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This report has been prepared by UBS Securities LLC. ANALYST CERTIFICATION AND REQUIRED DISCLOSURES BEGIN ON PAGE 34. UBS does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.
Global Research 15 April 2019
North America Alternative Energy Expert Call: Smart home energy efficiency; slide deck & transcript
We hosted a call with Sense We hosted a call with Mike Phillips, CEO and co-founder or Sense. On the call we discussed the market for real-time home energy usage and energy efficiency tracking equipment, which has the potential to drive consumer acceptance and adoption of energy efficiency. The call was part of our ongoing UBS Expert Series conference calls which aim to deepen clients understanding of an industry or topic through presentations by and Q&A with industry experts.
Key takeaways from the presentation
The views expressed below are those of the speaker and do not necessarily reflect those of UBS.
Sense is a developer of smart home energy monitoring electronics. The Sense home
energy monitor installs on the electric panel of a home and uses machine learning
to distinguish the unique electronic signals of various appliances. Sense commenced
initial product sales in 2016 and is now scaling up.
Sense expects energy infrastructure to be digitized in the future. The utility meter
may no longer be needed if a home is already tracking and capturing energy use
information. The sense tracking device can be purchased for $299 with only simple
clip-on installation to the electric panel required.
Customers are primarily buying energy monitoring products (like Sense) today based
on a desire for energy awareness and control. Consumers are "bored" by energy,
but find value in more practical applications for energy monitoring. For example,
based on energy patterns, Sense can help indicate if a sump pump turns on/off or if
a garage door is opened. Sense integrates popups into the monitoring app to make
it more engaging.
Slide deck and transcript enclosed In this note we republish the slide deck from the call, courtesy of Sense. A transcript from our call follows the slide deck.
Equities
North America
Utilities
Jon Windham, CFA Analyst
[email protected] +1-617-478-4711
William Grippin, CFA Analyst
[email protected] +1-617-478 4740
Daniel Ford, CFA Analyst
[email protected] +1-212-713-2224
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April Energy Expert Conference Schedule
All calls hosted at 11am ET
Apr 11: Energy Leaders: Kinetic energy storage w/ Teraloop
Apr 15: Energy Leaders: Wireless EV charging w/ WiTricity
Apr 16: Energy Leaders: EV grid mgmt w/ eMotorWerks: https://bit.ly/2WdYmwn
Apr 25: Energy Expert: Climate change public opinion: https://bit.ly/2TXjn0C
Apr 26: Energy Expert: Clean energy portfolios w/ RMI: https://bit.ly/2Og9K8e
Apr 30: Energy Expert: U.S. solar market update w/ NREL: https://bit.ly/2TNuaeN
April Energy Expert Conference Call Details
Emerging Energy Leaders: Kinetic energy storage systems. Thursday, April 11, 2019 @ 11:00AM ET w/ Teraloop. On the call we discuss Teraloop's kinetic energy storage system. Teraloop develops grid-scale energy storage that can provide a future alternative to batteries.
Emerging Energy Leaders: Wireless EV charging systems. Monday, April 15, 2019 @ 11:00AM ET w/ WiTricity. On the call we discuss WiTricity's magnetic resonance charging technology which enables high-powered wireless charging over a distance.
Emerging Energy Leaders: Smart EV charging systems. Tuesday, April 16, 2019 @ 11:00AM ET w/ eMotorWerks. eMotorWerks provides valuable grid management services - such as demand response, frequency regulation, peak shaving, and local balancing that help utilities and ISOs better manage grid volatility and leverage accelerating EV adoption. Pre-register here for access code and calendar reminder.
Energy Expert: Building public and political will for climate action. Thursday, April 25, 2019 @ 11:00AM ET w/ The Yale Program on Climate Change Communication. On the call we will discuss Yale's work on scientific studies of public opinion and behavior to inform the decision making of governments, media, and companies on building public and political will for climate action. Pre-register here for access code and calendar reminder.
Energy Expert: The economics of clean energy portfolios. Friday, April 26,
2019 @ 11:00AM ET w/ Rocky Mountain Institute (RMI). On the call we will discuss RMI's analysis of innovation and cost declines in renewable energy and DER technologies, which finds that clean energy portfolios can often be procured at significant net cost savings, with lower risk and zero carbon and air emissions, compared to building a new gas plant. Pre-register here for access code and calendar reminder.
Energy Expert: Update on U.S. solar market. Tuesday, April 30, 2019 @ 11:00AM ET w/ National Renewable Energy Laboratory (NREL). NREL advances the science and engineering of energy efficiency, sustainable transportation, and renewable power technologies and provides the knowledge to integrate and optimize energy system. Join us for a discussion on the outlook for solar energy in the U.S. Pre-register here for access code and calendar reminder.
