerns about privacy and their established relationship as a trusted home services provider, utilities had an open invitation from Americans to step into the fray.

Since then, smart home technologies have taken off, but many of the same barriers and opportunities exist, as evidenced by Jacob’s (our Digital Content Strategist) struggles with making home automation decisions for his first home.

His experience (below) lead to the same question we asked in 2015: When it comes to creating a smart home – where are the utilities?

Insights from a first-time home-buyer

As a first-time home-buyer, I spent a lot of time trying to get the “best.” I wanted the best mortgage rate, the best location, the best everything, all for the best price. That’s probably why our house hunt took around eight months. And, when we finally bought our home, it should come as no surprise that I wanted the best for the inside of my home.

I’ve always been interested in technology, and the prospect of having a house to call my own opened a new frontier of devices and technology – all of which promised to keep me safer and more comfortable and reduce our utility costs.

I spent hours researching security systems – from ADT to Vivant to Abode. I read reviews, specs and requirements, trying to uncover the “best.” The difficulty of my research was only compounded as I investigated smart thermostats and other home automation devices, like Google Home.

As the hours went by, I slowly realized that there was no true “best.” It was all about understanding the tradeoffs I’d have to make. I ended up choosing a DIY system from a small monitoring company (AlarmGrid) because it gave me the ability to switch pieces in and out as “better” things come out. (I realize I’m not the average consumer. Most people would likely have either given up long ago, or chosen a well-known home services provider offering a “packaged” solution.)

As a member of the Shelton Group team, I know a lot about utilities and some of the unique challenges they face when trying to market to their customers. And in sharing my experiences around the office, the question kept returning, why isn’t my utility filling this need?

Why not, indeed?

The utility RSVP deadline is nearing

In 2015, 16% of Energy Pulse respondents said they had a smart home security system; 11% reported ownership of a smart thermostat; 12% owned smart door locks or lighting; and almost a quarter said they would likely purchase at least one of these devices within the next year. Over 50% said their current provider was a home security company (primarily ADT), with the rest mostly doing business with their cable/Internet company.

Only 9% said their utility was one of their smart home technology providers, which is ironic: 73% of Americans said they thought that smart home technology could save them energy, and 29% said they would most trust their utility to offer smart home services securely over other kinds of companies.

Since then, we’ve conducted several custom studies for utilities confirming that most utilities still have an open invitation to guard against third party encroachers, strengthen customer relationships and improve satisfaction via smart home offerings. In addition, they have the chance to choose the energy management tools that will best facilitate their long-term DSM strategies. Years of consumer research has taught us that few customers will ever participate in demand response and/or more innovative pricing plans without information and control tools to reduce their risk and give them a sense of control.

Just as Jacob noted, the smart home technologies market is still fragmented (for now) and too complicated for most homeowners to go it alone. Utilities could be a trusted provider for an integrated system that offers not only energy management, with smart thermostat and lighting controls, but also the connected home security devices that have historically driven consumers to take their first smart home steps.

But we think that the “open invitation” has a rapidly approaching RSVP date. Our 2017 Energy Pulse study (publishing in December) finds that while the percentage already owning the kind of integrated system that Jacob was looking to build – one that allows them to control their thermostat, lighting and appliances from their smart-phone – is less than 5%, 28% say they are likely to seek one within the next year.

With both Amazon and Google (Nest and Home Assistant) kicking off huge holiday ad buys, we think that utilities must jump off the sidelines and get in the game – quickly. Otherwise the game will be over and they’ll have to go with their hats in their hands to third-party disrupters in order to communicate with their own customers.

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About the Author

Lee Ann Head

Lee Ann is a former contributor to Shelton Insights.

1 Comment

  1. Jeff Dols

    Nice work. The “smart home” is only the beginning. Before long we will a see a significant rise in homes and neighborhoods powering themselves with no need for a grid connection. Granted that most place require a grid connection, but you are not compelled to use it.

    It’s been said before, and I agree, that it would not be surprising at all to see companies like Tesla, and others, creating small generation plants in places like Puerto Rico using renewable sources. Solar, wind, and wave energy have a relatively low cost of entry compared to a fuel-sourced plants, and once storage is small enough and cheap enough, it will be interesting to see how quickly utilities lose customers.

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