Google may have found its long-sought path into the energy utility market with its acquisition of Nest Labs and the Nest Learning Thermostat.
Google announced that it is purchasing Nest Labs, which makes Internet-connected thermostats and a smoke alarm. Twitter lit up with remarks, mostly forecasting one of three outcomes: the death of Nest, the rise of the connected home, or Google’s world domination by way of placing advertising absolutely everywhere.
My tweet that morning predicted none of those:
Energy utilities are falling in love with Big Data but thus far they’ve resisted falling in love with Google, for whom big data is a core capability. Google has wanted into the utility market for years, a strategy marked most notably by the failed introduction of Google PowerMeter.
Utilities also are fascinated by human behavior, something Nest observes in detail — but relatively few utilities have subsidized the Nest thermostat in their territories. When I attended the Behavior Energy and Climate Change (BECC) conference last fall, utilities were well represented in the audience and on panels. Behavior based energy efficiency is a red-hot topic.
Soon Google will be able to offer utilities something that has been out of reach: detailed data on the behavior of residential occupants, interpreted by a powerful analytics platform. Couple this with smart meter data and you enable a whole new level of engagement with utility customers around energy management. Demand response gets easier, incentives more precisely targeted, and marketing dollars better spent.
Internet-connected thermostats can allow utilities to reach beyond the meter and issue setback commands in the homes of willing participants. Demand response payments to those participants can be based on actual savings, as confirmed by interval data from smart meters. This much of the equation was possible before Google. Nest founder Tony Fadell claimed Nest’s energy management service lowered energy costs for utilities by half. Fewer than 20 utilities are using it, though.
Now consider knowing in advance which homes’ peak usage will be due to heating or cooling (which is controllable) and which will peak due to something else. Nest behavior data and Google analytics together can predict this with surprising accuracy. Utilities can focus money and resources on those homes that will produce exactly the amount of actual energy savings needed, on demand.
Nest data reveals more about the mechanical workings of a home than can interval data alone. For example, utilities could know before homeowners that it’s time for an HVAC filter change or duct cleaning. Well-timed messages about rebates for those services could dramatically increase the ROI for energy efficiency marketing by utilities. Personalized, very relevant outreach beats glossy statement stuffers any day.
And that just scratches the surface. The implications of having more data, particularly behavioral data, and being able to analyze it extensively, run deep into many parts of utilities’ operations.
Pre-Google Nest Labs has been relatively successful in North America. But I can say with 99% certainty that you don’t own one (nor do I.) Even more lucrative markets for energy efficiency lie beyond our shores. Google knows its way around global markets like Europe, where there are hard targets for energy efficiency. Utilities in those markets haven’t met the same resistance to smart meters, which now are ubiquitous, and utilities are eagerly seeking better ways to use them. For Nest, Google opens the door to a world of opportunity.
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Energy Priorities 
Excellent observations Denis. You move discussion away from the simplistic “doom and gloom” and “panacea” perspectives, and toward the realities of the utility industry. As others comment, I would be very interested in how we handle the various roles that utilities play. These matter a lot and depend on a range of business strategies and regulatory institutions: (1) the electric cooperative working hard for its members; (2) the municipal utility constrained, at times, by inconsistent policy signals from voters; (3) the vertically-integrated utility concerned with the profitability of its generation assets; (4) the utilities in states with retail choice, caught between competitive pressures from retailers and the numerous priorities of state regulators; and (5) the wires-only electric utilities in Texas which have access to metered data, but which are significantly restrained in their interactions with retail electricity consumers (they no longer sell any power). Other stakeholders include the EE and DR companies and the competitive retailer energy providers. So many business strategies and regulations to navigate! Can any single approach to data analysis and program delivery be successful, or will our country remain Balkanized? We (http://defgllc.com) find that each behavior-focused consumer program raises unique issues and requires hands-on management.
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Good move! It’ll be interesting to see what they do with the purchase of this embedded utility relationship! I disagree with comments that they are just buying access to customer bills; they could do that by being (or partnering w/) a competitive supplier where markets are restructured (if the CA/Enron debacle hadn’t happened we’d have Electric Restructuring everywhere, which would have delivered these premium services nationwide by now!). My utility (National Grid – MA) is offering the Nest at $250 w/ $100 rebate. Too steep for me. Besides, the standard programmable thermostat, WEMO Insight ($60) and a GE motion detecting bulb ($15) already provide similar for less!
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On our LinkedIn group, Carter suggests Google bough Nest because Tony Fadell is the real innovator behind the original iPhone. I agree Fadell is innovative. He wanted a cool stat for his weekend lodge at Tahoe, and he had to start a company to make it, or so he said in a Greenbuild interview with Dwell. Nest is his baby.
How long will Fadell, or any of the other 99 ex-Apple employees at Nest, stay after their initial stock lockup period? Possibly long enough to instill more of the Apple dev process at Google than have the 500 or so Apple alumni who are already there.
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