Outlines of top-three HEM markets

Outlines of top-three HEM markets
The global HEM market is at its early stage of evolvement. The decisive factor behind market growth is major energy policies that vary from country to country, such as climatic and geographic differences, or various energy infrastructures that may also contribute to the growth. According to Transparency Market Research, North America, Europe and Asia Pacific remain the largest HEM markets in the world. The following lists the opportunities and trends within the top-three markets.

North America

While home security, automation and entertainment continue to gain market tractions in North America, the scale and revenue of HEM services/devices are expected to grow as well, as Icontrol’s 2015 State of the Smart Home Report points out, “70% of U.S. consumers are excited about the potential cost savings from energy efficiency and monitoring, and 48% say they are excited about the potential convenience in programming home settings and maintenance.”

Energy policies provide another driving force that drags customers into the HEM. Although U.S. Court of Appeals in Washington, D.C. has vacated the Federal Energy Regulatory Commission's Order 745, which calls for grid operators to pay for demand response (which is considered equal as power plants) at the full market price, several states have legislated to facilitate prevalence of smart grid and DR programs. For instance, in Illinois, Illinois Power Agency Act requires utilities to reduce peak loading by 0.1% every year for 10 years; in Maryland, The EmPOWER Maryland Energy Efficiency Act of 2008 also aims to reduce the total power usage by 15% by 2015. These policies contribute to the increase of DR programs which have emerged as a new business model. The market is expected to grow at an annual rate of 4.9 % from 2014 to 2023, reaching $2.2 billion in 2023, according to GTM Research.

After the strong need for DR meets the launch of Nest’s learning thermostat in 2011, DR via deployment of connected thermostats and subsequent cloud services has become popular. “In Las Vegas, we offer a free thermostat, free installation and free services through the local utility, in exchange for participation in the demand response program. Homeowners agree to turn their air conditioners down for two or three hours on very hot days,” shared Philip Dawsey, senior marketing manager at EcoFactor.

Some utilities, such as Baltimore Gas & Electric (BGE) and ComEd, also adopt the Behavioral Demand Response (BDR) approach, which utilize data derived from AMI, proprietary analytics, behavioral science and personalized communication, to measure and cut energy consumption.

Europe

According to Transparency Market Research, Europe is expected to be the fastest growing HEM market from 2013 to 2019, growing at a CAGR of 26.2%. Behind that growth, influence from energy policies is also decisive.

DR business may not yet be flourishing in Europe, but government initiatives have provided enough incentives for HEM adoptions. EU’s goal to reduce CO2 emission by 2020 is pursued by increasing renewable energy supply which often goes hand in hand with HEM.

“The German government will shut off all nuclear power plants, and aim to have 80% of renewable energy by 2050,” said Dr. Thorsten Müller, CEO of Bosch Connected Devices and Solutions. To achieve this goal, utilities have to invest in renewable energy (which can be used for heating devices) and transform themselves from traditional energy suppliers to energy-saving service providers. EON, German’s biggest energy distributor which serves 33 million customers across Europe, has declared that it will increase investment in wind, solar, smart grids and customer services.

The Spanish government has subsidized renewable energy sources, such as wind power and solar photovoltaic, for years. Although the subsidies had been slashed due to tariff deficit ($35 billion) and daunted the development of renewable energy sectors since two years ago, a 7.5% annual return for electricity sold by wind farms is guaranteed. As Spain’s economy recovers, the Ministry of Industry of Spain is expected to call subsidy cuts a halt. While Spain has set its goal to increase the percentage of wind power supply (up to 40% by 2020), HEM services/devices would be supportive in achieving it.

In 2008, the UK established Department of Energy and Climate Change (DECC), which has been responsible for the reformation of electricity market and energy efficiency. It also attempts to install 53 million smart electric and gas meters in both residential and commercial sectors by the end of 2019. These changes make the UK a fertile land for HEM. For example, according to Navigant Research, more than 100,000 customers in UK have adopted British Gas’ Hive Active Heating in a little more than a year.

Asia-Pacific

In the Asia-Pacific market, energy policies boost the HEM industry as well. What is happening in Japan shows how the government can deal with energy matters by promoting renewable energy and HEM. “Since the shutdown of all nuclear plants in Japan in 2011 after the Tohoku earthquake and Fukushima nuclear accident, citizens have suffered from power shortage, and thus small-sized electricity generators (some of which using renewable energy) and power-efficient appliances have been welcomed in households,” said Mina Wang, director of Smart Network System Institute at Institute for Information Industry.

Among these renewable energies, solar power is preferred in Japan. “Many households would install solar photovoltaics on their roofs, and the installers would monitor the efficiency of solar systems via data analysis,” explained Jason Liao, product marketing manager of Power & Energy Management Division at Billion Electric. “After their systems get inside of the homes, they would then consider improving their services by adopting HEM, which opens a door to new opportunities.”

These new opportunities emerge under not only force of natural disasters but also that of politics. In fact, Japan’s ECHONET Consortium has delved into energy saving by connecting home appliances for a long time. However, it was not until 2011 that ECHONET Lite was officially recognized as an open standard for HEMS providers to follow. “With this standard, the Japanese government intends to unite the power of the fragmented HEM market,” said Frankie Chen, sales director of POWERTECH.

In Australia, to raise the proportion of renewable energy supply, the government offers subsidies to solar energy providers, which makes the monitoring of power consumption a necessity. Since 2001, the number of households with solar photovoltaics installed has reached 1.4 million. AGL Energy, the largest utility company in Australia, has increased investment in renewable energy while providing services and tools that help improve home energy efficiency at the same time.

Though most of HEM services/products are developed surrounding the savings of electricity, in some regions, other energies may catch more attention. Wang expatiates with the example of Singapore, “The Singapore government promotes water efficiency above all other energies in both residential and commercial areas, because the country is facing water scarcity and has to buy water from Malaysia.”

Opportunity lies in where energy matters

Compared to the components of HEM solutions deployed in the top-three HEM markets, other differences are observed in terms of hardware preference. The most widely deployed HEM device in North America and Europe is smart thermostat for sure. However, in Asia, smart plugs or strips are used to monitor and control high-power consumption devices more often.

Besides, energy-efficient electronics are even more popular in Asia. To Asian consumers, they may consider buying a refrigerator or an air conditioner which features energy efficiency rather than using a smart plug when it comes to energy saving, and that is why Japanese and Korean home appliance vendors, such as Panasonic, Toshiba and Samsung, play a leading role in the development of smart home solutions.

As global energy issues and politics continue to provide momentum for reformation of utility infrastructure, the future of HEM market looks promising while burgeoning HEM services/products help renovate business models for both utility and smart home industries.
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