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Previous conference calls
Date Guest speakers Topic
29-Mar-19 eCarUp EV charging
28-Mar-19 HASI Behind the meter opportunity
22-Mar-19 SEPA Transactive energy systems
21-Mar-19 NEC Energy Storage Lithium ion battery storage
20-Mar-19 Evgo EV fast charging
15-Mar-19 IATA Airline climate change impacts
14-Mar-19 SEDG Deep dive on diversification strategy
8-Mar-19 RMI Economics of zero energy homes
5-Mar-19 EOS Storage Lithium ion battery alternatives
28-Feb-19 American Wind Distributed wind power
27-Feb-19 Fabriq Energy efficiency
26-Feb-19 EPA 4th National Climate Assessment
25-Feb-19 EIA 2019 Annual Energy Outlook
20-Feb-19 CorPower Ocean Wave energy
12-Feb-19 IRENA Geopolitics of the energy transition
22-Jan-19 NREL Electrifying the US energy system
22-Jan-19 UBS Analyst 4Q18 earnings preview
9-Jan-19 Rocky Mountain Institute Corporate demand for renewables
8-Jan-19 Ampion Community solar
4-Jan-19 UBS Global Analyst China Recycling restrictions
19-Dec-18 UN working group on climate change Global warming mitigation & impacts
13-Dec-18 UBS Analyst US demand for new generation capacity
13-Dec-18 Ascend Analytics Economics of grid battery storage
7-Dec-18 American Wind Energy Association 2019 US wind outlook & trends
6-Dec-18 RSG management Talent Management
3-Dec-18 WM management Volume outlook
30-Nov-18 DNVGL Energy outlook to 2050
29-Nov-18 Momentum Dynamics High powered wireless EV charging
28-Nov-18 Ferroamp Smart home energy devices
20-Nov-18 Smart Electric Power Alliance Trends in U.S. battery storage market
16-Nov-18 Ice Energy Ice storage for peak load reduction
9-Nov-18 PolyJoule Innovative mass market battery storage
2-Nov-18 Bureau of Ocean Energy Management U.S. offshore wind market
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Source: Company reports
Takeaway notes from previous expert calls Energy Storage
• The economics of grid storage w/ Ascend Analytics: https://neo.ubs.com/shared/d2FLtB983KnZWR
Date Guest speakers Topic
26-Oct-18 Sunnova Largest private residential solar company
22-Oct-18 UBS Global Analyst Global renewable energy trends
18-Oct-18 Lawrence Berkeley Nat'l Labs Trends in the US wind & solar markets
18-Oct-18 UBS Analyst 3Q18 earnings preview, Utility & Alt. Energy
16-Oct-18 Highview Power Liquid air energy storage technology
12-Oct-18 American Wind Energy Association US wind market Q&A
11-Oct-18 SolarReserve Solar & integrated storage developer
10-Oct-18 Ecogy Solar Distributed solar developer
9-Oct-18 ReThink X EV impacts on global energy systems
5-Oct-18 HEVO Wireless EV charging
4-Oct-18 UET Grid scale flow batteries
25-Sep-18 Tolvik UK & Ireland Waste-to-Energy outlook
19-Sep-18 WCN management Focus on MSW pricing strategy
18-Sep-18 CWST management New England waste market dynamics
17-Sep-18 ORA management Long-term growth strategy
13-Sep-18 ESS Inc. Grid scale flow batteries
12-Sep-18 NREL US solar & storage markets
10-Sep-18 ADSW management Market selection strategy
6-Sep-18 Sense Smart home energy devices
28-Aug-18 Ionic Materials High performance battery materials
22-Aug-18 Halo Energy Distributed wind generation OEM
21-Aug-18 UBS Global Analyst China Recycling restrictions
20-Aug-18 Sistine Solar Solar module aesthetics
16-Aug-18 Trident Winds CA floating offshore wind developer
13-Aug-18 UBS Global Analyst EU wind OEM's sector launch
19-Jul-18 UBS Global Analyst Trade war implications
11-Jul-18 American Wind Energy Association US wind market
26-Jun-18 Smart Electric Power Alliance US solar market
7-Jun-18 UBS Global Analyst Global renewables outlook
4-Jun-18 UBS Global Analyst China Recycling restrictions
24-May-18 UBS Analyst Implications of CA solar mandates
7-May-18 Smart Electric Power Alliance Utility integration of Electric Vehicles
27-Apr-18 UBS Analyst Offshore wind outlook
28-Mar-18 IRENA US energy storage market
North America Alternative Energy 15 April 2019
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• The US storage market w/ SEPA: https://neo.ubs.com/shared/d2bSeJ6punOrD
• Iron flow batteries w/ ESS: https://neo.ubs.com/shared/d2sGo6VgazIFb
• Vanadium flow batteries w/ UET: https://neo.ubs.com/shared/d2uY7Z5yckLFw
• Liquid air energy storage w/ Highview Power: https://neo.ubs.com/shared/d2ZGh0AaNVyi0
• Potentially disruptive battery tech w/ Ionic Materials: https://neo.ubs.com/shared/d2akXwlZCkHu0
Wind, solar and other renewable generation
• Economic competitiveness of US wind & solar w/ Lawrence Berkley Labs: https://neo.ubs.com/shared/d2IPSBHgNXYYb5E
• Off-shore wind w/ BOEM: https://neo.ubs.com/shared/d26joxwgtkYwBGE
• Distributed wind generation w/ American Wind: https://neo.ubs.com/shared/d2AaP5q4e4
• The outlook for US wind demand w/ AWEA: https://neo.ubs.com/shared/d2sbmS2HFri
• Outlook for UK waste-to-energy w/ Tolvik: https://neo.ubs.com/shared/d2tWpNn6TBE9
The Energy Transition
• Evolving US energy system w/ NREL: https://neo.ubs.com/shared/d2PzlHeFOcRG
• Long-term forecast for energy transition w/ DNVGL: https://neo.ubs.com/shared/d2wjtEiXp8
• 2019 Annual Energy Outlook w/ EIA: https://neo.ubs.com/shared/d2BgQsF3Hd
• The geopolitics of the energy transition w/ IRENA: https://neo.ubs.com/shared/d2yidFdfDH
• Corporate renewable demand w/ RMI: https://neo.ubs.com/shared/d2Pj2kqv0bmtfZ
• Aviation industry climate change strategy w/ IATA: https://neo.ubs.com/shared/d2KbkO4w0JJyBb
Electric Vehicle Charging
• The bull case for EV penetration w/ ReThinkX: https://neo.ubs.com/shared/d2TkyGrnCePgb
• Wireless EV charging w/ Momentum Dynamics: https://neo.ubs.com/shared/d20z36F5nxNxAuQ
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Climate Change
• Chair of UN panel on climate change: https://neo.ubs.com/shared/d2em2kVbTRZE
• EPA climate assessment: https://neo.ubs.com/shared/d2RlCKua71
Management calls
• Solaredge (SEDG) – Diversification strategy: https://neo.ubs.com/shared/d2GxE4SZer
• Waste Connections (WCN) – Pricing strategy: https://neo.ubs.com/shared/d2bsZ3CsvTEh
• Waste Management (WM) – Volume outlook: https://neo.ubs.com/shared/d21HHte0fvP
• Republic Services (RSG) – Talent retention: https://neo.ubs.com/shared/d25qy0KP19nqr
• Advanced Disposal (ADSW) – Market selection: https://neo.ubs.com/shared/d2JAe5z2lM7y
• Casella Waste (CWST) – Northeast waste market: https://neo.ubs.com/shared/d2cfGRZN9VYV4
This presentation was produced solely by Sense. The opinions expressed herein do not necessarily reflect the views and opinions of UBS. UBS accepts no responsibility for the accuracy, reliability or completeness of the information and will not be liable either directly or indirectly for any loss or damage arising out of the use of this presentation or part thereof.
