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AUSTIN TXFEB 22-24 2016 Event Summary

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SMART ENERGY SUMMIT: ENGAGING THE CONSUMER EVENT SUMMARY Consumer demand for energy-related products and services is growing, along with consumer adoption of smart home and energy management devices.

Parks Associates research finds that 36% of U.S. broadband households would participate in an energy program offering a free product and 25% consider an energy monitoring service very appealing. With adoption of smart home devices at nearly 20% of U.S. broadband households, BYOD programs are crucial in expanding participation.

Smart Energy Summit gives context that is critical to understanding the convergence of energy management, the smart home, and distributed generation as well as emerging opportunities that companies can leverage to increase consumer engagement. The smart energy markets have matured, and we can examine the results and successes of current energy programs to identify and understand the best strategies, the emerging channels, and the impacts of smart home integration.

This year’s event focuses on three core themes:

Partnership opportunities between energy and smart home solution providers Insights and analysis of the different approaches to delivering energy management

products and services The convergence of energy management, the smart home, and distributed generation

We want to thank those who supported this event: Sponsors include Tendril, EnergyHub, Honeywell, Powerley and DTE Energy, Affinegy, ecobee, PlanetEcosystems, WeatherBug Home, WSI, Z-Wave, Schneider Electric, State Farm, Tyco, and WattzOn.

Media and organizations supporting the event include Advanced Energy Economy, IoT Consortium, Antenna, Antenna Systems & Technology, Conference Guru, Engerati, FierceEnergy, GreenButton Alliance, HomePlug Alliance, HomeToys.com, ISE Magazine, IoT Today, Israeli Smart Energy Association (ISEA), KNXtoday, Northeast Energy Efficiency Partnerships, Open Interconnect Consortium, OpenADR Alliance, Remote Site & Equipment Management magazine, SmartGridNews, SmartGridSpain, Smart Grid Today, TD The Market Publishers, TREIA, Utility Dive, Utility Post, and WSN Buzz.

TUESDAY, FEBRUARY 23

Welcome: Engaging Consumers with Energy Management Solutions Parks Associates President Stuart Sikes opened the event by providing an introduction on the three main themes of the conference—

the utility role in the smart home, different paths to deliver energy management and engage consumers, and the convergence of energy management, the smart home, and distributed generation. This presentation focused on the opportunities and impact that partnerships, technology, and new business models are having on consumer demand for energy efficiency products and services.

Speakers: Tom Kerber, Director, Research, Home

Controls & Energy, Parks Associates Stuart Sikes, President, Parks

Associates

Key Takeaways: The seventh Smart Energy Summit started after the 2009 introduction of the smart grid,

and has brought together thoughts around the most influential developments in this space on an annual basis.

Many perspectives are represented. Energy providers, distribution utilities, renewable energy installers, device makers, home service providers, regulators, and VCs share information during the conference. 68% of the audience are energy providers and smart home integrators.

Devices are flooding the market, there are multiple value propositions in play, and partnerships are becoming increasingly important in the space. Emotional engagement is critical to adoption of any product or service, and as new business models emerge, the value for the consumer will increase through the product ecosystem that is being created at this event.

Smart Energy Summit explores the many different facets of the home energy management market: 1. Utility programs and energy market incentives 2. Smart home service providers 3. Smart product manufacturers

4. Partnerships 5. Integration technology

Over 25% of U.S. broadband households find energy monitoring services very appealing.

Success Stories in Energy Management For energy providers, the convergence of smart energy and smart home opportunities is a story of frenemy stakeholders. Myriad service providers and device manufacturers hope to protect and grow their core businesses while exploring new ways to further directly monetize their customer base or work with adjacent partners to provide mutually smart energy solutions.

Getting from here to there for all stakeholders is the challenge. Despite the value proposition of saving money and protecting natural resources, awareness of smart energy programs remains low with, at most, one-fifth of U.S. broadband households being “very” familiar with the various

programs tested. It’s a case of leaving money on the current table as well as charting the course

to future riches.

The good news is we may be approaching a tipping point as purchase intentions for smart home devices continue to grow, rising from 37% at the end of 2014 to 49% at the end of 2015. Purchase intentions for smart home devices are growing among both current owners and non-owners, a clear sign that the market for smart home devices is heating up.

Never has it been more important for energy providers to improve their product and marketing prowess. In a noisy world of information overload with nonlinear sales channels, energy providers must create the connection between awareness, intent to purchase and sales. Learning best-in-class ideas from one another is a great place to start.

