The Next Nest

Embracing the Future of Connected Energy Technologies

By Mike Kaplan, Ecova

As utilities develop their demand side management and customer solution strategies, they face a host of challenges ranging from new business models to competition for customer dollars. Emerging connected devices and technologies can be part of the solution, giving utilities a platform to enhance customer engagement and improve demand side management.

Utilities shouldn’t, however, sit back and wait for the next Nest thermostat to come along. Transforming market adoption of connected devices has historically been easier said than done. Utilities should proactively use lessons learned from the success of Nest, and competitive smart thermostats, and apply them to the next wave of connected energy saving devices for utility residential and business customers alike.

When Nest first launched in 2010, the idea that a customer-much less droves of them-would pay $250 for a thermostat was a foreign concept at best. As with many innovative end-user technologies, the prognosticators were wrong. Looking ahead, “Smart Thermostats Market Report 2015-21,” released by IOT Analytics in March 2016, predicts smart thermostat sales are expected to reach $4.7 billion by 2021, growing from $879 million in 2016.

Smart thermostat makers drove mass- market adoption by doing something much more profound than simply creating new hardware designs, algorithms and smartphone apps. They made the standard, fairly uninteresting thermostat something that customers actually covet.

Smart thermostats engaged customers in a new way by moving the conversation beyond the basic capabilities of the thermostat. The marketing and sales pitch was no longer just about new features and functions for controlling customers’ HVAC and saving energy. It was about something bigger: simplifying customers’ lives, providing customers with more control and comfort in their homes, and leading a savvier and more high-tech lifestyle. The message resonated with utility customers, driving demand for reasons beyond the original energy savings intent.

Utilities can learn from this experience as more energy efficiency products become smart, connected and valuable to consumers and businesses. There are several home and building technologies that have the potential to be “Nestified.” With the right set of customer offerings, utilities can expand adoption of these solutions and get customers to opt-in to demand side management at the same time:

“- Energy management systems for small-to-medium-sized businesses: Energy management systems (EMS) are not new in the commercial sector. Long considered a large commercial offering, small-to-medium-sized businesses (SMBs) can now take advantage of the EMS (or smart thermostat) capabilities to improve control of their buildings, attacking 30 percent to 50 percent of the energy savings potential that typically exists. The EMS is not just about saving energy-it improves business operations and reduces maintenance headaches. In addition, SMBs are increasingly open to new technologies that make them more nimble, from professional services firms adopting marketing software to operate more like a large enterprise, to restaurants that now use tablets to take and pay for your order. Likewise, utilities should communicate how an EMS can help ease the two most precious resources of SMBs: time and money.

“- Water heaters: Water heaters aren’t necessarily considered high tech, but smart water heaters could play a key role in grid management and demand response for utilities. Green Mountain Power in Vermont, for example, gives customers more control over their energy use by leveraging smart water heaters during periods of peak energy demand, when energy is the most expensive. A homeowner’s next water heater might be able to provide updates to her smartphone or online if it requires maintenance, which brings added value into the home or office. This new type of technology can help break the cycle of the water heater simply being an emergency purchase by transforming it into a purchase that is planned for and continuously managed.

“- Smart lighting: An emerging class of connected lighting products is providing utilities and their customers with unprecedented control over their light bulbs. For many customer segments, however, prices are still high and the incremental savings benefit is still being proven. While prices will come down over time, utilities must effectively market the benefits of these products beyond energy savings. Take the ability to precisely control the hue of any bulb: consumers may be interested in setting the right ambience when their friends come over, while businesses will care about how this capability can positively impact sales or employee productivity. Other benefits include enhanced security and even health. These are the types of reasons some customers might pay a premium for this technology.

What role should utilities play in the process of framing these benefits to their customers? Part of the answer depends on how savvy technology vendors are with their own marketing strategies, but utilities should be prepared to be a driving force when necessary. In addition, the utility has never been in a better position to elevate the message and drive greater adoption for these products. There are several key reasons for this:

1) Utilities are bolstering their customer engagement capabilities. Recognizing the need to deepen customer relationships and improve customer satisfaction, many utilities are investing in new customer engagement solutions and functions. Customer and digital experience is becoming increasingly core to the utility, supported by both internal functions and partnerships with external software and services providers. The right tools, processes and capabilities are big pieces of the puzzle to customer engagement success, but utilities also must master how to speak to their customers better than anyone else. Effectively introducing and communicating new technology products is one way to do that.

2) Utilities are getting into the analytics game. Like investments in customer engagement, utilities are taking data analytics seriously. With meter data-unfettered access to how customers are using its services-the utility industry is in a better position than any other vertical to understand customer behaviors and needs. With the right analytics solutions in place, a new level of personalized understanding can be embedded in customer engagement efforts around smart and connected products. That’s something a product manufacturer can’t do on its own.

3) Utilities are transforming the buying process. Utilities are increasingly at the forefront of the purchase process for energy related devices. By influencing the distribution, purchase and installation of these products, utilities can transform the energy buying process into a seamless experience. Technology vendors are already eager to work with utilities as a key channel. In addition, utilities are getting more proactive by improving their incentive and rebate strategies, and launching online marketplaces that guide customers to the right offer for them. Customers, particularly those who are connected, are more apt to listen to their utility: A report from Accenture Strategy titled “Re-energizing the New Energy Consumer,” published a couple of years ago, says that 41 percent of digital consumers trust their energy provider to help optimize their energy consumption vs. 31 percent of non-digital users.

As business facilities and home environments become smarter, there are more opportunities for utilities to think big and encourage the adoption of connected devices by learning from past industry successes. Ultimately, rather than focusing on one singular device for future growth, utilities should embrace the ecosystem that these connected devices create within the home or business, and work to scale this across their customer base to deliver more dynamic grid management and greater customer satisfaction.

The sum of a connected ecosystem provides even greater value to customers than its parts, and utilities should understand how to orient their strategies to capitalize on that value.

Mike Kaplan is vice president of marketing at Ecova. He leads Ecova’s corporate and product marketing efforts for solutions provided to utilities and commercial and industrial organizations. His focus areas include product messaging, sales enablement, go-to-market strategy development and demand generation. Prior to joining Ecova, Kaplan managed marketing activities for Retroficiency, the award-winning building efficiency analytics platform acquired by Ecova in October 2015. His experience spans a number of high-technology markets, including enterprise software, wireless and mobile, analytics and Internet. Kaplan holds a bachelor of arts degree in media studies from the University of Rochester and an MBA from the Massachusetts Institute of Technology’s Sloan School of Management.

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