Visions for the energy-smart home of the future haven’t panned out.
In the mid-2000s, the internet-enabled consumer dashboard was going to be the thing that revolutionized energy in the home. Even Google and Microsoft got in on the action – and then shut down their energy dashboards when no one was using them.
Then came the smart thermostat, pioneered by Nest. Many hoped the rise of smart thermostats marked the start of a wave of technology adoption that would enable millions of energy-aware homes. They have been helpful for demand response programs, but the gadget-centric model hasn’t yet unlocked a smart home revolution.
But today, there’s a new backdrop that is creating more urgency for the grid-interactive home: electrification.
As we electrify the economy and build more variable renewables, we need buildings to help balance the grid. And after decades of futuristic visions that never materialized, are we finally at a moment when the smart, grid-interactive home is emerging in a meaningful form?
This week, we dug into that question with Canary Media Senior Reporter Julian Spector. Read Julian’s piece on grid-interactive homes here as part of Canary Media’s week-long coverage of the smart home space.
Full transcript:
SPEAKERS
Stephen Lacey, Julian Spector
Stephen Lacey
I’m curious what’s the smartest device you have in your home?
Julian Spector
My home? So I don’t I don’t technically have a home right now. I’m kind of in motion. My lease was up last year. And I was like, what if I try living in a few different places first before I locked myself down? You know, kind of prioritizing flexibility.
Stephen Lacey
And you look like you’re in a utility supply closet right now.
Julian Spector
Yeah, I’m in a friend’s pantry slash washer-dryer closet in Southern California, currently. So yeah, the smartest device in my home, I guess that’s just my brain. Like I carry that wherever I go.
Stephen Lacey
Julian Spector is a senior reporter for Canary Media, and in between recent trips across South America and Mexico at the stop at a friend’s utility closet in between, he’s been reporting on this perennial question: what exactly is the energy smart home of the future? This is one of the most interesting and quite frankly, annoying topics in energy, if you ask me. I say it’s annoying, because we have this pop-culture influenced view of the smart home where everything is completely automated and our dwellings anticipate every need. And we’ve all internalized this whether we believe it’s going to happen or not. It’s just kind of how the smart home is judged. But I still find the question endlessly interesting because our homes are getting smarter. So many devices, from thermostats to Wi-Fi routers, to lights, to refrigerators, to batteries are potentially interactive. And it’s totally possible to orchestrate them for the benefit of the electricity system. That’s not science fiction.
Julian Spector
It will be more valuable, really, for all parties involved to have homes that are very much connected to the grid, are able to respond to signals from the grid based on things like an imminent shortage of power, is there a ton of cheap or free solar being pumped onto the wires at this moment, and you could get extra power, you know, and help out and use more clean energy. You know, instead of all these homes being their own little island, they are all together in some sense as part of this broader grid network, working together in ways that help the residents in the home, but also lower the overall costs of the clean energy transition and make the whole system more efficient, clean and stable.
Stephen Lacey
Now this vision that you just outlined has been out there for the last couple of decades, people have been talking about these grid interactive homes since the early 2000s. How does reality stack up to this imagined future?
Julian Spector
It’s not quite so shiny, as you might expect. At this point, we are seeing year-over-year growth in the number of connected smart devices in homes. So that is trending in the direction of smarter, more connected homes. Surveys of consumers also say that energy efficiency, sustainability are really top priorities for the people who are buying these devices. So as far as the grid-connected, grid-interactive, clean energy home vision, we’re extremely early. There are some really meaningful achievements in select pockets of the country in the world. But it’s very, very far from any kind of mass participation in the energy system. I think this topic in particular can get sort of ungrounded and abstract. But I did find actually quite a few companies that are already implementing this vision and thousands, tens of thousands in some cases, hundreds of thousands of homes.
Stephen Lacey
This is the Carbon Copy. I’m Stephen Lacey. This week, a new backdrop for the smart home. As we electrify the economy and build more variable renewables, we need buildings to help balance the grid. And after decades of futuristic visions that never materialized are we finally at a moment when the smart grid-interactive home is emerging in a meaningful form? I have seen many variations of the smart home vision over the years. In the mid 2000s, the internet enabled consumer dashboard was going to be the thing that revolutionized energy in the home. If people could just see in real time how energy is being used, they would transform their behavior. So the thinking went, even Google and Microsoft got in on the action and then shut down their energy dashboards when no one was using them. Then came the smart thermostat pioneered by Nest. Now that device and then a range of other smart thermostats, they’re genuinely good products. Google Nest has sold 11 million of them. People really like them. Many hope that the rise of smart thermostats mark the start of a wave of technology adoption that would enable millions of energy-aware homes. They have been really helpful for demand response programs, no doubt and shaving off some money from energy bills here and there. But the gadget-centric model just hasn’t unlocked a smart home revolution. One of the problems is consumer expectations. People don’t want to do that much work or buy a bunch of gadgets or look at a dashboard every day just to save a few bucks a month on their energy bills for the sake of it. Another is regulation. I mean, here in America, it’s so hard to make homes into grid assets because of a thicket of different utility programs and regional market rules. But today, there’s a new backdrop that’s creating more urgency for the grid-interactive home. And that led Julian to ask how it might influence a new phase of activity.