Speakers: Patrick Agnew, Program Manager, In-home Technology, Florida Power and Light Mark Cosby, Business Development Leader, Westar Energy Harry Emerson, Smart Grid/SmartHours Program, Director, Product Development, OGE

Energy Corp David Grant, Senior Vice President of Sales and Marketing, Tendril Steve Nisbet, VP - External Relations & Power Solutions, Wright-Hennepin

Cooperative Electric Association

Moderator: Allen Weiner, Senior Research Analyst, Parks Associates

Key Takeaways: Market adoption is moving from the innovator customer segment to early adopters.

o FPL has conducted HAN and smart thermostat trials and has 600,000 unique visitors to its site. The company is selling a tactile experience with the home where high design meets high-tech. FPL also positions the smart home as a way to renovate and redesign homes. Utility needs to generate revenue rather than just giving out rebates.

Utilities cannot be spectators in the battle for the home. Utilities need to grow consumer mindshare and create alliances and partnerships that bring value to customers.

Many of these stories needed more time to be better communicated. The focal point for all stories was that data can be aggregated to provide additional value to the end user of energy.

Know what you want to find out and how it provides value. Don’t collect all available data unless it is providing a purpose. Trials should be run like a business, including an exit plan.

The smart home can provide insights on engagement that can be used to deliver reliable DR and EE assets for the grid.

Several types of incentives have been successful; for example, guaranteed rates, line item credits, and free tech.

BYOT offers tremendous opportunity. Lack of familiarity among consumers continues to challenge the industry

64% trust service provider/home security solution provider The Internet is the preferred method of learning about product offerings. Customer experience with the installation process is important - It needs to work. Pilot programs are important to understand customer behavior and expectation.

o Utilities needs to have confidence in the product before recommending it to consumers.

o Need a mature way of evaluating platforms and forming strategic alliances o Reliability of the devices and the ability to control is of utmost importance

Keynote – Making Energy Easy and Engaging for Customers Energy providers need to stay ahead of their customers' evolving needs to succeed in today's residential energy management markets, and smart energy tools are key to gaining these insights and building deeper relationships. Connectivity creates new value in automation and controls and opens opportunities to expand consumer engagement with energy efficiency in the home. Bill Clayton presented field-tested strategies for the deployment of interactive energy solutions that drive adoption and generate excitement among consumers.

Speaker: William Clayton, Vice President of Customer Care Operations, Reliant, NRG

Unlocking the Value of Energy Usage Data Technology for monitoring and analyzing home energy data has developed to provide increasingly valuable, actionable insights for consumers and energy providers. Yet, familiarity with energy programs is generally low.

At most, one-fifth of U.S. broadband households are “very” familiar with various

energy programs.

Consumers are most likely to participate in an energy program if it is offered to them by their security system monitoring company. Yet, 25% of broadband households indicate they would participate in an energy program offered by their energy provider. One-third of consumers would participate in an energy program offering

a free product. Roughly one-half of consumers would permit utility control of appliances in exchange for a product rebate.

Non-financial incentives can drive energy program participation, but financial incentives attract 5-8% more households than non-financial incentives.

Speakers: Martha Amram, Founder & CEO, WattzOn and Green Button Alliance Will Duckett, Director of Business Development, PlotWatt Steve Nguyen, Head of Marketing, Bidgely Daniel Roesler, CTO & Co-founder, UtilityAPI and Green Button Alliance Emmett Romine, General Manager Insight & Demand Side Management, DTE Energy

Moderator: Brad Russell, Research Analyst, Parks Associates

Key Takeaways: It is not just a matter of if the industry can disaggregate energy data, but what that data

is used for and how companies deliver value to the end consumer. The data only serves a company once that company has turned consumer engagement into a good and viable business model.

Disaggregation is also only valuable if it helps the consumer fix a problem or issue that was important to the consumer.

Consumers do not always act just because they have information/data offered to them—it takes an event or problem within the home to make them change their behavior.

Energy efficiency can be advanced through data analytics. There is a distributed energy opportunity for usage based data analytics.

Consumers want to know how much they can save and not necessarily how much each device can save.

Innovation in Marketing and Consumer Engagement As both the breadth and depth of smart products entering the market grow, energy providers have the opportunity to leverage those products for demand response programs and to accelerate adoption through energy efficiency programs. Concerns related to loss of control and co-marketing arrangements are barriers for some utilities. However, co-marketing agreements have the opportunity to expand the reach of utility marketing efforts.

