Home appliance OEMs, while fighting for consumer mindshare with 'smart' features, are missing a big opportunity to shake up the growing residential smart energy and energy storage market. This article shares how they can do so, and score major market differentiation in the process.
Planet of the Ap-plianc-es!
How Home Appliance OEMs Can Shake Up The Growing Residential Smart Energy Market
Mark Waring, Principal,
Silicon V Strategies Copyright 2014
Some of the latest smart appliance efforts already appear ready for blast off to some futuristic world landscapes, hopefully none involving we humans chained and herded by horse mounted apes! But to the point, the latest in LCD displays and smart (and recently even smarter) communications options are nothing if not high-tech. Today, however, there are potentially even more immediate and impactful opportunities for appliances to lead, one in particular being in the area of smart energy.
Appliances are by nature energy sinks', or pure consumers of electrical or gas fed power; electricity in, clean clothes (or cold drinks, or simply a continuous blast of cold air) out. Today's smart grid, however, is increasingly thirsty for smart, active, non-passive elements to plug in and put to work, pumping energy in more than one direction, ironing out instabilities such as frequency variations, or operating actively to contribute to times of heightened electricity demand. Entire power plants are required solely for the purpose of kicking out extra power during these times (commonly called peaker plants), often popping up near power hogs such as massive server farms, or simply addressing concentrated spikes of electricity demand in urban areas, typically during hot summer afternoons.
But what if customers could respond to some signal, some request from the power company to reduce their consumption, even for a short time? The possibilities of avoiding those spikes would offer immediate payouts for both customers and power providers alike. And since this question has already been asked, there is already a healthy, if still somewhat nascent industry sprung up to accomplish just that, referred to by the appropriate, if not immediately obvious term, Demand Response.
Public companies including Comverge and Enernoc have built businesses largely on playing matchmaker, collecting both large commercial power customers and smaller residential customer bases, and marrying those participants to a local power provider, often providing the education and marketing outreach to gain buy-in from enough customers to matter, and often managing the actual dispatch of signals (which range from fully automated signals to an old fashion page or phone call to a factory manager), telling them to the effect, "Hey, things heating up, please back off your power draw by twenty percent for the next hour."
And here's where home appliances come into the picture, or should. The bulk of electricity demand is residential. Using the Federal Energy Regulatory Commission's own words, "…it is the residential class that represents the most untapped potential for demand response…" Appliances make up the lion's share of residential demand. However, it is quite challenging to convince an individual consumer to predictably and reliably agree to turn down his or her AC, or delay or worse stop the laundry machine mid-cycle, much less postpone the refrigerators defrost, however that would even work. But where there's a problem there's an opportunity, and smart thermostats, HEMS (a hub, if you will, in the home trying to manage multiple devices intelligently, sometimes with energy consumption part of the plan) are already being used to address this area, though with limited success.
One challenge is the customer is always king, and therefore these programs rely on soft-sell, opt in' approaches, not only to sign up the customer in the first place but then to participate when needed, and no one is going to tell Joe Friday (or Charleton Heston while plotting to overthrow the ape overlords!) that he can't crank his AC unit up to Max when he darn well wants to, or to quote Greentech Media, What if you don't want the air conditioner to turn off? That is the question that currently bedevils the demand response industry.
A second challenge is a lack of standards, or plug and play compatibility between various HEMs solutions, other home electronics (including smart appliances), and even the signaling standards which must al be in synch for a pure signaling scheme to accomplish its goals, or even have a chance.
A third challenge is the need for ungainly installations of often complicated hardware and software in the home, rather counter to making life simpler, which creates equally difficult sales channel issues.
A NEW APPLIANCE DRIVEN RESIDENTIAL SMART ENERGY PLATFORM
And here is where a confluence of factors makes the timing ideal for the introduction of a smart appliance which is more than a passive energy sink, but which can transform into an active energy element, or daresay even a home energy "platform" for utilities and DR providers, and consumers themselves, to use and monetize in a number of flexible ways. What makes this new appliance so different? Very simply the addition of a battery dock, tied to existing or included standard IP connection (most obviously Wifi).
Adding a low-cost, integrated energy storage capability, utilizing a Li-Ion battery capable of running the device for anywhere from a few minutes to a couple hours, even at a conservative cost estimate of $1,000/KWh, may be well under US$100, and Li-Ion battery prices are consistently heading down (and some of the largest appliance OEMs have in-house battery production already)..
Adding this capability in the form of a dock with some minimum communications (or better yet simply tying in to existing smart appliance communication schemes) reduces the manufacturer's cost adder to the sheet metal design and minimum connectivity required, arguably much less than what it's costing today to add other smart appliance' features. The result is a very low risk, but at the same time very flexible implementation, whereby utilities, government, or Demand Response providers may select and subsidize the battery itself, taking advantage of existing battery storage and general demand response incentives which exist today.
But why would the Demand Response industry, including the nation's utilities, get excited about this solution? For several reasons. A mainstream line up of appliances with such a capability addresses some of the biggest challenges in this technology driven space today. Signaling the appliance to switch to temporary battery operation reduces its load to zero, every time, not some ambiguous amount depending on a variety of factors such as comfort level, customer inconvenience, operating state, etc. Secondly, the question of how many customers will participate largely disappears. There is zero impact on the customer's usage of the appliance, it is an invisible, or maybe better a marketed Green feature – imagine a soft green LED light bar glowing to indicate your refrigerator has switched from the grid to its own power, and imagine the Best Buy kid inviting shoppers to unplug the demo unit and find the inside cold and glowing with light on its own – that might be an easier sale than some of the current smart appliance advantages!). Also involving the sales channel / logistics, this approach embeds the value of storage directly in the end usage device, eliminating the need for new wiring systems, garage monstrosities of battery banks or proprietary "HEM" devices which work only with other specific devices.
In other words, it gives the appliance OEMs an opportunity to place themselves squarely in the center of a very healthy, quickly growing smart energy market, with minimal up front risk or cost impact, and shake up a new industry with a much broader, sweeping, and ultimately useful solution. Who knows, it might put the first large OEM to implement this solution in the sights of Google's next energy partner or acquisition path, which is not a bad place to be, even if it involves dodging some speaking apes along the way!