Utilities Cater to Frugal Energy Consumers

Companies see profits in the home energy management market

When Sam Laidlaw looks to the future, he sees his customers using less energy—not the cheeriest of visions if you’re in the business of selling power. Laidlaw, chief executive of Centrica, Britain’s biggest energy supplier, expects people to respond to higher global energy prices by using power more efficiently. Rather than bemoan a drop in demand, he sees an opportunity in home energy management systems. The utility hopes to install 2 million smart meters—devices that measure every detail of home power use—by the end of 2012. Centrica has spent $468 million over the past three years buying companies specializing in smart meters, as well as boilers, heat pumps, and solar installation.

Laidlaw faces a crowded field that includes IBM, supermarket chain Tesco, and consumer electronics maker Panasonic. More than 80 companies are dabbling in home energy management, looking for ways to get products into the 200 million U.S. and European homes forecast to be connected to smart-metering systems over the next five years, according to Bloomberg New Energy Finance.

Smart meters generate data that tell your utility what time you get up, how often you eat a microwaved meal, and when you need to replace your refrigerator. “This isn’t just green window-dressing,” Centrica’s Laidlaw says. Smart meters will “offer the customer not just an understanding of what they’re consuming down to the appliance level, but also allow them to take advantage of time-of-use tariffs and be able to sell power back to the grid.”

The meters may smooth the way for greater use of home-generated power from sources including solar and wind, as well as the rollout of electric cars. Capgemini, Europe’s largest computer-services company, and Intel, the world’s biggest chipmaker, are cooperating on a tablet-style PC that will let customers control their appliances’ power use by, for instance, reducing the brightness of a TV. The data could also link appliances to an IPhone application to track and control energy use.

The competition may get more heated in Europe as Continent-wide laws drive efficiency measures. In the U.K. alone, the market to install smart meters, insulation, and micro generators (efficient, small-scale power systems that would supplement utility grids) could be worth about €4 billion ($5.7 billion) by 2016, according to Nomura Holdings. “Utilities have lived in a zero-sum world, where the size of the overall market always stays the same,” says Pilgrim Beart, founder of energy monitoring company AlertMe. “Utilities now … have the opportunity to create whole new markets.”

While power companies seem a natural provider of energy services, they are not as experienced as communications and media companies in handling household connectivity and managing technology platforms, says Bloomberg New Energy Finance analyst Albert Cheung. “Apple’s iTunes flipped the balance of power in the music industry—suddenly, the platform was as important, if not more, than the content itself. In energy, home management platforms could bring a similar transformation.”

Tesco and U.K. retailer J Sainsbury have rolled out home energy services. Sainsbury is partnering with Centrica’s British Gas to offer home energy assessments, solar panel installation, and insulation. Tesco is testing charging points for electric cars at six locations, says Corporate Affairs Director David North.

While utilities will spend as much as $46 billion to build smart grids by 2015, according to ABI Research, computer services and hardware companies are also racing to create products and services for power management. Atos Origin, France’s second-largest computer service provider, said in March last year that it would form a new division devoted to the energy industry. IBM and Cable & Wireless Worldwide announced plans earlier this month to develop a smart energy cloud that would give an overview of energy use across Britain. Data from energy users would be gathered, stored, and distributed to energy retailers, the company says. “The industry has old-fashioned working practices,” says First Utility CEO Mark Daeche. Recent innovations are “an opportunity to upgrade and improve how the industry works.”


    The bottom line: Some 80 companies are expanding into home energy management systems, which are forecast to be used in 200 million homes by 2016.

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