Distributed generation is gaining significant momentum. While overall adoption is still very low, purchase interest is high and moving completely off-grid is a leading motivation. With this in mind, utilities must develop strategies to participate in this market opportunity. Utilities and retail energy providers have many competitive advantages should they choose to enter the market.

When segmenting consumers along self-reported priorities of comfort, convenience, initial savings and lifetime savings, U.S. broadband households are fragmented into four nearly equal groups, with convenience leading by a small margin.

Speakers: Mauro Dresti, Manager Mass Markets,

Southern California Edison V. Rory Jones, Co-Founder and Chief

Executive, PlanetEcosystems Kevin Meagher, SVP Business Development,

ROC-Connect Justin Segall, President, Co-Founder, Simple

Energy Marianne Sy, Program Manager, Demand

Response, San Diego Gas & Electric

Moderator: Stuart Sikes, President, Parks Associates

Key Takeaways: Increasing customer engagement in energy monitoring and service programs is

challenging. Solutions include bundling products and services to add value in addition to energy, using points as consumers understand them, keeping processes to redeem points and obtain rebates and discounts short and simple, and utilizing partners for aesthetics and marketing value.

Companies use data intelligence to assess consumers on propensity to participate in energy programs and use profiles to predict engagement. Key demographics include the number of people in a household, the size of the house, and psychographic and demographic data. People who want to be the first to own/participate or want to help the environment can be key prospects.

Third-party partnerships are critical to customer engagement. These partnerships increase awareness and program sign-ups and the energy provider benefits from the association with high-tech companies.

Energy alone does not sell anymore. Bundling devices and services is what attracts consumers. But this is only effective if the consumer is educated on capability and functionality of the devices/services. Finding ways to get consumers involved is key.

What drives consumer engagement is education. Rewards programs are great, but only if the consumer sees the benefit. Informing the consumer on how these programs can help them better manage their energy usage, get money back from rebate programs, save on monthly energy costs, etc., will ultimately make the consumer base excited about the offering. Ultimately, gaining the consumer’s interest matters more than the programs, devices, and services.

Keynote – Connected Thermostats: A Revolution Driving Value for Utilities and Service Providers EnergyHub’s President, Seth Frader-Thompson, separated hype from reality in the connected thermostat market, citing real-world benefits for connected home service providers, utilities, and manufacturers. Seth shared data from around the industry to illustrate how these companies are leveraging connected thermostats to increase ARPU, improve consumer engagement, and expand their energy programs. He also provided a strategic look into the future to present ways to get even greater value out of these assets.

Speaker: Seth Frader-Thompson, President, EnergyHub

Integrating Smart Products and Consumer IoT into Utility Programs Smart devices open new opportunities for both EE and DR programs. Smart devices can reduce consumption and shift load throughout the product lifetime using new approaches.

Despite the long list of benefits associated with integrating smart products into energy programs, utilities must understand the strengths, weaknesses, opportunities and threats associated with bring-your-own-device programs.

Speakers: Andy Baynes, Energy Partnerships, Nest Denver Hinds, R&D Project Manager, SMUD Claire Miziolek, Market Strategies Program Manager, Northeast Energy Efficiency

Partnerships (NEEP) Peter Taylor, Vice President of Products, WeMo/Belkin Paul Wattles, Sr. Analyst, Market Design & Development, ERCOT

Moderator: Tom Kerber, Director, Research, Home Controls & Energy, Parks Associates

Key Takeaways: Belkin collects 20 million data points a day that can be used to understand user

behavior. Energy star rating can and does help create awareness around energy efficient

products. Customers enjoy the security of fixed utility bill and the security of reliable energy

delivery.

Data needs to be filtered at device level to ensure efficiency at utility rather than sharing extensive data with low impact.

DR programs are not necessarily attractive to consumers and utilities needs to have better value proposition for the consumer. Comfort compromise is the biggest challenge around DR acceptance.

One barrier to integrating smart products into utility programs centers on unknown performance. Utilities need some kind of data stream (telemetry signal) to validate consumer usage.

The #1 reason consumers don’t enroll in demand response has been lack of consumer control. Also, careful analysis of efficiency reveals overly ambitious claims of efficiency. Currently, demand response doesn’t offer a very compelling value proposition for consumer, i.e., “sweat for 4 hours and we’ll give you a $1.” The answer is to make the full suite of values available to consumer. The education challenge for utilities is to provide rate structures and incentives that consumers can understand and will respond to.

