Nest Acquisition Revives Google’s Energy Management Strategy

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:

With acquisition #Google finally gets path into utility market, #Nest gets access to global markets.

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.

Nest users can monitor and control their home systems from virtually anywhere via the internet. With permission, so could utilities. (Product images courtesy Nest Labs)

Nest users can monitor and control their home systems from virtually anywhere via the internet. With permission, so could utilities. (Product images courtesy Nest Labs)

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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About the Author:

Denis founded Energy Priorities Magazine on Earth Day 2004 and hosts the radio program by the same name distributed by NPR. He has authored hundreds of cleantech articles for a variety of publications, ranging from Sustainable Industries Journal to the New York Times, and he has been interviewed by major news outlets, including FORTUNE and MSNBC. He lives in the Seattle, WA area. Follow him on Twitter: @Cleantech. Contact him here. Disclosure information.

Posted in Energy Business, Energy Efficiency, Opinion

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