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How the Smart Grid Could Create a New Market for Energy Goods

tendrildashboardFormer Internet entrepreneurs that have moved into the energy biz are fond of comparing the Net to the power grid. One of their favorite forward-thinking claims is that in a similar way to how the Internet created a market to sell goods via broadband, a smarter energy network will create a market to sell energy-related goods and services. Are they grasping at straws to make their green crossover easier?

Well, yes, but they’re also right. A future smart grid that is two-way and has an open architecture will create energy information — real-time info about customers’ energy use, the electrical load on the power grid and individual energy-consuming devices connected to it. That information can be used to both empower the customer to make smarter energy choices, and at the same time create a market to sell energy-related products and services.

CEO of home energy monitoring service maker Tendril, Adrian Tuck, put it best when he said: “The underlying premise of the smart grid is that it not only delivers power, but information. And, once this information becomes available, it has unlimited potential to enrich utility and consumer experience. We envision a world where goods, services and incentives can be offered directly to the consumer based on their very individual needs.”

No one knows exactly how big the total market for energy goods and services could be, but it could include everything from energy-efficient light bulbs and appliances to building weatherization. According to the American Council for an Energy Efficient Economy, $178 billion was invested into making buildings more energy efficient all the way back in 2004 (their latest figures from a report in 2008), and nearly half of that (49 percent) was spent on energy-efficient appliances and electronics.

So how would such a market for energy goods work? The smart grid would connect to a home energy monitoring system, and potentially to the Internet, to connect information about energy devices and consumption. The homeowner would be alerted by the utility or third party vendor via text message, email or a smart-energy dashboard that, say, a connected washing machine is expending more energy than usual, then be presented with options for buying a new one. Because the power grid is already a network, using information technology, it can connect with already available communication networks, or connect with yet-to-be-created ones.

Such scenarios would require the installation of a lot of technology that isn’t widely available yet. But with the attention being paid recently to the smart grid, the promise of smarter energy is finally moving forward. Indeed, the U.S. stimulus package is allocating $4.4 billion directly for smart grid technology deployments.

More importantly, calls for making sure energy information is freely accessible to the customer and run over an open platform are finally being heard. That’s a key requirement for a market that would rely on energy data to sell appropriate goods: third parties need to be able to speak the same language. To that end, Google, for example, recently unveiled its PowerMeter smart energy tool.

So while some companies are already envisioning ways to use the power grid to create a market for energy products, does a regular home owner really want that? In a variety of early trials for energy management systems, some home owners have demonstrated that they don’t want to actively manage their energy consumption — either they don’t have the time, they don’t care, or their energy bills are low enough that they just automatically pay them. And they may not want their smart energy dashboard to keep urging them to spend more money on upgrading their appliances or lighting.

But like Google does with information management today, a new energy market would have to be an opt-in only system, whereby consumers can control their own data and pick and choose how it is used. (Google is emphasizing that its PowerMeter energy management tool will be opt-in only.) Ultimately there is hope that those interested in saving on their energy bill, or cutting their carbon footprint, would want to opt in and have the option to buy related energy products and services. If that proves to the case, Internet entrepreneurs will be the first ones lined up to start selling.

(Image courtesy of Tendril.)

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