The largest driver for utilities to integrate smart products into demand response programs is customer engagement. Normally a consumer interacts with their utility for about 4:00 minutes a year when paying bill. Nest’s DR program provides backend consumer engagement where incentives, marketing efforts and ongoing consumer communication are delivered, all perceived as coming from the utility.

When time of use plans go into effect, such as in California, bring-your-own device (BYOD) programs will take off. Utility needs to sue all channels to educate consumers on time-of-use rates and demystify how they serve the public good on all fronts.

Consumer expectations are higher than ever for devices that can be installed easily, operated easily, and seamlessly operate with other connected products and services. Platforms must be hardwired to accommodate complexity of router/device/hardware/software to provide reliability. Reliability is a problem in the face of obsolescence challenges. Sufficient encryption and authentication must be provided to ensure data privacy.

Direct Participation of Energy Platform Providers in Energy Markets The Federal Regulatory Energy Commission (FERC) Order No. 745, which was recently upheld by the Supreme Court after being struck down in district court, requires that RTOs and ISOs pay demand response resources participating in the day-ahead and real-time wholesale energy markets, the locational marginal price (LMP).

Traditional utility DR programs provide financial incentives for shifting load during peak events. However, DR can be applied in many ways beyond peak events. New approaches are different from typical demand response solutions in several ways.

Typical demand response programs are limited contractually with consumers, allowing them to be exercised only a few times a year. Traditional demand response solutions require that the

consumer sacrifice control or operation of their thermostat on the hottest days of the year in return for a reduction in utility rates. Real time solutions can anticipate peak events and pricing changes, and automatically change operation of appliances to shift load without the consumer even noticing. Utilities will no longer have to ask consumers to sacrifice comfort to achieve demand response goals. By using load shifting techniques that have no negative impact on the customer, they can run their program much more frequently, not just a few days per year.

Also, typical demand response programs focus on solving only peak demand problems. Real-time solutions can use demand response to address both pricing and capacity to provide utilities with the optimum portfolio of demand response programs for each hour of the day.

In restructured markets, retail energy providers can use demand response assets as instruments to mitigate risk due to fluctuations in anticipated load and energy pricing, or to take advantage of arbitrage opportunities between the day-ahead and spot markets.

Energy markets are also creating new rules for ancillary markets to utilize fast-acting smart products that can add or remove load in response to frequency fluctuations.

The panel discussed the changing demand response market and opportunities for direct participation in energy markets.

Speakers: Jeremy Eddy, Senior Energy Consultant, Itron Erin Keys, Director, Business Development & Strategy, Comverge Yann Kulp, Vice President SmartSpace, Schneider Electric North America Dave Oberholzer, VP, Business and Partner Development, WeatherBug Home

Ken Wacks, Consultant, Home, Building & Utility Systems; Member, Gridwise Architecture Council, DOE

Moderator: Tom Kerber, Director, Research, Home Controls & Energy, Parks Associates

Key Takeaways: Panelists noted that the industry cannot force consumers to run their home in an

environment that they don’t understand. The industry needs to provide consumers with an environment that they understand and enjoy.

The impact of standalone products is not significant for energy management, but coordinated operation of a group of devices can be significant for both utilities and consumers.

Reliability and “dispatchability” are the most important factors in determining the value of assets in energy markets.

There are still significant regulations and data barriers limiting energy-related opportunities this year. There is a conflict between those who want to focus on high-tech options and those who want to focus on regulating these options.

Special Session: Keynote Roundtable Understanding the Key Challenges Facing the Energy Management Market

Speakers: William Clayton, Vice President of Customer Care Operations, Reliant, NRG Seth Frader-Thompson, President, EnergyHub Paul Campbell, VP Innovation / Head of Silicon Valley Innovation Center, Schneider

Electric

Key Takeaways: Key industry challenges include how to motivate and increase participation in energy

management as well as how to differentiate commodity electrical service. Industry leaders are differentiating by adding additional products and services to increase the overall value of the offering.

Customer effort is the key metric. It is essential to ensure that energy programs do not require a lot of effort and that it is easy and intuitive to use both the program and the associated devices. Panelists consider the Nest thermostat to be practically effortless.

Partnerships are essential. The challenge is to minimize any friction created by partnerships, which is always a challenge when very large companies work together. It is very important to have shared objectives and strategies.

Consumers do not generally care about demand response or home energy management systems/services, and so the task at hand is to figure out a plan to engage them in a meaningful way.

Key industry leaders advise that, because there is no way to tell the future, ecosystem players must be able to adapt to whatever—and whenever—that new technology/service comes to market.