Reproduced with permission.
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Figure 1: Slide 1
Source: SENSE
Figure 2: Slide 2
Source: SENSE
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Figure 3: Slide 3
Source: SENSE
Figure 4: Slide 4
Source: SENSE
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Figure 5: Slide 5
Source: SENSE
Figure 6: Slide 6
Source: SENSE
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Figure 7: Slide 7
Source: SENSE
Figure 8: Slide 8
Source: SENSE
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Figure 9: Slide 9
Source: SENSE
Figure 10: Slide 10
Source: SENSE
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Figure 11: Slide 11
Source: SENSE
Figure 12: Slide 12
Source: SENSE
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Figure 13: Slide 13
Source: SENSE
We present below a transcript of our recent call with Mike Phillips of Sense. We have edited the transcript below for clarity. Minor grammatical changes that do not impact the meaning of content have been made. The opinions expressed by Mike herein do not necessarily reflect the views and opinions of UBS. UBS accepts no responsibility for the accuracy, reliability or completeness of the information and will not be liable either directly or indirectly for any loss or damage arising out of the use of this information or any part thereof.
UBS
Moderator: Jon Windham
September 6, 2018
1:00 PM ET
Jon Welcome, everybody, to the UBS Emerging Energy Leaders Call Series. This is Jon Windham, I head up the Alternative Energy and Environmental Services Equity Research for UBS. Today, we’re excited to host Mike Phillips, the CEO and Co-Founder of Sense, as the fifth installment of our ongoing UBS Emerging Energy Leaders Call Series.
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In this call series we are covering a wide spectrum of private companies in sectors including alternative energy generation, storage, smart home, to name just a few of the topics. Today’s call will feature Sense and their home energy monitoring solution. The format of the call will be a presentation by Sense followed by Q&A. Vonda will provide instructions on logging any questions after the presentation.
First, just a bit of logistics. There are slides to accompany today’s discussion that were sent out about 15 minutes ago to everyone who had pre-registered for the call. If you need a copy of those slides, please email either myself or William Grippin, and that’s [email protected].
I’d like to welcome to the call Mike Phillips, the CEO and Co-Founder of Sense. Mike, thank you for being here today. The floor is yours.
Mike Thank you very much, Jon, and thank you all for joining. I hope you all have the presentation. I wanted to start with a broad overview around energy and homes, and smart home technologies.
If you look at page 2 of the deck, called “Energy Use in the Home is Evolving,” we are seeing many general consumer-driven trends around people getting solar panels for their roofs, getting electric cars, to some degree starting to get storage systems, and then a variety of smart home devices like I show here, connected thermostats, smart speakers, and of course Sense there, you see on the right. The numbers are starting to get very interesting, on the smart home side especially. There are something like 15 million connected thermostats in the US now, and almost 20 million smart speakers that people are using.
Our view is all of these things are starting to influence how people think about and use energy in their homes, and this is having a very big impact, and will have ongoing impact for everyone in the sector, including especially utilities. You may be seeing that there’s a lot of activity with things being driven, including with increased carbon reduction goals and so on in California, goals that just came out, which is causing things like time-of-use rates, that are very important for utilities to have more control over when people use energy.
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This is of course having a big impact on consumers about starting to have to think about energy in ways that they never did before. So each of these things that I show here on the slide have opportunities both to hurt and help the situation around more flexible use of energy in homes.
If you look at the next slide, slide 3, it is our view, though, that the energy infrastructure itself just has not kept up with the needs of this increasing consumer awareness and intelligence of what needs to happen in homes. In particular, there’s still this dichotomy between utility meters, so smart meters that, frankly, are not terribly smart. They’re connected, they provide remote meter readings, but aren’t doing very consumer-oriented things for the end users.
Then everything else is considered behind the meter from the utility perspective, and this means when you want to add solar, or you want to add battery, or even add an EV, you typically have to have an electrician come to your house and rearrange the equipment in your house to handle that. By the way, that’s our little orange box in the lower middle there. We are having to put our hardware in, we have to have our own retrofit hardware that sits into this energy infrastructure.
