A Shift in Energy Information's Center of Gravity?
February 28, 2014
A version of this article appears in the March/April 2014 issue of Home Energy Magazine.
Who would have expected the purchase of a thermostat company to be at the top of the business news? What is Google up to? Pundits say that Google plans to monetize the thermostat data by taking cuts from furnace installers and purchases of other big ticket items—and perhaps even small ticket items—that can be tracked with thermostat data. Maybe that’s possible, but I want to comment on other aspects.
First, keep in mind that Nest is not alone. There are other Nest-like companies in New York, Canada, and Silicon Valley, each with many clever ideas and their own, powerful allies. They will give Google a run for its money.
I believe that Google’s acquisition of Nest signals how the “center of gravity” of energy information inside homes has shifted away from the smart meter towards the thermostat or, more specifically, the Internet-connected thermostat. Arguably, the data from smart meters could be monetized to an even greater extent than thermostat data. So why has this shift occurred? One reason is because the smart meter has had such a problematic rollout. Accessing the data and using that data highway has been made incredibly difficult because of missteps by utilities, regulators, technology companies, and even consumer groups. It’s impossible to build a national business model when each state—indeed, each utility—has its own data guidelines and technical standards. Look at the effort required simply to create the Green Button Initiative. We are still arguing about who owns smart meter data.
In contrast, the data exchanged between a smart thermostat and the Internet is unregulated and can be used, shared, and repurposed by all sorts of organizations, (starting of course with Google). The Internet technology is already standardized, widely accepted, and installed in nearly every home. The security and confidentiality pathways are also well trod, including allowing people to opt-in to the services (which is not the case for smart meters). Data, like water, finds the path of least resistance.
The second trend reflected in Google’s purchase of Nest is related to time-of-use pricing for electricity. The smart meter constantly measures electricity use and enables utilities to charge higher prices during periods of peak demand and lower prices when supplies are plentiful. This is a good idea and should save consumers money after the tariffs are rolled out. But consumers will also discover how devilishly complicated it is to program their thermostats when they need to take into account both their temperature preferences and the variable price of electricity. A thermostat like Nest connected to the Cloud can remove much of the complexity by tracking the local tariffs and merging the occupants’ preferences. It won’t be idiot-proof but it will be a lot more user-friendly. I think people will flock to Internet-connected thermostats. This looks like a business opportunity, which might be assisted by many people already viewing web resources as less “evil” than their local utilities.
Smart meters still provide a tremendously valuable stream of data about a home’s performance and they are a key element in the electricity grid of the future. But they are not going to be the hubs of energy data that we imagined only a few years ago.
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