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INSIGHTS

Home owners invest more for home automation

Home owners invest more for home automation
The U.S. is the largest market for home automation (HA) systems and devices. Security remains a terrific opportunity as it is the pillar for all other services.

According to Berg Insight Research, global revenues from shipments of HA systems will grow to nearly US$9.5 billion in 2015. Significant revenue contributions will come from retrofit of existing homes, both luxury and mainstream. These numbers include all three categories of HA: professionally installed, do-it-yourself (DIY), and the more recent category systems installed by broadband and utility service providers.

North America represents the largest market for HA worldwide. According to BCC Research, the HA section of the market is set to reach $5.5 billion by the year 2016 at a growth rate of 10.5 percent annually. The home automation market in the U.S. can be broadly classified into lighting, home entertainment and security systems, and energy management and HVAC systems. Of these two sections, the former was poised to grow at the rate of 12.2 percent annually to reach $3.8 billion by 2016. The latter system was expected to reach $1.7 billion by 2016 at the rate of 7.4 percentannually.

HA systems will no longer be confined to two niche markets: luxury customdesigned systems and DIY systems. Systems are becoming more mainstream. "A revolution is taking place in the appeal, deliver, support, and pricing of HA systems as the technology moves from being a high ticket investment to becoming another newly essential monthly service,” said principal analyst Jonathan Collins, ABI Research in their press release. Easy, reliable, and stable HA systems that are also fun to use are the key to winning greater adoption.

HA Boosts Housing Market
The housing market in the U.S. is slowly rebounding. Despite the real estate market recovery, returning homebuyers are weighing their options very carefully. The market for HA technology also reflects this trend. More affordable systems that provide similar benefits to homeowners as high-end offerings are becoming the norm. Indeed, high-end packages that enable whole-home entertainment and are priced into the tens of thousands of dollars draw plenty of looks, but more affordable options that provide basic functions such as the ability to control security, lighting, and HVAC are steadily cropping up and gainingattention. This spells great opportunity forbuilders and integrators alike.

Current low mortgage rates provide a great opportunity for first-time home buyers. Some of these first-time buyers are younger consumers who have grown up with technology in the palms of their hands. As more are entering the housing market, these younger generations will play a growing role in shaping the market in the years ahead. It could be interesting and exciting to see how builders can sell, implement, and execute HA technology in entry-level homes.

Savings with Energy Management
Energy management would also be one of the reasons fueling consumer interest as utility costs continue to rise. However, whether homeowners take energy savings as ROI varies wildly depending on the country, utility, and rates. “In North America the ‘argument' or ‘justification' might include ROI, but the primary motivation is that remote control via smart device is fun,” said Mark Walters, Director of the Z-Wave Alliance. “In other markets where rates are higher and where the communication is coming primarily from the utility company, ROI is often the leading and deciding factor.”

Jay Kenny, VP of Marketing at Alarm. com is seeing an increase of customers who are eager to achieve savings with energy management. “I think there are two types of consumers that are adopting the energy management technology today. One type is those who are environmentally conscious. They want to conserve energy and are interested in green energy. These are the early adopters of energy management. We started to see another type of customerswho like to see how much they can save on their energy become a larger portion. The problem historically with pure energy management system is the users have to spend hundreds of thousands of dollars up front for the hardware and maybe there is a service fee. With our solution, our customers have their security systems and they see a lot of value in that and they add energy management to it. So they spend only another five to ten dollars a month to get the control of energy solutions. Because it is bundled into this larger home platform solution, it is relatively low cost just to get this energy management piece.”

What consumers are willing to pay for are systems that not only promise energy savings but also provide for remote management and cool user interfaces on smart devices,” added Walters. “In North America, the biggest factor for adoption of communicating thermostats is the remote-controlled door lock. The door lock brought the alarm and security companies on to the scene. They know how to sell and deliver smart devices. They include smart energy devices as a part of an overall smart home offering. Additionally, other home automation/ management devices — such as door locks, lighting controls, and window shades — are pulling smart energy devices into the home.”

"It seems that the leading factor for adoption of smart energy devices is the convenience of using smart devices, phones, and tablets, to control the smart energy devices both locally and remotely,” added Walters. “We have had time-based setback energy control for decades. Now, remote control is the next generation of ‘optimization' and it has become more important as our schedules become more hectic and as energy availability and cost are starting to vary on a random ‘real-time' schedule.” By connecting electronic thermostats that can communicate with the HA system, it is possible to save on energy consumption up to 15 to 20 percent.

Market Education
Expanding gap between demand and supply of electricity and environmental effects of excessive usage of energyconsuming appliances are particularly driving increased focus on energy conservation. However, market education and awareness of energy management is still poor, according to Walters. “Any increase would improve adoption. ROI is one argument; save the planet is a stronger argument, while avoiding future rate hikes and outages is an even stronger argument.”

The education must occur both ways. Utilities' investment in system automation and better management will reduce the amount of unplanned maintenance. According to A.T. Kearney, better demand management from energy utilities could save roughly $10 million a year. The issue of demand management will grow more critical and complex as consumer energy use changes with energy management tools. Utilities' information on these changing patterns would help reduce the penalties they pay for energy supply imbalances.

Incentives such as offering energy management products like smart meters along with an attractive offer can win new customers. By doing so, it not only improves a utility's brand as a green supplier but also may draw and retain environmentally conscious consumers. Consumers, on the other hand, get clearer information of their bills and savings.

HA to Medical Services
Currently, less than a quarter of US homes have security systems, which is roughly half the penetration rate of cable television. In 2013, the security and HA markets will continue to bind together. The security system, with its ability to know the status of all parts of the home, makes it the logical foundation for automation systems. Service providers do not just stop at HA and are sure to include more. Ultimately, HA services will follow an aging US population and expand beyond lighting and thermostat controls to medical services. Health service providers will be able to see remotely when patients take their medicine or need emergency care.

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