Julian Spector
Yeah, so one big thing that’s changed is this new momentum around electrify everything, after years where a lot of the clean energy focus was just getting more renewables built. There’s now real policy and interest in electrifying homes, electrifying buildings, swapping out the fossil fuel appliances for electric ones. But it doesn’t just solve the problem entirely. Because, you know, we’re trying to clean up everything and if we just electrify the homes and leave them non-responsive to the grid, suddenly you have much bigger electrical demand that has to be met by clean energy. But if it’s not lining up with when the clean energy is being produced, you got a problem there. And to illustrate that point, you can imagine in California it’s feasible that in the next few decades almost all the homes will be cooking without gas, you know, switching to induction stoves, and heating and cooling electrically. But let’s say we got a ton of solar power during the day and then at night, everyone’s coming home, the solar power stops producing because the sun goes down, and then everyone’s turning on their, their induction stove to cook dinner. And suddenly you have this spike of demand that just didn’t used to exist at the exact time that was already really our most challenging time for meeting electricity needs in California. And so I think there’s this real risk that if we only electrify and don’t do it in a smart and flexible way, that creates a much bigger headache for trying to like build enough clean energy and deliver it to the people at those times than if we just do some common-sense approaches around making the making the buildings a useful player in this whole system.
Stephen Lacey
Yeah, the electrification piece is really interesting because NREL the National Renewable Energy Laboratory put out an electrification futures study and found that with widespread electrification across the economy we’re going to have to double the amount of electricity generating capacity that we’re installing – renewable electricity generating capacity through the middle of the century. So it’s a lot more capacity and there’s a lot more flexibility you need in the system when you’re developing that much renewable energy.
Julian Spector
Absolutely, yeah. And then the other facet here is the grid has to be built to meet the moment of highest demand in the year. But you know, that’s only one hour and there’s a one hour where everyone’s using all the things because there’s no coordination to help to smooth out the demand, you could end up being forced to buy all these really expensive, grid transmission upgrades, distribution upgrades, things like that, that could be avoided if there’s just a little more coordination to smooth out the things that don’t have to be happening all at the same time.
Stephen Lacey
What’s interesting, though, is that this isn’t necessarily a technology problem. Like we have the ability to communicate with devices, devices are getting better in the home, consumers are adopting those devices. So what is the technology landscape itself look like here? Because there’s a lot of interesting stuff that has happened that could potentially enable this grid interactivity.
Julian Spector
Absolutely. Yeah. So the there’s plenty of technologies that can do this and are doing this. When I spoke with Elta Kolo, who’s a longtime analyst of the future of the grid space and investor as vice president Huck Capital. She said, “I don’t think we should be calling this the home of the future. It’s the home of the present because the technology is already here.” And yeah, I mean, there’s solar charged batteries in homes that can feed into the grid if you need to actually send power back to the broader system. You’ve got smart thermostats, which are probably the single most widespread consumer product of the energy suite here. And then there’s things you can do with heating and cooling, such as pre-heating your water in an insulated water heaters so you don’t need to use energy during the peak demand times or the higher price times. So you know, these things are doable. They’re already being done. And I think that’s broadly true of the Clean Energy Transition, like we know how to make clean power and shift it around. But it’s how do you find ways to do that, in rules and regulations that were written for an earlier era that don’t necessarily recognize that all these technologies are here and able to do these valuable tasks?
Stephen Lacey
Yeah. So if technology is not really the problem, then what are the limiting factors. They seem to be consumers and how they view the space and their role in it. And then regulation?
