Navigating the Oncoming Storm: Opportunities and Challenges with Home Energy Management

A version of this article appears in the Summer 2017 issue of Home Energy Magazine.

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Home energy management (HEM) systems—comprising smart networked devices that can provide information on, and dynamically adjust, energy use within a home—have been evolving for decades and finally appear poised to enter the mainstream. However, with hundreds of players getting into the home automation space, the increasing availability of myriad smart devices, an increased vendor focus on customer security and convenience over energy savings, and numerous other challenges, it can be daunting for even seasoned energy experts to try to figure out how best to approach this market, much less find ways to realize the many benefits HEM systems may be able to yield.

The good news is that most of the HEM devices currently available (across multiple manufacturers) tend to fall into one of several product categories. Some of these devices are already beginning to see widespread market penetration, while others are still in the early stages of development and dissemination, and each offers unique opportunities for energy savings, demand reductions, and energy use information. With utility demand-side management pilots and programs around HEM devices just beginning to emerge and evolve, and given the rapid development of the underlying technology, HEM devices and systems appear likely to play an increasingly important role in the energy space going forward.

An Overview of HEM Devices

The HEM market is evolving rapidly—existing devices continue to change and new wireless-enabled “smart” products keep emerging. Nonetheless, most currently available devices tend to fall into one of several general categories: smart thermostats, smart plugs, connected lightbulbs, smart appliances, and in-home energy-use displays (EUDs). Each of these devices has unique and distinct advantages and disadvantages, but, effectively combined into an HEM framework, they collectively have the potential to provide relevant, granular, and actionable energy-use data; directly reduce energy consumption through automated control algorithms; and provide sophisticated demand-response (DR) and load-shifting functionality.

Table 1. Summary of Common Home Energy Management Devices

Table 1 summarizes and compares the costs and savings associated with these devices. Although the dynamic nature of the control algorithms used and the potential to prompt behavioral change make it difficult to estimate representative energy savings for many HEM devices, the granular data they collect may offer new approaches to measurement and verification (M&V) that will facilitate a better understanding of savings.

Smart Thermostats

Of all the HEM devices discussed in this article, smart thermostats have been among the first to really flourish in the market. In fact, 2016 data from the E Source Residential Customer Insights Center suggest that 6% of all residential customers have now installed smart thermostats in their homes. That growth is especially impressive in light of the fact that smart thermostats only really emerged onto the market in 2011 with the release of the Nest Learning Thermostat. With straightforward programming, appealing online portals and mobile apps, attractive designs, and a better overall user experience than traditional programmable thermostats, it seems that smart thermostats are here to stay. In fact, their unique set of features may even help to make them a central interface point for HEM systems.

The ecobee3 is a smart thermostat that offers an external thermometer and occupancy sensors for rooms without a thermostat. (Ecobee)

Many of the smart thermostats on the market offer a variety of energy-saving strategies. These strategies range from trying to learn occupant preferences (in order to autonomously improve temperature set point schedules) to behavioral prompts or tracking the user’s smartphone location to turn down HVAC equipment when no one is home. Given the variety of energy-saving tactics involved and the technology’s comparatively recent introduction into the market, research establishing average energy savings remains ongoing. However, utility program evaluations performed to date indicate that the level of HVAC energy savings realized has ranged from 5% to 19%.

In addition to providing energy savings, virtually all of the smart thermostats on the market offer sophisticated DR capabilities with two-way communication and comprehensive reporting functionalities that utilities can take advantage of. In many cases, smart thermostats can even combine multiple control strategies to maximize demand reductions while also maintaining occupant comfort—an improvement on previous generations of HVAC DR controls. Utility evaluations indicate that average per-home demand reductions have ranged from 0.7 kW to 1.6 kW during utility DR events. These levels of demand reduction are generally similar to those achieved by traditional direct load control programs using switches, but the smart thermostats can provide improved occupant comfort, longer potential event durations, and better data to support program managers.