We do think that this is going to change long term, so if you look at slide 4, we do have more of an abstract view that from a future perspective what is really needed here is if you want solar, here’s how you plug it in. If you want an electric vehicle, here’s how you plug it in. You want storage, here’s how you plug it in. All of this needs to be driven behind the scenes with intelligence about when energy gets used, what it costs you, how to interact with both consumer-facing services, which is shown here in this chart, and utility services have to co-exist in good ways.
Now, how that actually gets mapped in the infrastructure, whether it remains utility-provided meters and then everything else on the consumer side, or this starts to merge with the consumer infrastructure that gets smarter over time, and at some point maybe you don’t need a meter anymore because if the electrical system in the home already knows where energy’s being used, why do you need a separate meter coming from your utility to do
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that? Our role, just to be clear, is not in defining this full energy infrastructure, but we are really going after the intelligence part inside of that, and I’ll show you how in just a few slides.
We do think actually this is fairly analogous to what happened in telecom years ago. In fact, our backgrounds are from the telecom world, where 15 years ago a phone was just a phone that you got from the phone company. If you wanted some other service, like a navigation system, or a music player, you’d have to go buy some separate piece of hardware and make use of it.
Then the evolution is the platform itself evolved such that you could get a phone from your carrier, or you can get your own phone and bring your own phone to hook into a carrier network, so either a consumer-driven side or a carrier/utility in this world-driven side. The infrastructure can run both making phone calls and text messaging, so carrier stuff, and consumer-facing applications, a very wide range of them can run on that same infrastructure.
We think the same can and should happen in the energy infrastructure over time, probably not to the extent that there would be an app store for your utility meter that lets you download a million different applications, but architecturally the infrastructure itself should become digitized, and smart, and then a variety of services can run on that using that type of architecture.
This is not only us thinking this, in fact, if you look at slide 5 that we call “Market Context,” everyone is talking about this sort of thing. I don’t know if you saw, there’s a Bloomberg new energy finance group had a nice report about digitization of energy infrastructure. It was a pretty good overview of this. If you look at each of the major providers of energy infrastructure shown here, they’re talking about their future is digital. Upper-right in that picture is actually an article written by us about how we think utility meters can and should evolve to be able to run a variety of services.
So, that is the future in which we think we are heading collectively as an industry, and again, the role that we want to play at Sense is data-driven intelligence inside of that.
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Let me now switch to what we actually do today, so if you go to slide 6, talking about our current product, Sense Intelligence for the Home. Normally, at this point in a presentation I would try to give a live demo, because this stuff is a little hard to explain but very easy to understand once you see it live. But let me try to describe.
If you look at the screen shot there on the right, basically we have applications that live on your phone, so look at any place in the world, you can take out your phone, quickly open up an application, and see in real-time right now what’s happening in your home. There’s definitely an energy aspect to it, so there’s a real-time energy number that is changing on the half-second level, so you see exactly how much energy you’re using right now. So if you are in your home you can run around the house and turn on the microwave and the toaster and see the energy view of that. If you have solar, there’s also a real-time production of solar.
There’s definitely an energy aspect to this, but one thing that’s important to know from a consumer-facing view, consumer engagement view, energy is kind of boring for most consumers. So what we’re finding is that engagement’s actually driven, not so much from that energy view, but what we can derive from it.
What we’re deriving from it is this detailed view of what’s on and off at this point in time, and we do it in kind of a fun way. If the garage door opens, a little bubble pops up on the screen in real-time, showing what the garage door is doing; if the washing machine is going, you actually see this bubble getting bigger and smaller as the clothes slosh around in the washing machine. So it’s a fun, engaging interface.
The app shows an infinitely scrollable timeline of things that have happened in your house. You can see when the vacuum cleaner ran. You can see when the microwave turned on. You can see when the garage door closed. You can see when the oven turned off. People use this for a wide variety of applications or services for themselves, which is, did the kids get home from school yet, did I leave the oven on, is my sump pump running when it’s raining, because if not my basement’s going to flood.
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Again, this real-time and historical view of what’s going on in your home is the main intelligence and consumer-facing functionality we’re providing today, but you’ll see that we aspire to do more than that over time.
Let me now shift to how this works. If you go to the next slide, slide 7. Part 1 is, how do we know what these different devices are doing? We are not relying on smart devices. If, over time, all devices get connected and have an interface, we’re happy to tap into that, but for the most part that’s not true today.
Instead, we’re making use of the fact that different devices in your home use power in slightly different ways. When your toaster turns on, it’s a resistive load, so the current is exactly phased to align with the voltage and it’s pretty steady-state. Incandescent light is the same way, except incandescent light, the tungsten heats up very quickly and the resistance goes up as the temperature goes up, so we see this exponential decay of current at the startup of an incandescent light. A refrigerator has an inductive motor, so the currents phase offset from the voltage.
I’m telling you all these little details because it is these very, very detailed view of power that allows us to see what different things are doing in the home and the characteristics of them.
The way that happens, if you look again at slide 7, “How Does Sense Work?” It is a separate hardware device. As I mentioned previously, we’d love for the utility meter or the main panel on your house to give us enough data, but it doesn’t today, so our own little hardware goes in the consumer’s electrical panel. It measures power just with these little clips that clip around the main wires, and we plug into a breaker to power our box.
This is normal energy monitor stuff, but the thing that’s not normal is we’re measuring at a million samples per second. The utility meter sends data once every 15 minutes, we’re measuring power at a million times a second, which I know sounds extreme, but the reason we do that it is this very, very detailed view of power that allows us to pick these things apart, and you really do need extremely high resolution to figure out the
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differences between devices. So that then is combined with the middle of that picture, which is machine learning, which is signal processing, data science, machine learning to figure out the signatures of devices.