Julian Spector
Absolutely. So I think a critique that you can make of the clean energy industry, writ large, and this is generalizing a little bit but there’s a lot of companies that are very good at tackling these thorny, wonky, really complicated grid problems, engineering problems, design challenges, and coming up with these really complex but interesting solutions that some would call fascinating, perhaps. But that’s often happening at a at an extreme distance from any sort of consumer friendly conversation or understanding. And you know, that a lot of these startups have to really sell to utilities as the way to get into the market. And it’s just a different mindset or skill set, if you’re trying to sell to these subject matter experts, a relatively small group of them. And that’s who decides if your product gets bought or not, is very different from mass-marketing products that an individual person, a normal – someone not obsessed with the grid might actually be interested in. But then like you said, the the regulation and the incentive structures, that’s a huge one here, because if you don’t have a way to compensate people for helping the grid, it’s like, why should you do it? I mean, you could ask people to do it out of the kindness of their hearts. And, in fact, that’s something California has done repeatedly with its flex alerts when it’s a summer heatwave, and there’s not enough power to go around. And they just basically plead with people say, please use less electricity, please. But that’s via text message. It’s social media.
Stephen Lacey
Via text message? This is not an asset that can be controlled. It’s like it’s on social media and a text message,
Julian Spector
You don’t want your whole economy depending on you’re begging people to turn off the lights at a crucial time, right. You want to have a system in place where you’re reacting before you get to the emergency, you give people a reason to do the kind of behavior that is desirable. And yeah, so we’re starting to see pockets of this where maybe it’s a local pilot project in a single utility territory. Or, if you’re in one of the more competitive markets like Texas, or increasingly in California, there are these sort of more open space for companies to structure kind of more dynamic business models, that are able to actually participate in the broader system and reward people. But across the board, yeah, the regulatory factors are, are very tricky.
Stephen Lacey
We’re gonna pause the show here for just a moment. And when we return, we’ll Look at a few companies that are actually making progress in pockets of the country. So let’s hear about what companies are actually doing that is interesting and making a real impact. There’s a lot of experimentation with business models. It’s pretty incremental at this stage, but certainly some promising activity that you went out and highlighted. So tell me about some of the companies you looked at and what they’re doing that feels genuinely impactful.
Julian Spector
So yeah, I’ll run you through a few of them. You know, one is Octopus Energy. Have you heard of them?
Stephen Lacey
Yeah, I have. They’re a UK retailer?
Julian Spector
Yeah, so started as a UK retailer, and they’ve kind of kept growing and growing and now they have got their tentacles in a lot of things, so to speak. So in the fall, when it looked like the UK was facing potentially a fuel shortage as a result of the war in Ukraine and gas prices and everything, Octopus Energy, just kind of flipped on a demand flexibility service overnight for their customers. They just said, “Hey, customers, you can help us avoid grid shortages, and we’ll compensate you” and they got like 400,000 people to sign up almost overnight. And in the first event that they responded to with this kind of decentralized grid response fleet, they lowered demand by 108 megawatts, which is like a serious amount of power. That’s could be a peaker plant, not needing to fire up. So that’s pretty cool. Now in the US, they operate in Texas, where there’s also this really decentralized rough and tumble competitive market around electricity. And so they found that over there, they can come in and be a retailer. And what they do is they, they lower the electricity rates people pay if the customers sign up more connected devices that Octopus can operate on their behalf. So for instance, if you’re a customer their electricity and you get a EV. And you say, Hey, you can control my smart EV charger, within certain parameters schedule when it charges up they chop your rate per kilowatt hour electricity by 20%. That’s a substantial amount, you know,
Stephen Lacey
And aren’t they wrapping EV leases into those contracts?
Julian Spector
Yeah, yeah. So they can also hook you up with the, with the EV in the first place and do the lease payment on the same energy bill, because it’s all part of the same package to them. And they’re not just giving away money here, what they’re able to do is use that flexibility to source the power they have to provide to that customer at times when there’s more renewables. And it’s cheaper in the in the wholesale market. And so it’s really a win win. They compete with other retailers by offering cheaper rates, and they’re able to offer the cheaper rates by enlisting the customer devices. And then it’s all kind of building towards this macro vision of a cleaner grid and more efficient grid and a more decentralized and resilient grid.
Stephen Lacey
Who else jumped out to you?
Julian Spector
Do you remember Sonnen from the old battery storage market?
Stephen Lacey
Yeah. German battery provider?