Industry leaders have seen successes and many failures and it appears companies are finally figuring out what works to take the energy management marketplace forward.

Customers want a simple life. Make their life simpler and not complex. Engagement will continue to grow as the market matures over time.

WEDNESDAY, FEBRUARY 24

Solar Industry: Integration, Competition, and Impact on IoT Solar technology installed behind the meter has implications for utilities, because excess energy flows back into the grid. Utility-scale solar must be managed as an asset in energy markets. Wherever solar exists on the grid, it has an impact on Utility DR and EE initiatives.

While distributed generation and storage technology is driving cost reductions, tax incentives and third-party financing have made installation even more affordable. Retail parity, the point that the installed cost of solar is less than the retail price of electricity, is here in different regions of the country, and is nearly here in the remaining areas.

Batteries have traditionally been too expensive for widespread installation, but the price curve for battery storage is reaching the point where energy storage is now a viable product. The combination of manufacturing efficiencies brought about by the growing volume from electric vehicles and technology enhancements has resulted in significant cost reductions and adoption.

Speakers:

Dwain Kinghorn, Chief Strategy and Innovation Officer, Vivint Solar Karen Poff, Project Manager, Austin Energy Matt Smith, Senior Director of Utility Solutions, Silver Spring Networks Ivo Steklac, Vice President General Manager of RLC Solar Energy Solutions, SunPower

Corporation Ilen Zazueta-Hall, Director, Product Management for Energy Management, Enphase

Moderator: Eddie Accomando, Research Analyst, Parks Associates

Key Takeaways: The future of solar energy in the home is to be part of an overall strategy that includes

other elements, such as smart thermostats and demand response systems. To achieve

this strategy, players must understand that they are being invited into the customer’s home and need to figure out how to work well with other infrastructure already in the home.

Solar costs are falling, meaning that microgrids are now highly viable for large market segments. Swanson’s Law states that the cost of solar drops 20% with each doubling of volume.

The challenges and opportunities for solar include integration with storage as home storage complements the value proposition of solar, and may be necessary as solar penetration increases. In Hawaii, additional solar capacity has been blocked because grid reliability is at risk.

While it is clear that those who have solar in their homes are very passionate, a poll taken at the event suggests that 46% of those surveyed say it will take more than 20 years to reach 50% penetration, and 22% say it will never happen.

There appears to be no one single value proposition that drives the residential solar market. Some industry leaders say financial incentives work, while others believe there needs to be better governmental policies to encourage great usage of solar power. However, the industry has seen five years of significant solar growth and that use of solar is the tip of the spear for energy-engaged consumers. Solar users are evangelists who slowly convert their entire neighborhoods.

Factors required to boost solar adoption: o Tax credits and regulatory incentives o Better communications with customers o Attitude of being a guest in people’s homes (play well with what is there) o Implementation of standards o Storage in the home

There is a passion among home owners for solar installation.

Keynote – Getting Paid to Save Energy ... Finally For many years, the question asked of consumers about Home Energy Management has been, “How much are you willing to pay to save energy?” Consumers answered with their wallets by refusing to pay for Home Energy Management solutions and so adoption of such solutions has been disappointing, to say it mildly. Now, with new programs underway, consumers can finally get paid to save energy. This keynote highlighted the current state of these new programs and what needs to be done as an energy community to expand these programs toward mass adoption.

Speaker: Paul Campbell, VP Innovation / Head of Silicon Valley Innovation Center, Schneider

Electric

Integrating Comprehensive Energy Management Solutions into Smart Home Systems Smart home systems providers vary in their strategies to provide home energy management solutions. This panel focuses on how smart home systems providers may look at home energy management.

The discussion is focused on the perceived value of services that address the market for home energy management solutions and on benefits, challenges, and future strategies in integrating energy information with smart home solutions.

Speakers: Ramon Alvarez, Senior Director, SmartThings Landon Borders, Director of Connected Devices, Haiku Home by Big Ass Solutions Kris Bowring, Director of Business and Channel Development, Lowe's Companies, Inc. Letha McLaren, Chief Marketing Officer, Icontrol Networks Wannie Park, VP of Utility Solutions, CEIVA Energy

Moderator: Eddie Accomando, Research Analyst, Parks Associates

Key Takeaways: Security and convenience are the key drivers for adoption of new energy management

solutions Understanding the value proposition for the consumer on the product level is critical to

adding features and capabilities. At the end of the day, customers only care about dollars and how much they are saving o Security has always been a top market driver, 85% of the population understands

what security products are/do. o We need an open ecosystem that can leverage existing smart home devices. o Need balance between value proposition for consumer engagement with HEM

information and consumers’ need for ease of use The future is a hub-less world. The hub is a necessary bridge for now, but soon

connectivity for interoperability will be embedded in devices or move to the cloud. Hubs can be embedded in the router, set top box, home security panel, etc. For the next few years, protocols will still require a hub until we have more consolidation or integration of protocols.