Finally, in the context of HEM, smart thermostats offer another potentially enormous benefit. Because they’re designed to know when users are home and can respond to DR signals—and because users are likely to engage with the thermostat’s screen (or mobile app) on an ongoing basis to adjust temperature settings—they may be great candidates to act as the central interface for HEM systems. Not only might they replace EUDs as the source of information on a home’s energy use, but they might also be well positioned to coordinate the way a home’s HVAC, plug loads, lighting, and appliances respond to a DR event. Nest is one company that is already moving in this direction. The Nest thermostat’s built-in ZigBee wireless compatibility allows it to talk to many smart meters, and the Nest Developer program is fostering interconnectivity with a diverse array of smart products from other companies, ranging from connected cars to home appliances, security system components, and a broad range of consumer electronics.

Smart Plugs

Essentially a newer Internet-enabled version of smart power strips, smart plugs are just starting to gain a foothold in the market. Whereas smart power strips generally provide 6 to 12 outlets and work by autonomously turning devices on or off based on the power draw of a single control device, occupancy, or a preset schedule, smart plugs are Internet enabled and typically offer one or two controllable outlets. Unlike smart power strips, smart plugs usually don’t provide current- or occupancy-based control strategies. Instead, they allow users to set schedules for their plug loads, turn them on or off remotely, and even monitor each plug load’s power draw (the kind of granular data that studies show is most effective in getting users to change behavior) via an online portal or mobile app. Given this functionality, a number of smart plugs are currently being marketed as residential lighting controls (for plugged-in lamps) that can not only save energy but also provide security benefits by allowing users to program lights to turn on and off when they’re away from home—an electronic version of the old mechanical timers. Current estimates of potential energy savings from smart plugs range from 2–3% to over 20% of the connected load.

Many smart plugs also provide DR functionality, giving utilities even more options to consider for their load management programs. One notable example is Consolidated Edison’s CoolNYC program. Launched in 2011, this was one of the first programs in the United States to target window air-conditioning units for DR purposes using a smart plug called the ThinkEco Modlet. The program has been very successful to date: Con Edison now has tens of thousands of participating customers, with each smart plug providing an average load drop of around 0.4 kW. Unsurprisingly, given Con Edison’s positive results, utilities like Baltimore Gas and Electric, Commonwealth Edison, Consumers Energy, and CPS Energy have all recently started to offer their own window air conditioner DR programs.

The ThinkEco Modlet offers an Internet-enabled product with two outlets. (ThinkEco)

Despite the inherent flexibility of smart-plug devices, the main barriers to further market penetration appear to be their high up-front cost, a lack of awareness about these products on the part of customers and utilities, and (with the possible exception of the smart products focused on lighting) a somewhat vague value proposition to end users, who may not know how best to implement them. However, these products are still relatively new, and it seems likely that the market will continue to evolve, removing many of these barriers as time goes on.

Smart Appliances

From an energy perspective, smart appliances are appealing primarily for their potential to automatically adjust power draw based on control signals from a utility. Some also provide granular energy-use data or offer users the ability to control them via a mobile app. The utility signals can be related to changing electricity prices, a DR event, or even the real-time availability of renewable energy on the grid. The exact control strategies employed tend to vary depending on the type of device and the manufacturer, but examples of smart appliances and their capabilities include:

• clothes washers that can delay the start of the wash cycle, recommend using cold water instead of warm or hot water, or reduce power to the motor and/or heater;
• clothes dryers that can postpone the beginning of the dry cycle, automatically enter an energy-saving mode, or reduce heater power draw for a set period of time;
• refrigerators that can delay the time of their next defrost, raise the freezer temperature set point by a few degrees, or disable antisweat heaters (if applicable);
• dishwashers that can delay the wash cycle or turn off their heater during the drying stage to reduce power;
• electric ranges with multiple ovens that can prevent the larger oven from heating up, prevent self-clean, reduce burner heat output, or even disable burners entirely; microwaves that can reduce power output (leading to slightly longer cook times), reduce lamp light levels, or reduce fan speed; and
• electric storage water heaters that can adjust temperature set points, turn off the heating elements entirely, or ramp heating elements up and down dynamically to provide energy storage and regulate the heating frequency.

Smart appliances aren’t inherently more energy efficient than “dumb” appliances (though they are often Energy Star certified), but they may save energy during DR events or critical peak pricing periods.

