Why utility providers are missing out on the future of smart homes

Just 7 years ago, Nest launched its first smart thermostat. It was great for geeks and not compatible with most European HVAC-systems, but it became an instant success anyway. The same happened with the Philips Hue Lights. They where not cheap and you needed a special light switch or an app on your smartphone to turn the lights on and off. Not exactly the experience you are looking for as a consumer. At the time, all home automation manufacturers where having a good laugh with Nest and Philips with what they thought where just products for geeks.

Today, Best Buy, Target and Amazon are packed with all kinds of connected smart home products. In the US, 32% of households own at least one smart home product. Traditional suppliers of switches, heating systems or home automation systems are forced to follow, or they risk being pushed out of the market by new players like August, Ring or LIFX.

The reason for this sudden growth in adoption was the introduction of the Amazon Echo back in 2014. With its release, Amazon created an accessible smart home environment in which devices from different manufacturers could work almost flawlessly together. Other manufacturers like Samsung, Wink or Vera had tried earlier with comparable products but they were missing two key elements: a large distribution channel and a reliable way of control (voice) backed with a powerful computing environment. In a recent study, 36% of Amazon Echo owners in the USA indicated to use the device regularly for shopping.

What we see now is an explosion of connected smart home devices in the US. There are smart locks, connected door bells, smart ovens, heck even a smart tooth brush. People are automating their homes themselves and they don’t need a bunch of money or a certified electrician to do so. Home owners can gradually upgrade their homes and for whom it’s still too complicated, Best Buy has launched a service that helps them  install and link together all these different devices.

The winners of this game are yet again Google, Amazon and the producers of Smart Home hardware. These companies are now collecting more data then ever about energy consumption, water usage or the general lifestyle of consumers.

My Amazon Echo is the center of my smart home setup. It knows when I switch on the light, at what temperature my thermostat is set and when the sprinklers in my garden will turn on. It’s the perfect stack of data for utility providers.

For companies in the energy market, it’s time to realize they will have to offer the consumer what he wants in order to get this data. It will enable them to make better predictions and steer consumption in order to shave off peak demand.

Some of them are already trying by offering smart thermostats or usage meters linked to a subscription. While the initial idea is good, the execution is completely wrong. Nest or Smappee don’t charge a monthly fee to keep their services running. Instead they earn money on the gathered data. In the same way, energy players should not charge money for these services, the benefits of the data far outweigh the costs of offering these platforms.

The best example? In the US, Tesla is working together with building contractors to build “smart neighborhoods”. The houses are packed with sensors, power packs and solar panels that provide insights in the energy usage of the people living there. The gathered data enables Tesla to know exactly how much power will be needed at a certain time and balance out demand and production. That alone saves a lot of money for the grid operator who doesn’t need expensive back-up power plants when demand can’t be met.

Energy producers are already sharing their production data with grid operators. Now it’s time for energy companies to wake up and start offering consumers something they want in exchange for valuable usage data that can radically decrease the costs for utility providers. Because, as is the case with many other sectors, data-munching giants like Google are after their lunch (and their breakfast and dinner, for that matter).