I should mention that our backgrounds are from speech recognition, so we’re making use of a huge body of work that’s been done in speech recognition in the past. We’re applying it to these power signals in a somewhat different way, because it’s like doing speech recognition with 30 people all talking at the same time, because the power we’re measuring is the signals of all the devices working at once, or all the devices that are on, in any case.
Then importantly, there’s a network effect. When we first were deploying these a couple of years ago, it was very hard to deploy them because the only way to make this work well was to have good models, and the only way to have a good model is to have lots of data, and the only way to get the data is to deploy these in the field. Unlike some other machine learning areas where there are existing data sources, here there were no existing data sources at this detailed power level.
But we are now in the virtual cycle part of that. We are currently collecting, we just crossed 1 TB of data per day flowing into our servers across our deployments of detailed energy data. That’s allowing us to increasingly have a view about what different devices are, how they turn on and off, and how they operate in normal modes, and even in failure modes, because we think that’s actually another important part of what we can be doing over time.
In fact, that’s a good transition to the next slide, “Smart Home Use Cases,” to now answer the question of okay, so what? We can now have a detailed real-time view of power, and start to tell what devices are doing, why does anyone care about that? It does fall into these four categories, and by the way, this matches in general the promise of the smart home.
If you look at IoT and smart home, those value propositions fall into here also, but we have a special angle on this because of the breadth of what we see. The areas of value are certainly in energy awareness and
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control. In fact, we’re seeing, through some of our work with utilities to get real energy savings by having these in people’s homes from an efficiency standpoint, and now increasingly important is giving consumers awareness of when power is being used, and how to alter their behavior to save money when they’re faced with complicated time-of-use plans, where there’s not a single price for power, but it really depends on when and how much power you’re using in a dynamic way. So we’re increasingly building an intelligence to give consumers visibility to that.
The top-right of this picture, Home Awareness, is, as I mentioned, what we’re finding today is the primary driver of a consumer engagement for us. In fact, what we’re seeing from the market is people are primarily buying our product today based on some notion of energy awareness and control, but then they stick with it based on this broader notion of awareness because the energy stuff gets boring over time. So we are very much leveraging that from a customer engagement perspective.
Down at the bottom two pictures there, the bottom-left is around security and safety, and by security we don’t mean versus burglars, we mean versus something bad happening in your house. Can we—and we can—detect things like an arc fault in your wall that might cause your house to catch on fire, or somewhat less drastically, that your air conditioner tries to start five times because of a failing capacitor, and then finally starts. You, as a consumer don’t know that until it fails completely, and then it’s an expensive repair instead of a cheap, quick repair.
So being able to diagnose problems and have peace of mind that things are working correctly in your house, we think is an important chunk of value.
Then finally on the bottom-right, again, the overall promise of smart home is around control and automation. In fact, if you go to the next slide then, so slide 9, “Consumer Benefits,” our view of smart home is most of the IoT world has started from the control side, so connected light switches, connected thermostats, connected EV chargers and so on, and because they’re starting from that side they’re necessarily focusing on vertical use cases.
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We are coming from the other side, so the broad-based sensing of where we can see not only what the connected things are doing, but all the unconnected or so-called “dumb” appliances in your house, we can see what they’re doing as long as they’re connected to the electrical system and have a discernible electrical signature. It’s our view that to really make automation work well you need this broad-based intelligence, and the only way to drive that is you need data from the home.
So think of what we are doing as complementary to what most of the IoT world is doing, and in fact we’re starting to now connect into those things. In fact, we just announced a relationship with Philips Hue lighting, where if you have both Philips Hue lights in your home and Sense in your home, they can connect to each other and provide a broader view of what’s going on in your home, and you can control the Hue lights from your Sense application. But that’s going to start to expand to thermostats, EV chargers, and so on to more fully realize the vision of a truly connected and intelligent home.
Just a couple more slides here, and then I’m happy to answer questions. I mentioned a while ago about consumer traction and consumer engagement, slide 10 is just the proof points around that. We’re seeing very positive consumer traction numbers and consumer engagement numbers. We measure both weekly actives and monthly actives, so weekly active means did you open the app at least once in a week.
The graph on the upper-right there is a really important one to look at, it’s how that varies over time. It’s the case for all applications that when you start with them people are engaged and play with them a bit, but over time then they decline to some steady state. Most energy-related applications decline very drastically, down to a very small usage base.
What you see here is, yes, we decline like all applications too, but asymptotes to around 50% weekly active, so about 50% of the users, even a year after install, are still opening the application on a weekly basis, or in a given week they are opening the application; the monthly actives after a year are 75%. The number of app opens per week after a year is about 12, so almost twice per day.
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Again, it’s our view that people are—they are doing this based not only on an energy view, so when Jon introduced us as an energy monitor, we think the category of energy monitor probably doesn’t exist in a long term way. We think the category is more home intelligence because you need this broader notion of home intelligence to drive consumer engagement, and that’s what we’re seeing in this graph here.
Just two more slides. One is, we are working with utilities because we do see that utilities are an important channel to market for us, especially since we think utility meters are a good hardware platform on which we should be able to run our software over time. We’re doing quite a bit with utilities around energy efficiency, demand response, things like these time-of-use rates, improving operational efficiency, helping with high bill complaints, and so on.
Then final slide, and then I’m happy to answer questions, is just consumer stories or customer stories. I think this is an important time to point out one of our challenges, by the way, which is the thing that we’re going after is a broad notion of intelligence for the home, and that by its nature does not have a single use case. As you can imagine, marketing and selling a single use case to consumers is a pretty clear thing to do. Getting consumers used to this notion that they can have a broad view of what’s going on in their home, and that that has many, many different use cases is the marketing challenge that we are working on and making good traction with.