Julian Spector
When I started covering them for Greentech Media, when we worked together now years ago, you know, they were this company, they were big in Germany. In the US, they just were a lot more expensive than the Powerwall was in the early days. And you kind of wondered how long is this gonna last, because it’s hard to just be a more expensive alternative. But what they have in Germany is this massive, decentralized kind of utility, almost where they, they have batteries in people’s homes, and they coordinate them and operate them in the wholesale markets in a way that they can basically provide really affordable electricity service to the customers, because they’re kind of using the customer’s batteries to bid into these markets in really complicated ways. And, you know, they just can’t do that in the US because of the different regulations in every state and this emphasis on the traditional utility model. But they found ways to make little versions of that wherever possible. And so one of the most interesting is actually in Utah – tough market for rooftop solar, they got rid of the net metering policy that pays you for the extra electricity you send to the grid. So there’s very low compensation for solar, also, power is very cheap. But what Sonnen was able to do is kind of convinced the utility Rocky Mountain Power, that it would be really useful to have thousands of home batteries able to respond in milliseconds to whatever grid need you might have. And so there’s this now thriving network of literally thousands of homes participating, and they get a big check up front from the utility like a couple thousand dollars. And then the utility is able to calm these batteries for usually, it’s like the frequency regulation, which is just little bursts of power that kind of get the grid back in line where it needs to be. And it’s kind of a wild success story, because there’s none of the usual policy supports and attack to some of the solar sales folks who are working with Sonnen on this company Yes Solar. And, you know, they’re saying their customers are actually pretty excited to be like helping the broader community. Yeah, so with Sonnen, actually 88% of the batteries they’ve installed in the US are part of some sort of virtual power plant or grid-interactive program, which is just a wild statistic compared to the norm for the market where most people are buying the batteries for really the backup power, and it just kind of sits there.
Stephen Lacey
One of the other companies that you talk to was Ohmconnect, which is an interesting company, because, you know, so far we’ve been talking about more expensive devices that people need to be able to interact with the grid, but Ohmconnect doesn’t necessarily require that. So what’s their business model?
Julian Spector
Yeah, so they work with all sorts of devices. So you don’t need a fancy battery. At its most basic, they’ll just text you, “hey, if you can reduce your usage for the next 15 minutes or half an hour we’ll reward you for it.” And then if you want to get more involved, you can get these smart plugs where you just plug a major appliance into that and they’re able to remotely flip it on and off in response to the needs of the grid. So they’ve done a lot of scale through this, they’ve got 300,000, grid interactive homes worldwide that they’re managing. And in California, which is their main base of operations, they’ve got 250,000, appliances and devices under their control. So I think what’s cool about their model is their CEO Cisco DeVries, he’s all about the incremental wins. He told me, you know, you’ve got to start somewhere that’s relatively easy and makes sense for people and you can build from there. He said, they’ve noticed when people sign up, they’ll compare the like, key summer months, energy consumption to the year before the customer signed up. And they reduce energy use by 10.2%, on average, but he admitted that’s actually a lot more than anything we’re doing as a company to change their their energy usage. So there’s almost a psychological effect beyond the technology itself.
Stephen Lacey
So all visions of the future in this area, I wouldn’t say all, but many visions of the future in this area, have a Jetsons-like feel, and this is a much more tempered view of how the smart home will play out. So we’re at the very early stage of this transition, even though it’s been ongoing for some time. What do you think the evolution of the smart home looks like? What do these companies think? And do you feel like the industry is being more reasonable about setting expectations?
Julian Spector
I think so I think you don’t need to overhaul the home entirely, you can take devices, people actually have already and make some use out of them for the grid. It’s a more modest goal and I think more realistic than swapping out the entirety of the built environment for something clean and shiny and new. So the key going forward is just finding the places where you can graft this new vision onto the existing energy system. And I would guess we do see more grid interactive homes in absolute terms, but that it’ll be very unevenly distributed. And what I mean by that is, you know, we’re already seeing some very exciting programs in Texas, where the structure of the market allows creative businesses to come in and just whip something up and do it. You know, you’re seeing that in the UK, we’re finally seeing more of it in California, which is like, talked about it for years and years without really making the structures needed to make this a repeatable kind of thing. But that’s finally starting to happen there. And then you can see the cases where there is a traditional utility that is just thinking a little more creatively than some of them and jumps on board with this. So that means there’s millions of people living in places where they just might not have lucked into having a sufficiently creative utility to give them access to this sort of thing. But that’s the structure of our energy system and solving that requires a higher order level of organization and mobilization.
Stephen Lacey
It doesn’t Look like you have a grid interactive thermostat behind you in that supply closet.
Julian Spector
Yeah, I don’t know. There’s a bunch of bottles of rum and some power drills.
Stephen Lacey
It looks like there’s an electric vacuum there hanging on the wall. Maybe the utility can cycle that on and off as it’s charging.
Julian Spector
Yeah, you know, if there’s a good battery in it, maybe we can start activating the Dyson vacuum fleet.
Stephen Lacey
Julian Spector, a senior reporter at Canary Media, thanks so much.
Julian Spector
Oh, this was very fun to talk through and, you know, let’s come back in a decade and see if it’s really happening.
Stephen Lacey
And that is all for the show.
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