To create more meaningful value propositions, more data needs to be shared from fans, thermostats, and energy companies to address more thoughtful use cases.

There is still too much friction with obtaining energy billing data information for consumer to integrate with energy management. Consumers don’t currently engage around energy management as much as they could without pricing and billing info. Instead they engage more around controls. Lowe’s energy management system is measuring energy consumption by device and then combining rates from Genability to give consumers a better picture of what their energy usage is costing them.

SmartThings is using professional installers to install cloud meters using Encore to capture more energy data more easily.

Role of Energy Management in Smart Home Solutions Smart devices can reduce consumption and shift load throughout the product lifetime using new approaches:

Waste Elimination – Many products are left on unnecessarily, wasting energy. Turning off or adjusting settings when the products are not in use or when the home is unoccupied is a simple, painless approach to becoming more energy efficient.

Behavioral Feedback and Recommendations – The manufacturer can use the connection to its product to become an advisor, providing feedback to consumers on how to adjust operation in order to be more energy efficient.

Automate Equipment Operation – Many products include features and capabilities that are not fully understood by users. Some of these features can lower the cost of operation of the device and reduce overall energy consumption.

Fault Detection Diagnostics – If a device can automatically monitor its operation and determine when performance has been degraded, the device can provide feedback to correct operational degradation and provide a solution; this can promote consumer actions that will cause higher efficiency levels over the product’s lifetime.

Choreographing Loads – Today, all of the appliances in the home operate asynchronously. The upstairs and downstairs heating and air conditioning units cycle on and off to control temperature, as does the hot water heater. Tariff plans that include a demand charge can be dramatically reduced by choreographing cyclic loads.

Optimized for Electricity Pricing – As more utility-scale distributed generation comes online, systems can be used to consume load during periods of low demand and high supply – such as a windy spring night. Systems would respond to pricing signals to cycle on automatically. Smart products can respond to variable tariff plans that reflect wholesale pricing.

Maximizing ROI – The return on investment associated with smart products, rooftop solar, and battery storage can be optimized, factoring in net-metering, demand charges, and variable tariff plans, if applicable. Shifting load can also broaden the energy management system for the home.

Coordinating Products – As the number of connected products in the home increases, the ability to control a system of products for a global optimum solution, rather than an optimum solution for each independent product, can produce significant savings. For example, light shades can coordinate to optimize lighting at the lowest cost. Similarly shades, fans, and HVAC systems can coordinate to optimize comfort at the lowest cost.

Speakers: Bill Alderson, Director, Marketing and Digital Services, Rheem Dennis Mathew, VP, Xfinity Home Product Management, Design & Deployment,

Comcast Todd Nolte, Marketing Technologies Manager, Carrier, United Technologies Carlos Nouel, Director of Partnerships and Joint Ventures, National Grid

Jeremy Warren, Chief Technology Officer, Vivint

Moderator: Tom Kerber, Director, Research, Home Controls & Energy, Parks Associates

Key Takeaways: In bundled smart home options, energy management is an important feature, but it

needs to be simple to understand. Often, energy management purchases are emergency purchases (like a broken AC unit or hot water heater) and so the value proposition has to be easy to digest and resonate with the consumers’ immediate (and future) needs.

Consumer savings from home energy management devices/services are important but are not the best value proposition to promote. Convenience, peace of mind, etc., are also very important and consumers need to understand the whole value proposition if companies want to increase market adoption.

Panelists point to a lack of consumer awareness being a key factor in uptake of smart home/energy management solutions. Customers seem unable to justify the high initial cost, as they won’t see the ROI for quite some time. This is compounded by the lack of usability of solution.

Smart products need to be smart without being too complex. If the consumer doesn’t find them easy to use relatively quickly, they either won’t adopt the technology, or won’t get the full benefit and will eventually drop the solution altogether. Make user automation simpler and data easier to process and the consumers are more likely to participate. o The industry needs a consolidated solution and not a bunch of apps/segregated

devices - Consumer quote: “Moved from N remotes to N apps.” Consumers don’t understand kWh. They just understand money ($). The effectiveness of pilot programs depends on whether the objective is to learn or force

product on to consumers

Energy Management and Smart Product Solutions The smart home has reached the tipping point. 19% of broadband households own a product that can be monitored or controlled with a smartphone, tablet, or computer. While lights, locks, thermostats, and networked cameras have been the leading categories of connected products for many years, the breadth of connected products is also growing. New categories, such as door bells and sprinkler controls, are entering the market in increasing numbers.

