RESEARCH REPORT Executive Summary: Smart Thermostats Standalone, Networked, and Learning Smart Thermostats: Global Market Analysis and Forecasts NOTE: This document is a free excerpt of a larger report. If you are interested in purchasing the full report, please contact Navigant Research at research-sales@navigant.com. Published 4Q 2013 Patrick Levy Associate Analyst Lauren Callaway Research Associate Bob Lockhart Research Director
Section 1 EXECUTIVE SUMMARY 1.1 Overview: The Smart Thermostat Smart thermostats, also known as programmable communicating thermostats (PCTs), utilize integrated technologies that surpass the basic sensing and control functions of traditional thermostats. Functions range from remote reading and control to fully automated control systems that balance learned user habits with utility demand-side management. In some cases, the smart thermostat is part of an integrated home automation system that includes other devices such as smart lighting, plugs, entertainment, and security systems. During the recent smart grid frenzy, smart thermostats developed a degree of excitement alongside announcements of ambitious smart meter rollouts and demand response (DR) programs. Unlike products and solutions that are directly integrated by government-sponsored utility smart grid programs, smart thermostats have remained largely in the commercial sphere where uptake relies on individual energy efficiency awareness and cost savings as purchasing incentives. As such, the market for smart thermostats has struggled to gain traction. Currently, utilities remain cautious about investing in programs and tools that provide incentives for consumers to regulate their energy use. Likewise, vendors have struggled to produce userfriendly solutions with proof of substantial cost savings that motivate customers outside of the energy-conscious segment. However, the combined factors of increased energy awareness, interest in home automation and security tools, and more user-friendly solutions have led to an uptick in shipments for smart thermostats during the past year and have revived a sense of optimism and excitement on behalf of vendors and stakeholders. 1.2 Market Dynamics Key challenges in the smart thermostat market are how to make product offerings appeal to customers and utilities on the basis of potential energy and cost savings, how to integrate into existing programs and goals (utilities), user friendliness, and commercial appeal and product awareness. The variety of distribution channels for smart thermostats reflects the disparate strategies being employed to increase awareness and uptake of products and services. Available at retail stores, directly through utilities, and more recently though broadband and home security providers, vendors are testing incentives ranging from commercial appeal to ease of adoption as an add-on to other home automation services. In general, executives interviewed for this report stated that potential customers lacked understanding of the full benefits of smart thermostats, and maintained a perception of high cost for the product with little return on investment (ROI) through energy savings. 1
1.2.1 Market Opportunities Adoption of smart thermostats by independent homeowners is dependent on the consumers desire to be proactive in preserving resources needed to generate energy, to save money on their energy bills, and to build convenience into their home through intelligent heating and cooling. Opportunities to sell smart thermostats through retail have been taken up by companies like Lowe s and The Home Depot in the United States and B&Q in Europe. It remains to be seen whether marketing efforts on behalf of these retailers will raise the interest of a large pool of customers who are not already planning to replace an existing thermostat. On another front, providers of home automation packages have increased efforts to market smart thermostats as an energy efficiency add-on to preexisting services. For utilities, load curtailment and energy efficiency programs can increase awareness of smart thermostats, incentivize disinterested buyers by increasing product awareness, and communicate possible savings over high energy costs. Three main opportunities exist with utilities: small utilities that are geared toward low-cost, high-reward smart grid upgrades and functionality, generation utilities that aim to avoid plant-related upgrades and expansion, and utilities that struggle to meet efficiency targets. 1.3 Forecast Overview Globally, the majority of activity for smart thermostats is concentrated in the United States, Canada, Western Europe, Australia, and New Zealand, and is commercially based. In Europe, the United Kingdom s smart grid mandate portends awareness of home energy management tools. In Southern European countries such as France and Spain, legislative pressure on utilities to keep energy rates low is set to expire in the intermediate-term, which is likely to incentivize household efficiency purchases and upgrades. Navigant Research expects increased activity in select parts of Asia Pacific due to new and ongoing pilot projects for smart buildings, cities, and grids. Growing attention toward smart grid upgrades and energy efficiency in select areas of Latin America, such as Brazil, also infers potential for smart thermostats to take hold. 2
