Connected Home 2.0: A Billion Pound Opportunity for Energy Suppliers

19 June 2018

by Ronan O'Regan, Digital Utilities leader

Our latest Connected Home 2.0 survey clearly demonstrates how consumer attitudes, beliefs and intentions have continued to evolve in the connected homes space - and the many opportunities for companies within the UK market. The adoption rates for devices have doubled since our last survey in 2016 and a plethora of new devices means the market is forecast to hit £10.8bn in 2019. However, energy suppliers will increasingly face competition from technology and telecoms companies as the influence of these sectors grows with millennials.  

The energy opportunity

The £10.8bn figure covers a wide ecosystem of devices, designed to impact every corner of the home. But what about how consumers interact with their energy consumption, specifically devices providing smart heating, lighting and remote control (plugs)? Our survey tells us that this market will experience strong growth, with around a 12% adoption rate of each device to date and a further 15% of respondents expecting to purchase a device within two years. This indicates a market size for energy-related devices alone of around £900 million in 2019.     

How energy suppliers capitalize

While the connected home market represents a significant opportunity for energy suppliers, it is also a space that many associate with technology or telecoms companies. This means that even if energy suppliers came to market with a full portfolio of smart technology, they will face increased competitive challenges from telecoms and tech companies. Our data backs this up with only slightly more people trusting an energy supplier (60%) over a telecoms company (58%) or a tech company (55%), to supply and install their connected home device.

Therefore energy companies may need to consider whether to come to market with a brand that is separate from the more traditional perception of the energy supplier – much like Centrica’s approach with Hive, adopting the look and feel of a dynamic tech brand. This is one of the contributing factors to Hive being accountable for an estimated 60% of the 1.5 million smart heating installations in the UK to date, according to market research firm Delta-ee.  

Of course perception is one hurdle but energy suppliers will also have to provide technology that seamlessly integrates into customer homes. Although Centrica again took the lead here initially investing in AlertMe (a UK technology developer) as far back as 2010, and fully acquiring the company in 2015, others are hot on its heels via partnerships including EDF with Netatmo and SSE with tado°.

If other energy companies can successfully define how they would like to be perceived in the market and bring hardware propositions (internally or through strategic partnerships) that are attractive and user friendly, the market opportunities can become much more attainable.

Long term success means adapting to different demographics

It is important to remember that the market is immature and consumers are still discovering what the connected home actually means to them on a personal level.

This also means that as the market develops, energy suppliers should target different segments with propositions that can be adaptable as consumer needs continue to evolve. However, suppliers should heed a note of caution regarding the 18-25 year group in our survey: they put tech companies (67%) ahead of energy suppliers (60%) in terms of trust to supply connected home devices.  

Our survey shows that even before installation only around a third of this age group expect heating, lighting or plugs to have a positive impact on their lives in a comfort or financial sense. Although once up and running, the actual positive impact is felt by more than double the amount of respondents.    

Energy suppliers will need to convince younger customers of the potential benefits of these technologies while guarding against tech companies in the sector by leveraging their energy expertise position to work with customers in lowering energy bills, leveraging wider benefits of smart energy devices and introducing relevant new products, as Hive now demonstrates with the addition of a wireless camera to the portfolio.

Future blogs in the series will explore the opportunities outside of the core area for energy suppliers in the connected home.

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