We’re really driving that by seeing what the consumers do. We pay a lot of attention to what consumers are doing with this, and what we find is it really is a broad set of things, some of them very energy-related, saving money on energy, but increasingly we’re seeing people using this for detecting something going wrong in their house. Then over time, we are taking those particular things and building intelligence above the low-level stuff to help them do that in a good way.
Maybe, Jon, it’s best if I pause there, and I am happy to answer questions.
Jon Okay, great. Thanks, Mike. Vonda, can you give instructions for participants on how to log a question, and
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then after you do that I’ll probably kick it off with a couple.
Coordinator Of course. [Operator instructions].
Jon Okay, great. Mike, maybe I’ll get it started. I have a couple topics I wanted to cover, and one’s on the customer experience side, particularly a place like California is going to time-of-use rates. Is the idea here that the Sense application on the phone, that you sort of have to figure out how you could save money, or would it make specific recommendations to you, like instead of starting your dishwasher at 8 p.m., start it before you go to bed at 12, and you’ll save X over the course of a month? How does it work from the customer side on driving savings?
Mike Yes, great question. So far we’ve been focusing on getting the basics right in the application, so getting device detection working, getting training working, and giving the consumers a usable and engaging view into things. You are right, that means that to derive value consumers have to figure out how best to use the information we’re providing to help them do those things. You are very much asking a question which leads to where we are heading, which is, we are now building intelligence up on top of the core to help people do specific things.
It certainly includes energy efficiency, so it includes things like detecting that you have an inefficient air conditioner and giving you recommendations about what to do about it. It includes this notion about fault detection, seeing that there’s something wrong with your refrigerator, and it may fail soon. You might like to know that before the food goes bad in your fridge.
We’ll include things like time-of-use rates, of how to compare. Many places now there are multiple choices that the consumer has about which plan to use. We could look at historical data, because we have detailed historical data of how you use energy to help you select which plan to use, then give you appropriate feedback during the day about how you could save energy and save dollars in these time-of-use cases, and then ultimately to even automate that for you.
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The long term is consumers shouldn’t have to worry about any of this. The consumer should be able to potentially pick some trade-off between comfort and cost savings, and then let the system negotiate with the utility and control the thermostat, and the water heater, and whatnot to help you have the best comfort for the least cost.
Jon Great. I’ll ask a sales channel question in a direct way. How do I buy this?
Mike Very easy right now. You can get it on our website, Sense.com, or on Amazon, we’re selling on both of those places. We have, on purpose, started in a direct to consumer way so that we can really focus the company on the needs of the end consumer first, to get the value proposition right.
Now, with all that said, we think long term this doesn’t get to market at large scale as a retrofit, consumer go out and find and buy one of these things, and get it installed in an electrical panel. It’s our view that this kind of intelligence should be in all houses, and that only happens once it’s built into the infrastructure. This is why we’re very excited about figuring out how to work with people like electrical panel makers and utility meter makers to make the core infrastructure have not necessarily us built in, but have computation built in, and the digital sampling built in, and then let us and our competitors be able to run that software in these environments.
Again, this is analogous to what happened in telecom, where it used to be a monolithic platform, became a more open platform where then there’s a competitive environment for what’s the best navigation system, what’s the best music player, what’s the best video stuff. That’s where we think this needs to go, and then we want to very much compete in the provider of energy-related intelligence for consumers and the interaction around that.
Jon Got it. And maybe a last question from me and we’ll turn it over to see if there are questions from the audience. I certainly have a few more, but we’ll give participants an opportunity. Longer term, is part of the business model and the way you guys are thinking about it, there’s just absolute value also in the data set itself, and who do you think that would be valuable to?
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Mike Yes, we do think, again long term, that this kind of functionality should end up being just free for consumers. It should be expected that you get this along with your energy system, or is built into your house. Then for us, monetization should come from how do we leverage that to help the consumer in ways.
So an important point to make, and I just want to be clear, is you need to choose are you going to be on the side of the consumer in that data equation. We very much decided to stay on the consumer-friendly side of that. We’re not looking to how do we use the data to spam the consumers with things, but within the context of consumers opting in, or getting value out of it, we think there’s a big range of ways that the data and the consumer relationship becomes important.
For example, in home service plans, if you want someone to be able to take care of all the equipment in your house and take care of it before it breaks, that should be a service. The consumer would pay for that service, and then we should get paid for the data part of that.
Insurance companies, people who write homeowner insurance are doing it based on not a lot of data about what happens in homes. Cars, they actually have a lot of data about from the RMV, or if you opt-in to data sharing through one of these port things that happen in the car, you can have really detailed data about cars, but you just don’t have that data for homes. So insurance companies could use this kind of data for risk assessment and risk reduction that has benefits for the consumer and the insurance provider.
Again, that fits nicely in a consumer opting-in to some sort of data sharing in exchange for a service or a rebate, or something like that. Then of course in the utility world, utilities increasingly need consumers to do things. They need them to be more efficient, and they need them to have better control over the timing of when they use energy. Again, consumers should be able to opt-in to programs where they get reduced rates or get paid in exchange for sharing data interaction to help them use energy in better ways.
Jon Great. Vonda, questions from the audience?
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Coordinator Yes, sir. We have one question, which is coming from the line of William Grippin. Please proceed.