Navigant Research expects substantial global growth for smart thermostats, but the aforementioned market barriers are likely to keep the overall penetration rate relatively low. A global market of nearly $1.4 billion by 2020 is forecast, a small number in comparison to other smart grid and energy efficiency product offerings but a significant step up from the niche market that smart thermostats occupy today. Chart 1.1 Smart Thermostat Revenue by Region, World Markets: 2013-2020 ($ Millions) $1,600 $1,400 $1,200 $1,000 $800 $600 North America Europe Asia Pacific Latin America Middle East & Africa $400 $200 $- 2013 2014 2015 2016 2017 2018 2019 2020 (Source: Navigant Research) 3
Section 8 TABLE OF CONTENTS Section 1... 1 Executive Summary... 1 1.1 Overview: The Smart Thermostat... 1 1.2 Market Dynamics... 1 1.2.1 Market Opportunities... 2 1.3 Forecast Overview... 2 Section 2... 4 Market Issues... 4 2.1 Market Overview... 4 2.2 Market Drivers for Smart Thermostats... 4 2.3 Market Inhibitors for Smart Thermostats... 5 2.4 Competitive Landscape... 6 2.5 Smart Thermostats: Standalone versus Networked and Learning Capabilities... 6 2.5.1 Standalone Smart Thermostats... 6 2.5.2 Networked Smart Thermostats... 7 2.5.3 Learning Smart Thermostats... 7 2.6 Market Drivers: Utilities... 7 2.6.1 Meeting Load Growth and Growing Peak Demand... 8 2.6.2 Reducing Energy Consumption... 8 2.6.3 Smart Meters... 9 2.7 Utility Adopters of Smart Thermostats... 9 2.7.1 Demand Response... 9 2.7.2 Smart Thermostats and ADR... 10 52
2.7.2.1 New York City: coolnyc... 10 2.7.3 Customer Centric ADR... 11 2.7.3.1 Nest Labs and Rush Hour Rewards... 11 2.8 Broadband Service Providers for Smart Thermostats... 11 2.8.1 Home Automation Providers... 12 2.8.1.1 Comcast Xfinity Home Automation... 12 2.8.1.2 AT&T Digital Life... 12 2.8.1.3 Verizon Home Monitoring and Control... 12 2.8.2 Home Automation and Security: The Value-Add Add-on... 13 2.9 Retail Channels for Smart Thermostats... 13 2.10 Case Studies... 13 2.10.1 OGE Energy Corp.... 13 2.10.2 NV Energy... 14 2.10.3 National Grid USA Service Company, Inc.... 14 2.11 Market Growth Prospects for Smart Thermostats: United States and Internationally... 14 Section 3... 16 Technology Issues... 16 3.1 Smart Thermostat Overview... 16 3.2 Applications and Analytics... 16 3.3 Interoperability and Communication Standards... 17 3.3.1 Z-Wave... 17 3.3.2 ZigBee... 18 3.3.3 HomePlug... 19 3.3.4 Wi-Fi... 20 3.3.5 Smart Energy Profile (SEP) 1.1 and 2.0... 20 53
3.3.6 Universal Smart Network Access Port (USNAP)... 21 3.4 Thermostat and Smart Thermostat Component Breakdown... 21 3.4.1 Analog-to-Digital Converter... 22 3.4.2 Network Interface: A Product Differentiator... 22 3.4.3 Powerful Processing and Memory Capabilities... 22 3.4.4 Display: Appealing Form Factor and Powerful User Interface... 22 Section 4... 24 Key Industry Players... 24 4.1 Smart Thermostat Providers and Associated Services... 24 4.1.1 AlertMe... 24 4.1.2 Carrier... 24 4.1.3 ecobee... 25 4.1.4 EcoFactor... 25 4.1.5 Energate... 25 4.1.6 EnergyHub... 25 4.1.7 Honeywell Inc.... 26 4.1.8 icontrol Networks... 26 4.1.9 Nest Labs... 27 4.1.10 Opower... 27 4.1.11 Radio Thermostat of America... 28 4.1.12 Tado GmbH... 28 4.1.13 Tendril... 29 4.1.14 Trane... 29 4.2 Utilities Participants... 29 4.2.1 Austin Energy... 29 54
4.2.2 Baltimore Gas and Electric... 30 4.2.3 British Gas... 30 4.2.4 Enel... 31 4.2.5 Green Mountain Energy Company... 31 4.2.6 National Grid... 31 4.2.7 NV Energy... 31 4.2.8 Oklahoma Gas & Electric... 32 4.2.9 San Diego Gas & Electric... 33 4.3 Home Automation Providers... 33 4.3.1 ADT... 34 4.3.2 AT&T... 34 4.3.3 Comcast Corp.... 34 4.3.4 Time Warner Cable, Inc.... 34 4.3.5 Verizon... 35 4.3.6 Vivint, Inc.... 35 4.4 Network Protocol Associations... 35 4.4.1 HomePlug Alliance... 35 4.4.2 ZigBee Alliance... 36 4.4.3 Z-Wave Alliance... 36 Section 5... 37 Market Forecasts... 37 5.1 Global Smart Thermostat Forecast Overview... 37 5.2 Smart Thermostat Market Forecast by Type... 40 5.3 Regional Forecast: North America... 42 5.4 Regional Forecast: Europe... 43 55
5.5 Regional Forecast: Asia Pacific... 43 5.6 Regional Forecast: Latin America... 44 5.7 Regional Forecast: Middle East &Africa... 44 5.8 Conclusion and Recommendations... 44 5.8.1 Recommendations... 45 Section 6... 46 Company Directory... 46 Section 7... 49 Acronym and Abbreviation List... 49 Section 8... 52 Table of Contents... 52 Section 9... 57 Table of Charts and Figures... 57 Section 10... 58 Scope of Study... 58 Sources and Methodology... 58 Notes... 59 56
Section 9 TABLE OF CHARTS AND FIGURES Chart 1.1 Smart Thermostat Revenue by Region, World Markets: 2013-2020... 3 Chart 5.1 Thermostat Shipments by Region, World Markets: 2013-2020... 37 Chart 5.2 Smart Thermostat Shipments by Region, World Markets: 2013-2020... 38 Chart 5.3 Smart Thermostat Revenue by Region, World Markets: 2013-2020... 39 Chart 5.4 Smart Thermostat Revenue by Type, World Markets: 2013-2020... 40 Chart 5.5 Networked Smart Thermostat Revenue by Region, World Markets: 2013-2020... 41 Chart 5.6 Standalone Smart Thermostat Revenue by Region, World Markets: 2013-2020... 41 Chart 5.7 Learning Smart Thermostat Revenue by Region, World Markets: 2013-2020... 42 Figure 2.1 Percent of Homes with Air Conditioning by Region, United States: 1980-2009... 9 Figure 3.1 Nest Labs Mobile Application... 17 Figure 3.2 Z-Wave Home Control... 18 Figure 3.3 Example of ZigBee Networks through Wi-Fi and AMI... 19 Figure 3.4 HomePlug Topology... 20 Figure 3.5 Migration to SEP 2.0... 21 Figure 3.6 Smart Thermostat Hardware Components... 23 57
