Resiliency and electrification will drive smart energy

After years of lackluster starts in what I think of as the internet of electricity, we might be at an inflection point thanks to the very real perils of climate change. For at least a decade, companies and energy experts have envisioned a future where the electrical grid responds to market and demand signals to ultimately use less energy. That vision has evolved from using less energy to using more renewable energy and better matching the use of energy when it was created by renewable means (often during daylight hours, when solar and wind generation are strong).

But the last two years have led to a shift in how we view our reliance on the grid and how our portfolio of energy generation has exacerbated the problem of climate change. We need more resiliency in the grid. We also need to transition from coal, gas, and natural gas as quickly as possible. In the meantime, we’re beginning to realize that as we shift to a more information-rich grid that will become increasingly more dependent on renewable energy, there’s no way we’re going to actually use less energy. And this has huge implications for the smart home.

These two trends — electrification and resiliency — will drive investment into energy management technologies going forward. Let’s tackle electrification first.

New York City this week became the largest city in the country to ban natural gas hookups in new buildings. This means that gas dryers, ranges, and more are now forbidden in new construction. Other cities have taken similar steps.

But adding dryers and ranges to the electric grid is a big lift, simply because both appliances require larger 240-volt circuits and a lot of electricity. New buildings can price these needs into their electrical boxes and the amperage demands from the utility, but electrification is also a trend in remodels as consumers try to replace gas appliances with electrical counterparts (or gas vehicles with electric ones). And it means that people will need to upgrade their electrical boxes, which can cost between $5,000 and $20,000 depending on where they live and how much of an upgrade they need.

Instead, I expect we’ll see more consumers choose smarter electrical boxes that can help manage a limited supply of electricity coming into the home. With an eye toward reducing consumption, I tried smarter panel boxes and devices that attached to those boxes to help me understand the electricity consumption in my home, but quickly hit a wall. At some point, modern life requires electricity. I dumped the meters.

But software that can manage limited amperage coming in and allocate it based on residents’ needs and preferences makes sense as we plug more high-powered devices into our homes. It’s why resiliency will drive the adoption of new energy management devices, whether they are smart breaker boxes from a company like Span or Schenider Electric, or software from a tech provider that attempts something similar using a digital assistant.

The second big trend driving investment and change in the energy world is resiliency. In the last two years, it seems, wildfires, extreme weather, and a spike in the number of employees working from home have made people willing to spend on batteries and other forms of energy storage and off-the-grid generation.

Last month, we saw Generac, a generator company, buy Ecobee for $770 million; ADT, meanwhile, spent $825 million on SunPro, a solar panel maker. Both of these deals combine smart home software with energy generation and storage. Basically, we’re seeing a way to ensure the supply of energy while managing it even when homes are off the grid.

I break the energy market down into five elements: generation, transmission, storage, management at the edge, and consumption. I focus mainly on management and consumption because that’s where the smart home companies are stepping up. Broadly speaking, we need to increase the capacity and resiliency of the grid while also bringing in more electricity-consuming devices through the electrification of cars and buildings. But let’s start with generation.

1. Generation: Generation encompasses both the big utilities using fossil fuels or renewable power from wind, solar, or water. It also includes localized generation through solar. The big challenges here are moving toward a more sustainable generation strategy as well as managing the variability of some renewable energy sources.

2. Transmission: Transmission involves moving electrons from the utility to a home or office or feeding power back into the grid. It features the combined challenges of an aging infrastructure with those related to regulations and business models. But it is clear that in an era of extreme weather caused by climate change and more and more of our economy relying on reliable electricity, transmission investment and innovations need to happen. We’re already seeing some utilities try to add real-time usage and pricing signals to aid both transmission and generation; we have also seen what happens when transmission falters. In California, for example, PG&E’s power lines are causing wildfires, so the utility shuts down power during periods of high winds and drought. In Texas last February, one reason the state had such a catastrophic power failure during the freeze was that its grid was isolated and lacked resiliency.

3. Storage: Here’s where things start to get interesting for the smart home. Storage is essential because it provides resiliency when the grid is unavailable and helps make energy available when renewables aren’t providing electricity. There’s old-school energy storage, like generators that run off gasoline, and newer storage, in the form of batteries. Based on a few pre-CES briefings I’ve been given, we’re going to see some interesting products associated with energy storage in January. There’s also plenty of research on modernizing energy storage techniques that are practically ancient. But storage is basically a buffer between generation and consumption.

That’s why I found the Generac deal for Ecobee so interesting. With the acquisition, Generac, which is basically an energy storage company, is gaining control of the largest energy-consuming device found in most homes. It’s also gaining control of a team that has done a lot of work building software designed to help consumers save energy. For the near term, it feels like a chance to introduce Generac to a newer tech-savvy audience, but over time it’s a chance to intelligently link the supply of energy to demand.

4. Management at the edge: On the management side, we’re seeing companies in the traditional electric panel market such as Leviton, Schneider Electric, and Honeywell add smarts and internet capability to their products. Newer entrants like Span are building networked electrical boxes that will manage the flow of electricity and let users set their own preferences, while Amazon and others are building data models into their smart home software to track how much energy is being consumed by certain devices so they can offer ways to manage it using their AI.

5. Consumption: When it comes to managing energy consumption, HVAC systems are the primary focus simply because they are the top user of a home’s electricity. But utilities are also starting programs to help manage the consumption of electricity by water heaters while appliance companies are trying to think about features that might help consumers save energy by changing settings on their dryers or fridges. With more input from the grid on the price of electricity or the availability of renewables, we could see intelligent delays built into a dishwasher or dryer so they only do their jobs when electricity is plentiful and cheap. An electric vehicle that doesn’t need to charge right away might wait until other big electricity-consuming loads are done before charging, for example. And when the grid is unavailable, appliances and management software will collude to conserve electricity while trying to keep users comfortable and preserve food in the fridge or the charge on a laptop.

Many of the pieces are here already, but the tech and energy world has been waiting for incentives that will force the adoption of a smarter grid and better energy management in the home. These are, after all, big infrastructure upgrades, and until resiliency and regulations forcing electrification became an issue, conservation wasn’t pushing people to make much of an investment.

In the coming years, that’s going to change. And it will change rapidly as the climate gets more unpredictable and our devices get smarter.