Although smart appliances may offer potential benefits to utilities that are interested in load management, a number of challenges remain to be resolved. Not only are smart appliances expensive, but the load-shaping and DR capabilities of these appliances can be difficult to explain to end users, and many of the power-reducing features may create more problems for customers than they solve. For example, in a worst-case scenario, customers may pay a lot for an appliance that doesn’t always do what they want in order to get benefits they don’t fully understand. Perhaps for this reason, smart appliances have remained fairly niche products, and it’s unclear how successful they may be in the future. A notable exception is the grid-interactive electric water heater. These water heaters seem to be able to provide substantial DR benefits without leaving users in cold water.

Connected Lightbulbs

LEDs aren’t just more energy efficient than other lightbulbs, they’re also more controllable. On top of that, they last much longer than other lightbulbs, leading manufacturers to look at new ways of encouraging end users to replace them before their expected end of life. To take advantage of the unique features that LEDs offer, while also beginning to treat them as consumer electronic devices that users will want to upgrade on a recurring basis, many manufacturers are now selling Internet-enabled LED products that can be controlled remotely and, in some cases, change color.

The Philips Hue offers a host of features, including remote dimming and schedule-setting. (Philips)

Considering the higher upfront cost of these connected lightbulbs, their main selling points thus far have been convenience, security, fun, and potential health benefits. The focus has not generally been on energy savings, but some products do offer features like dimming based on ambient light levels or geofencing that can turn the lights off when the user leaves the house (as determined by the location of the user’s smartphone). Similarly, there is no reason why connected LEDs could not be used in DR applications (though the individual load reductions they offer may be fairly small), but utilities generally have not used them for this purpose to date. But LEDs represent another nascent “smart” market that bears continued observation, and they may be designed to provide more energy and demand benefits going forward, in addition to the many other benefits that they already provide.

In-Home Energy-Use Displays

EUDs were once considered an essential HEM technology, but utilities’ interest in—and activity around—them has waned, and they may soon be made obsolete as the information they provide increasingly becomes available through a variety of other channels (including mobile apps, web portals, and possibly smart thermostats). At their most basic, EUDs are physical displays that show the user how he or she is consuming energy (often using data from a smart meter). Depending on how sophisticated it is, an EUD may also provide historical data for comparison, show current electricity prices, and enable the utility to communicate with the user. The purposes of all this information are:

• to show customers how they use energy, with the goal of promoting energy-efficient behavioral change; and
• to provide time-of-use (TOU) customers with the information they need to minimize their utility bills by shifting their power draw away from peak periods.

A variety of studies have shown that intermittent whole-home energy consumption data are less effective at promoting behavioral change than up-to-date, granular, device-specific data, which can prompt savings of 15% or more.

Despite the benefits offered by EUDs, several problems make their future prospects dubious. A variety of utility representatives have indicated that EUDs can be technically complicated to install, and that they are difficult to find through retail channels. And it is unclear whether or for how long users will make use of the information and other benefits they provide. However, the biggest problem is simply that, as more and more customers rely on mobile devices like smartphones and tablet computers to manage day-to-day activities, they will logically prefer an energy-use app that works with their existing device to a stand-alone EUD. And as smart thermostats gain traction in the market, they may provide an ideal platform to engage customers around such topics as energy consumption, TOU pricing, and DR events, making EUDs redundant. Time will tell, but it seems possible that the era of stand-alone EUDs has come and gone.

The Potential for Interactive Benefits

Although it remains to be seen how interconnected HEM devices will ultimately become, more-comprehensive systems offer a variety of potential benefits that individual devices may not provide. For example, the Alarm.com Smart Thermostat can monitor contact sensors throughout a house that were installed as part of the home’s security system, and can automatically pause or set back the HVAC system if a window or door is open, while sending an (optional) alert to users to let them know what it’s doing. Similarly, ceiling fan company Big Ass Fans partnered with Nest in 2014, enabling Nest’s thermostats to control Big Ass Fan’s residential Haiku product (for example, by turning the fan off when no one is home) in addition to the HVAC systems the thermostat is already able to control. These are just a few of the ways that interconnection may open up new opportunities for energy efficiency.