The security channel remains the leading channel for smart home services, yet recent announcements from Samsung to embed the SmartThings hub into new televisions will certainly shift the adoption curve of home control systems that are independent of security.

As both the breadth and depth of smart products entering the market grow, energy providers have the opportunity to leverage those products for demand response programs and to accelerate adoption through energy efficiency programs. Smart product manufacturers have the opportunity to integrate lighting control and smart thermostats into their platforms, leveraging

consumer interest in cost savings, system control, and eco-consciousness to differentiate in an increasingly crowded market.

Speakers:

Stuart Lombard, President and CEO, ecobee Ann Perreault, Marketing Director, Smart Grid Solutions, Honeywell Lori Singleton, Director, Emerging Customer Programs, Salt River Project (SRP) Matthew Tolliver, VP of Business Development, EcoFactor

Moderator: Stuart Sikes, President, Parks Associates

Key Takeaways: Current adoption of energy management programs is primarily among innovators

although early adopters are starting to buy smart thermostats, which are moving at a rapid pace compared to other devices. The best energy-related products will be able to learn, producing high-value learning such as the home’s energy efficiency, the time required to heat up and cool the house down, etc., and will be optimized and easier to use.

At this time, not all home devices can talk to each other. While interoperability is considered to be highly essential, there is concern that a single app that controls everything will result in a lowest-common-denominator approach and an offering that doesn’t produce the best user experience. The industry wants to offer interoperability but also compelling point solutions and the two are not always compatible.

Industry Executives expect that their most valuable partners in two years will be smart home service providers, which will have a strong influence on what consumers buy for

their homes. Other key partners will be multichannel distribution partners that can reach the mass market. Broader partnerships with companies that have more experience in marketing loyalty programs and retaining customers, as well as device partners with strong and sought-after brand names, will benefit the energy industry. o People are buying products based on simple value propositions. There is still the

question of whether energy is a standalone product? Or does it need to be bundled with other smart home products?

o Learning “schedule” is not as valuable as learning efficiency based on home/room occupancy, outside weather, etc.

o The industry needs to engage consumers the way they’re using technology. 80% of adjustments to smart thermostats occur on the phone app

o Time of use programs have been successful in helping with peak demand problem, especially during the summer months.

Interoperability, Integration, and Energy Management Interoperability is becoming a topic with renewed interest as application layer standards enter the mix. Apple HomeKit launched, Google announced Nest Weave, and the AllSeen Alliance and Open Interconnect Consortium have seen strong growth in membership. At the same time, new network layer protocols are competing for a slice of the Internet of Things market. ZigBee 3.0 was announced, as was Thread, Bluetooth Mesh, and Bluetooth IP, and the W-Fi Alliance has announced a standard for 802.11ah, named HaLow.

In the energy space, different groups have worked on a method to communicate demand response event data and energy pricing and data that enables participation in energy markets. OpenADR was developed to communicate DR events and energy pricing information, and the 2.0C standard will include the ability to participate in energy markets.

This panel discussed the rapidly changing landscape of technology and application interoperability solutions.

Speakers: Barry Haaser, President, Managing Director, OpenADR Alliance; CEO, Lakeview

Group Dave Hurst, Director, Market Analysis, NextEnergy Art Lancaster, CTO, Affinegy Bill Scheffler, Director of NA Sales and Business Development, Sigma Designs/Z-Wave Mark Walters, V.P Strategic Development, ZigBee Alliance

Moderator: Tom Kerber, Director, Research, Home Controls & Energy, Parks Associates

Key Takeaways: White goods products are large energy users. Many makers don’t want to embed

proprietary controls, preferring an interoperable framework that allows for differentiation. The AllJoyn framework provides controls in a central app that includes support for 50 product categories, including entertainment devices and appliances. These controls include a tie into demand response systems.

Some of the forces of interoperability consolidation include smart inverters, more integration at the application layer, and cloud-to-cloud integration. It’s still early to focus on consolidation when products are just now becoming energy aware. This is setting the stage for more applications but patience is warranted. Interoperability takes a lot longer and is a lot harder than most people understand. Fragmentation is still likely for the next five years.