William My question was just around, it seems like the Sense product would be a nice complement to a residential solar product from the likes of a Sunrun, to help the consumer better match the energy generated with their consumption, or at least just track it and understanding that dynamic. Is there any opportunity for you guys to partner with a company like that to get these in the hands of more consumers?
Mike Great point. We had the same realization early on, in fact, we have functionality built into the application to explicitly handle simultaneous solar production along with seeing consumption together in the application. So there’s an extra option with our product where there’s another set of sensors that plug into the solar feed.
We are working with a number of solar installers, where some of them are starting to make use of Sense as just part of their overall system, to give better view for the consumers, you’re talking about better system planning up front, better tracking of what happens after the solar gets installed, what happens to the bill. Did it go down to what you were expecting it to, and if not, did consumption increase? Did solar production not meet the target?
So, yes, very much we think that there is a very nice synergy there and we are spending quite a bit of time with solar installers and the end consumers on that.
William So, it sounds like there’s a lot of integration, a lot of information that’s available. Is there any opportunity or way to be involved in the automation of the decision making to reduce energy usage on one device or another, or is that more in the scope of a smart device?
Mike We are certainly spending quite a bit of our effort on this whole energy awareness topic. And it’s probably from an efficiency standpoint where we have data about how these actual products work in the field, and that can be helpful
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feedback back to the manufacturers, or the regulatory bodies that try to set efficiency standards and so on.
We just did some interesting work around DVR boxes, and the power that they use, when they’re supposedly in off mode. A hint is they use way more than you think that they might when they seem to be off. And feeding to consumers about—efficiency really is some things that consumers can do something about. Don’t leave their AC fan on all the time, or don’t leave the dehumidifier running when they don’t need it, don’t leave the roof coils to melt the ice on the roof when you don’t need that.
So there’s some consumer parts of it. There’s some monitoring of equipment to make sure it’s working as expected. ACs, they degrade over time, for a variety of reasons, and typically the homeowner doesn’t know about it until it fails completely. There’s quite a long tail between when your AC is new and working well, and when it fails completely, you know about it, and in between there there’s quite a gap of where it’s working but not efficiently, that if you or the service provider working on your behalf knew about it, you could make things work more efficiently.
The automation part tends to come in more for timing of when energy gets used. A very relevant example that’s going to become increasingly important is as people get more and more electric vehicles, from the utility standpoint, if everyone gets electric vehicles and gets home and plugs them in at 6:00 p.m., and the interfaces charge now, that’s going to be a huge, huge problem for utilities because they’re not going to be in a position that they can tell you that you can’t have an electric vehicle because my substation is maxed out, and the cost of increasing the peak capacity is huge.
The solution is, consumers don’t really care when their car gets charged, they just need it to go far enough tomorrow, so there really should be automation running on the behalf of the consumer that interacts with pricing signals, or whatever, from the utility to make good decisions about when to charge the car, when to heat the water, when to cool the house.
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Some of that’s being done already through thermostats and whatnot, but the opportunity is to do it in a bigger, more holistic way. That’s where our broader view of what else is happening in the house has some value beyond just a connected thermostat by itself.
William Great. Thank you very much.
Jon Thanks. Maybe piggybacking on your last comment there, I actually got two questions e-mailed to me. One of them I think fits into your last comment. The question is, “How do the economics for Sense differ from when they have a home equipped with smart meters versus one which is not?”
Mike We do view that the future is increasing numbers of connected devices, so we’re spending a bunch of our time on integrations, so making our products talk to other products. And, by the way, one of the problems we have, and this is a little bit of a technical detail, is there’s no broad-based standards that lets us do that once. We really have to be doing specific integrations with specific other connected devices to make these things work nicely together.
We did just announce and release an integration with Philips Hue Lighting, but that’s the first of many. We’re working on some thermostat integrations. We’re working on some connected plug integration. We’re working on connected EV integrations. So these things are coming over time, and we think the benefits are clear.
As far as the economics, these things are all separate hardware products that the consumer is buying, and the key is to make them work well once they bought them. We think over time it starts to become the default that devices get connected and smart versus having to make an explicit decision about I’m going to buy a separate thermostat versus what just came with my HVAC system. So we do see that over time this just becomes default in people’s homes.
This is where even things like could Sense functionality be built into a main panel of a house or something like that starts to be very compelling, as this is how my home is
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getting smarter. Energy coming to the house is a key access point and a key resource coming in, and we’re sort of at that bridge between energy and a big expense for you and the rest of the smart home stuff. We think it’s an important place to be, and where utilities and electrical equipment makers and others can play along with us.
Jon Got it. Another group of questions from a topic I wanted to get into. Can you provide any information on where you are in terms of number of units shipped in terms of penetration? And then also is there any information within that, like a specific geography, say California, where sales tend to be going to, more or less? Any comments about where are you on the go to market.
Mike I don’t want to provide completely specific numbers. But I can tell you that we’re selling now in the tens of thousands of these per year versus—we were first selling them in 2016 and on purpose selling a very small number so we can start to get that data loop going that I mentioned, but we’re now in the scaling up phase and crossing the tens of thousands of devices.
We do view that as still very much the beginning of an early market for these things. If you look at the trajectory of thermostats, and connected lighting, and connected doorbells, and so on, they’re quite a bit further along, and we think this type of broad-based intelligence should be the next step in that growth.
Jon Then following on that, IP protection, who do you see as your competitors within this? Is there someone else who has a similar type product, or is this pretty unique in the market right now?
Mike I think one thing I may not have mentioned enough of is the underlying technology for this is actually extremely difficult. We find it to be as difficult as speech recognition. As I mentioned, that’s where our backgrounds are.