Interconnection can also make energy-use data more available to the end user. Irrespective of the individual HEM devices themselves, research has consistently shown that customers value energy-use feedback and will often act on it to increase energy savings—at least in the short term. In the case of HEM systems, however, it’s unclear where this information will come from or how customers may access it. Possible options include

• a networked EUD that can talk to smart devices in the home (though this may not necessarily be the best long-term option, as I explained above);
• an all-in-one HEM web portal that shows data and allows customers to adjust their devices from a single place;
• a utility-provided mobile app that just provides the energy-use data (and maybe offers suggestions on how to reduce consumption); and
• customers’ smart-thermostat displays and apps.

All of these approaches are viable with current technologies, but figuring out which specific strategies will work best in the long run will require utilities and HEM manufacturers and vendors to work together. Because many HEM devices currently offer stand-alone apps and may not share data effectively with other devices unless they are connected to a central hub, partnerships will be vital in realizing the benefits that interconnectivity may eventually provide.

Finally, for utility load management programs, HEM interconnectivity might facilitate more-robust DR and load-shifting functionality. For example, having a house full of devices that coordinate their duty cycles and intelligently respond to DR events might significantly reduce demand without having a negative impact on customers. There are no such devices on the market at present, but utilities and other major players in the energy industry may encourage manufacturers to develop them, given the potential benefits they may offer.

Emerging Utility HEM Initiatives

Utility smart-home initiatives are still in the early stages, and many of them are primarily focused on load shifting and user engagement rather than on energy efficiency. This is not particularly surprising, given the lack of robust established energy savings data and the ongoing challenges around M&V that these devices currently present. In general, the utility pilots and programs involving multifaceted home energy management systems (comprising multiple devices, as opposed to those focused on a single HEM device) that have been run to date highlight one of three approaches that utilities have taken with respect to HEM offerings:

• Develop a custom HEM system from the ground up in order to maintain the utility brand and reduce uncertainty about issues such as who owns HEM device data.
• Partner with third-party vendors to streamline the utility program, give participants more choice about which devices they install, and reduce program costs (making the overall program more cost-effective).
• Install and study HEM technologies in new-construction projects to better understand the potential benefits of these technologies, and to learn more about the underlying ecosystems involved.
• Each of these approaches offers unique challenges and benefits, but all of them are helping to establish the role of HEM in utilities’ program portfolios.

Conclusions and Recommendations

The HEM market offers a range of potential benefits for utilities and other players in the energy space, from sophisticated energy efficiency and DR capabilities to granular energy-use data and the potential for improved customer engagement. On top of that, expected market developments such as growing penetration of solar PV and energy storage systems, and ongoing developments around electric-vehicle charging, appear likely to make HEM systems increasingly relevant to end users, utilities, and other players by amplifying the need for dynamic residential load management to help balance the grid. However, given the many potential selling points of smart-home devices, HEM vendors and manufacturers may not always understand—much less prioritize—the types of energy management capability that utilities and others might prefer that they focus on. For these reasons, HEM systems may represent a major opportunity for energy industry partnerships. Utilities and other interested parties would be well advised to closely follow developments in this area and to develop a strategy for interacting with this fast-changing market.

For demand-side management programs focused on energy efficiency, the kinds of HEM ecosystems being promoted by third-party companies—particularly those offering home security services—may pose a potential threat to utilities, given the free-ridership issues that may arise if utilities choose not to form partnerships or create their own system from the ground up (since customers may have energy-saving HEM devices installed by a third party without a utility incentive, making it impossible for the utility to claim savings). With that in mind, utilities will probably be able to go one of two ways: develop their own smart-home offering, or work with major HEM players to create mutually beneficial joint offerings.

Where DR and load management are a priority, it may be worthwhile for utilities to forge relationships with prominent third parties and manufacturers that seem likely to have influence in this area, along with other companies that may ultimately help shape the demand-management functionality of HEM devices. As evidenced by the experiences of several utilities, allowing third parties to get DR-ready devices into homes so that utilities can control those devices to manage demand on the grid can be a successful and cost-effective approach to load management, with a dynamic and customer-friendly DR resource that’s likely to continue to grow in the future. Furthermore, partnerships established now may enable utilities to influence the development of residential load-shifting technologies in the future.

Essie Snellis a senior research manager at E Source. His core areas of expertise include home energy management systems, Internet of Things devices, water heating, and black-box technology evaluation.

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