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Utilities can capitalize on IoT with managed services strategy

Neil Strother's picture
Principal Research Analyst, Guidehouse
  • Member since 2012
  • 2 items added with 2,896 views
  • Apr 8, 2016

The Internet of Things (IoT) gets plenty of attention among utility stakeholders these days. Rightly so, given the great potential this trend has for linking smart devices, data (analytics), and positive outcomes for both customers and utilities. But there is a dearth of experience and understanding about how to unlock its value. The key to riding the IoT wave, however, is to look beyond connecting devices and applications to a sustained level of IoT services that deliver lasting and meaningful benefits.

To put this into perspective, consider that the expected addressable market for IoT among U.S. commercial and residential buildings is about $500 million by 2020, now less than 4 years away. That is according to Navigant Research’s recent IoT Enabled Managed Services report, which was co-authored by my colleague Casey Talon and myself. Some of the drivers of this market include reducing operating costs, increasing demand for greater customer choice, and improving synergies within existing demand-side management programs.

Platform for Integrated Services 

To be sure, installing IoT devices with sensors, actuators, and communications functionality is not a trivial undertaking. Significant costs and time will be involved. But that is a baseline step for building owners, managers and homeowners. Once deployed by the customer or in conjunction with a utility, connected IoT devices such as meters, thermostats, lighting, and appliances become a platform for integrated services. Those services include energy management, automation, and maintenance.

By leveraging this IoT platform, utilities put themselves in a better position to strengthen customer relationships as a trusted advisor, which can lead to greater customer satisfaction and potentially greater revenue beyond merely charging for kilowatts. However, if utilities do not fill the trusted IoT advisor role, other companies will swoop in to compete for the title. Third-party energy service providers, solar PV companies, broadband service providers, security companies, device manufacturers, and retailers represent the clearest threats to assume this IoT advisor role.

IoT Reality Today

Currently, adoption of IoT devices remains at an early stage, and the market is fragmented. Dozens of companies crowd the IoT value chain, offering hardware and software solutions as the basic building blocks of an increasingly connected built environment. But many of these solutions remain in their own silos or connect to others in rudimentary ways. For instance, a smart thermostat might participate with a utility demand response program, but has little to do with connected LED lights or smart appliances. Thus, the notion of a holistic IoT system that operates in concert remains a challenge. Getting devices to interoperate and share data in a secure way is but one of the many hurdles.

Over time, these hurdles will fade, as the market process is more evolutionary than groundbreaking. But this does not mean to sit back and wait. The IoT wave is accelerating, and the recommendation for stakeholders is to act tactically now by developing an IoT strategy that can transform customer engagement with targeted services that leverage IoT capabilities.

Case Study: Green Mountain Power’s eHome Program

One utility that has taken this to heart is Green Mountain Power (GMP) in Vermont. GMP’s eHome program provides a comprehensive approach to home energy management, combining IoT technologies with flexible financing. The utility then wraps in ongoing advisory services.

The technology pieces of the eHome program include smart thermostats, smart plugs, ductless heat pumps, heat pump water heaters, advanced air filtration, solar PV, electric vehicle (EV) charging, a Tesla Powerwall, and real-time data analytics. There are many moving parts to the program and the utility is there to coordinate them. The effort starts with a home energy audit and weatherization assessment; customers then choose which specific technologies best suit their needs. Funding for the building and technology improvements is offered through a partnership with NeighborWorks of Western Vermont, a non-profit funding source.

By offering this type of holistic engagement, GMP solidifies its position among customers as a trusted advisor and provider of IoT services. And by linking financial help, the utility helps to accelerate technology adoption. The utility is also seen as a technology leader by offering not only energy, but also by enabling customers to try onsite storage, EV charging, and solar-enabled distributed energy resources (DER) management services. 

Case Study: EnergyUnited-GridPoint Offering

For its industrial customers, North Carolina cooperative EnergyUnited has chosen to become a channel partner as a way to leverage the IoT trend. EnergyUnited is working with GridPoint, a provider of energy management solutions for utilities, enterprises, and government agencies. Industrial customers of EnergyUnited who take part in the GridPoint solution receive asset-level visibility into energy consumption and equipment operations. The benefits to the industrial customer are energy and operational cost savings, while the utility deepens its customer engagement and increases customer satisfaction. 

How it works: GridPoint installs the necessary devices—such as submeters, smart thermostats, controllers, remote sensors, and load control processors—at the industrial customer’s site. These IoT devices then generate data that communicates with GridPoint’s energy management platform. The software as a service (SaaS) offering includes advisory capabilities for identifying energy savings opportunities and implementing automated demand response. According to GridPoint, results for customers are encouraging, with an estimated energy savings of up to 30% and an 18-36 month payback. For a cooperative utility like EnergyUnited, a partnership such as this provides an affordable way of leveraging IoT technology by offering energy management services to an important segment on the customer side of the meter.

These case studies illustrate ways that utilities can take proactive steps to stay relevant with customers as IoT technologies enter the market and find traction. By partnering with companies or acquiring new technologies in this space, utilities can remain relevant players by offering services that customers want, whether residential, commercial, or industrial. By embracing the IoT, utilities can enhance the relationship with customers with ongoing services.

The IoT trend remains at an early stage; utilities could wait before taking the plunge to ride the wave, but that would be a mistake. Customers are already in the water—and so are competitors. A comprehensive IoT services strategy should be top of mind in order to seize the opportunities that lie ahead.

Neil Strother is a principal research analyst at the energy practice at Navigant. 


Stacey Bailey's picture
Stacey Bailey on Apr 13, 2016

Great quote, Neil: 

"The IoT trend remains at an early stage; utilities could wait before taking the plunge to ride the wave, but that would be a mistake. Customers are already in the water—and so are competitors. A comprehensive IoT services strategy should be top of mind in order to seize the opportunities that lie ahead."

I couldn't agree more. Utilities are already positioned for this...need to jump in the pool.

Neil Strother's picture
Thank Neil for the Post!
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