Fog computing, or designing for local cloud interoperability, will provide solutions using machine to machine communication that will solve many interoperability problems in the home.

There is a shift in thinking among utilities. They are realizing they don’t have to own all the energy products, they just have to touch the products with data. The consumer wants to control the device and react to the data, whether it is a time-of-use or demand response program. Customer empowerment changes the whole model. Utilities should do what they do best but not make a grab for control.

Proprietary protocols are the biggest challenge to connecting with utilities. Standardized protocols are necessary and achievable because demand response programs are not all that unique.

Energy Providers: Opportunities to Dominate the Smart Home and Energy Management Market Smart home product and service providers are changing in many ways. Smart home controllers and smart home platforms are adding more networks, more intelligence, more data analytics, and more value-added services. Today, smart home service providers control almost every aspect of their offerings. Consumers make one choice, the service provider, and the service provider chooses everything else. The service provider determines what products work with the platform, what algorithms control those products, what the user interface looks like, and even how the system is installed. The consumer has almost no control. Today, if consumers want a group of products that work together, the easiest choice is to select a service provider or home control platform. With only a few exceptions, products that work together are not available without a smart home controller or a smart home platform.

Smart home system vendors generally charge a recurring monthly fee for services. Smart product vendors charge an upfront fee in the form of a price premium for smart products. The business models used by different participants are a reflection of existing business models. However, connectivity opens up many new possibilities that use smart products to enhance the

value chains of different industries, unlocking new value and enabling participation in new revenue streams that are not directly funded by the consumer.

The smart home market can be described using two axes: control of the smart home system and monetization of the smart home.

The vertical axis describes the entity which controls the smart home system, how it is installed, what products, algorithms, apps, and user interface or interfaces are used. At the lower end of the vertical axis, the end user makes all of the decisions. Consumers get what they want, how they want it. The consumer chooses what products to purchase, when they are purchased, how they are purchased, what apps or subsystem controllers control those products, and what smart home platform, if any, they want. Consumers may acquire connected products over time, as they replace legacy products with new, smart products. Some consumers may proactively replace some products if they find the value proposition compelling.

At the upper end of the vertical axis, the service provider makes all of the decisions. Most smart home systems on the market today are closed to both new products and third-party app developers. Smart home service providers tightly control the ecosystem to assure that the user experience is positive; nonetheless, they know that a system open to both apps and products will beat a closed system in the long term. Today, business issues rather than technology issues

create friction and slow down integration. In the long term, to be successful, smart home platforms must simplify business transactions and make integration more scalable.

Monetization is represented on the horizontal axis. On the left side of the scale, the consumer pays for products and services directly, either in recurring or upfront fees. On the right side of the scale, alternative business models allow manufacturers and smart home service providers to generate revenue indirectly, from other industry players.

When asked, industry experts agree that the energy industry can provide the greatest financial benefit for smart home service providers. Therefore, the energy industry has a significant long term competitive advantage in the smart home market.

In addition, 90% of industry experts agree that alternative business models will have a significant impact on the competitive landscape in the next five years.

Speakers: Corey Chao, Innovation Manager, Connected Home, NRG/Reliant Rick Luna, Sr. Manager, Products and Services, CPS Energy Steve Nisbet, VP - External Relations & Power Solutions, Wright-Hennepin

Cooperative Electric Association

Moderator: Tom Kerber, Director, Research, Home Controls & Energy, Parks Associates

Key Takeaways: Energy providers who want to play a role in the smart home and energy management

markets need to understand the dramatic market shift from one in which the provider is in charge to one in which the consumer has greater choice. At the same time, the market will shift from one in which the consumer pays to one in which external forces (be they the provider or other subsidy) pay for service.

Energy providers who face less regulatory pressure and oversight—such as reporting to a board of directors—have more freedom to experiment with new services without facing bureaucracy and decisions halted by inertia. Municipal utilities and co-ops have more regulatory flexibility than IOUs to experiment with new programs and models. Branding is important. Those brands that resonate with customers have the ability to launch new services even if they stray from their core competency. The endgame is to prove that the provider is a partner with the customer.

Security is the best entry point for smart home market. One key strategy is to partner with the best-selling product vendors. Load balancing is key for utilities. Brand and existing relationships with consumers are critical competitive elements for

success in the smart home services business. The utility channel could very well lose out to other channels as the home energy

management lead.

The industry is just starting to look at distributed generation before building out new traditional transmission infrastructure.

There are back-office challenges integrating new business silos (home security and energy provider for example), such as billing and support.