The thing you may not know is, there were literally a couple thousand people working for 30 years to make speech recognition go from early lab systems that we had 30 years ago to things like Siri, and Google Home, and
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stuff today, which still are not perfect, but a huge investment of resources there. There has not been nearly that level of investment in this how do we use detailed data about power signals.
So don’t worry, we don’t have to do that again because we are able to make use of a big body of knowledge there, but the level of difficulty is quite a bit higher than we had anticipated, which is a good thing from our point of view because then it becomes a very big barrier of entry. So we think we’re passing the phase where it’s going to be easy for there to be a lot of entrants competing.
Obviously, the big players, if they get serious about this, can put infinite resources into things like this and find ways to make progress, but we think we’re pretty differentiated in the market today in terms of the level of ambition that we put into this and we think we can remain so for a while. Even if a big player does put a lot of resources into it there’s a time component based on that data loop that I mentioned, that it just takes a while to get enough data flowing.
Jon Yes, I hear you on speech recognition not being perfect yet as well. I have a four-year-old that gets in regular arguments with Alexa.
Mike Yes.
Jon One of the avenues, as you were talking I was thinking how the data set could evolve over time and what you could do with it. One of the things that crossed my mind was Volkswagen. Volkswagen, when you put the car in the lab it will tell you has this much emissions, but in the real world could be very different. I suspect there’s a lot of that similar in whatever the energy rating is on your dishwasher or fridge, and I think you alluded to this before.
How granular or how specific is the signature, meaning do you think over the course of time you could not just identify this is your dishwasher running, is you probably have a Maytag dishwasher from two years ago or four years ago, or hey, listen, here’s one of the recommendations, you should go buy a new dishwasher or
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a new dryer? Am I thinking about this in the right way as to where this could evolve?
Mike Yes, you absolutely are. We actually do see a pretty vast amount of detail about how these appliances are working. We see things like the rotation speed of the spin cycle of a washing machine. We can even see in a dishwasher, when the water’s draining at the end of the drain cycle we can see the water starting to gurgle because the load on the pump changes.
To the extent that the devices have enough complexity in them, we can tell make and model, so things like a dishwasher does have usually enough complexity that we can tell that. Something like a toaster we can’t, because they’re all just these resistive heating elements that turn on with some variability of wattage, but we probably can’t go down to the make and model.
So depending on the device we can see the detailed operating characteristics, we can see, to some degree, the make and the model. And you’re right, using that kind of in field data of how these things actually operate to help manufacturers, help regulatory bodies make sure that these things are working as they’re expected, and give consumers great feedback about how these things operate in the field and how efficient they actually are, is a role that we think we can play.
Jon Great. Vonda, one more opportunity if there’s any questions on the line.
Coordinator There’s no questions in the queue.
Jon Maybe I’ll ask one last one that I was wondering, and I don’t know how much granularity you can provide on this. It’s obviously direct to consumer now, but there’s obviously a lot of different sales channels you could go down with partnering with someone like Itron or Sunrun, or someone who just recently did a home renovation, the people that do in-house speakers and lighting controls, this would seem an obvious channel.
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Do you want to talk a little bit about if you’re going to go down those avenues, is it something in like 6 or 12 months, or is it longer term, you’re feeling good about the direct to consumer right now? If you could talk a little bit more about timing that would be interesting.
Mike We are absolutely pursuing channel partnerships today. We have a number of them in various stages of development. Yes, you’ll start to see some increasing announcements about those from us over time. But we do fundamentally believe that there’s a big picture here of the ways in which homes should be intelligent, and we think we have an important role to play there, but we don’t think that we do that all by ourselves.
So working with solar installers is a great thing from our point of view. Working with storage providers, working with electrical equipment makers, and infrastructure of the home, working with utility meters are all things that we are actively pursuing and very open to such partnerships.
And utilities, by the way, I should have also mentioned utilities is a very important one to us.
Jon Okay. Great. I’m going to have to get one of these.
Mike Okay, sounds good.
Jon Thank you, Mike, and thank you to all the investors for joining the call.
Just a couple notes here, as we’re reaching close to the top of the hour. The next UBS Emerging Energy Leaders Call is Thursday, September 13th at 1:00 p.m. with ESS, which has a long-duration storage product, so please join us next Thursday.
For those interested, we are also hosting a management call with a municipal solid waste company, Advanced Disposal, on Monday next week, to dive into their market selection thought process. We’re also having an Energy Expert Call with NREL on the state of the US solar market on Wednesday of next week. Please reach out to myself or Will Grippin for details on those calls.
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Mike, with that, I’ll turn it over to you for the last word.
Mike Thank you very much for having me on the call, and thank you all for listening. If there’s interests or topics that you want to discuss, please reach out. I’m easy to reach. I’m [email protected]. I don’t know if that’s included in the materials that Jon provided, but please reach out if it makes sense to discuss any of this in more detail.
Jon Thanks, Mike. Thanks, everybody.
Mike Thanks, everybody.
Coordinator Ladies and gentlemen, that concludes your conference call for today. You may now disconnect. Thank you for joining and have a very good day.
[END OF CALL]
Valuation Method and Risk Statement
Our valuation methodology for the Alternative Energy space is based on a variety of metrics including P/BV, EV/EBITDA, P/E, and retained equity value per share. Our target multiples are derived from historical group averages with adjustments for expected growth rates, leverage, and earnings growth confidence. We identify the following risks for the sector: Demand for new renewable installations has historically been volatile around changes in state and federal policy, and we expect this volatility to continue. In addition, margins for product manufacturers can be impacted by swings in raw materials pricing and the overall level of energy prices.
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