Section 10 SCOPE OF STUDY This report examines the residential smart thermostat market in five major regions (North America, Europe, Asia Pacific, Latin America, and the Middle East & Africa), presenting a 7-year forecast and market sizing from 2013 through 2020. In addition to a total view of the smart thermostat market, Navigant Research provides separate market sizing and forecasts for two segments: standalone and networked smart thermostats, with a sub-segment of learning thermostats under both categories. Navigant Research further examines these categories by looking at utilities adoption of smart thermostats for demand response and energy efficiency, and analyzes both pilot and fully deployed programs. In addition, this study looks at the competitive landscape of smart thermostats to identify and highlight the key players in this market. SOURCES AND METHODOLOGY Navigant Research s industry analysts utilize a variety of research sources in preparing Research Reports. The key component of Navigant Research s analysis is primary research gained from phone and in-person interviews with industry leaders including executives, engineers, and marketing professionals. Analysts are diligent in ensuring that they speak with representatives from every part of the value chain, including but not limited to technology companies, utilities and other service providers, industry associations, government agencies, and the investment community. Additional analysis includes secondary research conducted by Navigant Research s analysts and its staff of research assistants. Where applicable, all secondary research sources are appropriately cited within this report. These primary and secondary research sources, combined with the analyst s industry expertise, are synthesized into the qualitative and quantitative analysis presented in Navigant Research s reports. Great care is taken in making sure that all analysis is well-supported by facts, but where the facts are unknown and assumptions must be made, analysts document their assumptions and are prepared to explain their methodology, both within the body of a report and in direct conversations with clients. Navigant Research is a market research group whose goal is to present an objective, unbiased view of market opportunities within its coverage areas. Navigant Research is not beholden to any special interests and is thus able to offer clear, actionable advice to help clients succeed in the industry, unfettered by technology hype, political agendas, or emotional factors that are inherent in cleantech markets. 58
NOTES CAGR refers to compound average annual growth rate, using the formula: CAGR = (End Year Value Start Year Value) (1/steps) 1. CAGRs presented in the tables are for the entire timeframe in the title. Where data for fewer years are given, the CAGR is for the range presented. Where relevant, CAGRs for shorter timeframes may be given as well. Figures are based on the best estimates available at the time of calculation. Annual revenues, shipments, and sales are based on end-of-year figures unless otherwise noted. All values are expressed in year 2013 U.S. dollars unless otherwise noted. Percentages may not add up to 100 due to rounding. 59
Published 4Q 2013 2013 Navigant Consulting, Inc. 1320 Pearl Street, Suite 300 Boulder, CO 80302 USA Tel: +1.303.997.7609 http://www.navigantresearch.com This publication is provided by Navigant Research, a part of Navigant Consulting, Inc. ( Navigant ), and has been provided for informational purposes only. This publication is intended for the sole and exclusive use of the original purchaser under terms and conditions agreed to by the parties. This publication may not otherwise be reproduced, recorded, photocopied, distributed, displayed, modified, extracted, accessed, or used without the express written permission of Navigant. Navigant makes no claim to any government data and other data obtained from public sources found in this publication (whether or not the owners of such data are noted in this publication), and makes no express or implied warranty, guaranty, or representation concerning the information contained in this publication, its merchantability, or its fitness for a particular purpose or function. Any reference to any specific commercial product, process, or service by trade name, trademark, manufacturer, or otherwise, does not necessarily constitute or imply an endorsement, recommendation, or favoring by Navigant. Navigant does not assume, and hereby disclaims, any liability that may result from any reliance on or use of any information contained in this publication, or for any loss or damage caused by errors or omissions in this publication. If you do not have permission from Navigant covering this publication, please refrain from accessing or using this publication. Please contact Navigant at research-info@navigant.com to obtain permission to use this publication. 2013 Navigant Consulting, Inc. Notice: No material in this publication may be reproduced, stored in a retrieval system, or transmitted by any means, in whole or in part, without the express written permission of Navigant Consulting, Inc. 60