The Home Area Network (HAN) Sweet Spot Update

In May 2009 I wrote about the sweet spots in the evolution of the Home Area Network (HAN) segment of the smart grid value chain.  I suggested that we should expect the forces of consolidation to ruthlessly acquire the smaller one-trick pony product players in the quest for more complete solutions and thus more market share in race to control the gateway to customers.

So I thought it would be useful to look back to see what happened in the past eight months to the HAN players I mentioned then and the evolution of this “sweet spot”.

I said then and still believe now that the sweet spot in this space will be occupied by players who integrate and manage the technology, devices, software and services needed to deliver a flexible easy to use combination of energy management, social responsibility services, entertainment and communications services as a Home Area Network (HAN) solution that would make all these technologies easy to use for customers.  And once installed for energy management, the HAN opens the door to a wide variety of entertainment and other ways to suction dollars out of our wallet. These are sweet spots because if they work as expected, we will love them and use them.

As a home owner I am not likely to ask Oracle, SAP or IBM for a Home Area Network Solution, but AT&T, Comcast, and PG&E (or substitute your own utility here) have a great shot at my business because I know them well and trust them to provide reliable service.  While I may look at new products from start-ups, I am more likely to buy from established players I trust especially if this is an add-on service to my existing bundle.  That is why, I believe we will see more complete end to end solutions from the consolidation of many smaller players with products that are fast, easy to use, nimble, customer friendly and plug and play.  These sweet spot providers make the value proposition of an established player like Comcast or PG&E or AT&T all the more compelling as a strategy to gain market share.

I said to expect many niche players with terrific solutions, and the better their products the more attractive as prey they will be.

So what is happening to those on my watch list?

Silver Spring Networks keeps growing and in December 2009 closed a $100 million preferred equity round on top of a previously raised $175 million to keep its wireless mesh network growing. The financing will be used for development of new smart grid applications, job growth and the continued expansion of Silver Spring’s global footprint. The investment round included existing investors Google Ventures, Foundation Capital, Kleiner Perkins Caufield & Byers and Northgate Capital.

  • In October 2009, Silver Spring Networks was selected by American Electric Power (AEP) for the utility’s Smart Grid programs at its operating companies, Indiana Michigan Power and AEP Ohio. Silver Spring is growing utility market share with its field tested, IP-based technology, which creates an end-to-end, secure and intelligent platform for the Smart Grid.  Other utility customers include Pacific Gas & Electric Co and Florida Power & Light.
  • In September 2009, Greenbox Technology, founded by the Metromedia creators of Flash was sold to Silver Spring Networks. Despite its advantage from its Flash founders and funders and early success in utility pilot projects, the Greenbox business model of selling its proprietary software and sensors was not seen as sustainable because it was dependent upon being part of other solutions it did not control. But Silver Spring Networks saw its web-accessible dashboard and software to manage data from sensors installed on appliances and household devices as rounding out the Silver Spring product line.

Silver Spring’s networking technology interconnects smart metering collection points with the utility networks using a wireless mesh technology instead of WiFi to improve communications and reduce “dead spots” or gaps in coverage which sometimes affects the WiFi alternatives. It has won an impressive string of big utility customers giving it momentum and buzz in the marketplace.

But despite its success Silver Spring Networks may not be big enough or diverse enough to be a winner at the end of the HAN Smart Grid race.  While its focus on providing the metering devices, sensors and software to enable Smart Grid makes it attractive to utilities, the real test will come when that tsunami of meter data starts descending upon utilities and customers both of whom will need to do something with it to realize the smart grid promise. For this reason I believe Silver Spring Networks will end up being sold to a much larger player who is now focused on the enterprise scalable meter data management end of the solution. But meanwhile, enjoy the ride up the food chain with this solid company.

Trilliant, another smart meter networking player from Redwood City, California uses a version of the 802.15.4 wireless standard to allow meter interoperability with each other and with concentrator points. Trilliant has deals with more than 100 utilities, including Ontario’s Hydro One. The Trilliant strategy is to put lipstick on the pig and go out on dates with some of the biggest players in the business such as ABB and IBM.

  • In September 2009 Trilliant and  ABB, announced successful interoperability of Trilliant’s SecureMesh™ communications network with ABB’s Station Automation and Protection products, enabling utilities to choose best-of-breed technologies for their Smart Grid rollouts.
  • In August 2009, Trilliant did a similar deal with IBM announcing it is integrating its technology with IBM. Under a new agreement, Trilliant will incorporate IBM’s WebSphere® and Tivoli® products into Trilliant’s UnitySuite™. Trilliant and IBM will also pursue joint solution architecture development and integrated solution offerings to the global utility market, as well as cooperate on industry standards development.

ABB wants access to the 100+ Trilliant utility clients and can provide substantial technical and engineering support while IBM covets the services revenue and long term utility relationships across the Smart Grid value chain.  This is a nice package but can ABB and IBM make nice and will the sum of their offerings be sufficient to compete with the other major league players lining up at bat?

SmartSynch calls itself a Smart Grid Infrastructure Company enabling utilities to communicate with any device on the grid. The company’s two-way delivery of real-time energy usage data over public wireless networks (AT&T, Rogers, T-Mobile, etc.), in lieu of private network build-outs claim to simplify smart meter deployments for over 100 major North American electric utilities.

  • SmartSynch is a counter play by the communications industry designed to prevent electric utilities from developing their own private networks that might ultimately compete with the telecoms.  It is also a play by wireless to rein in the opportunities from cable companies that there is a credible wireless options for HAN gateway control of customers.
  • SmartSynch’s Managed Services package is a full-service application solution that hosts the Transaction Management System™ (TMS) processes all metering data and provides customizable data files to the client via FTP transfer on a scheduled basis. This is useful to smaller players needing these services or utilities not ready to invest in their own communications networks.

SmartSynch provides meters with devices that communicate over existing cellular networks to leverage that technology which has primarily been used in commercial and industrial settings into the residential market where it would directly challenge to the dominant RF mesh providers in seeking control over the home area network (HAN) gateway by the telecom and cable companies. This is like the VHS vs BetaMax competition for standards setting bragging rights.

Tendril says its technology facilitates a dialog between consumers and suppliers through an energy ecosystem that connects in-home devices (like thermostats) to the utility back office. It was an early backer of ZigBee, the 802.15.4 wireless standard that is widely used to move data from smart meters to home devices. Tendril not only makes many of those smart devices but licenses its software to third-party device makers, including smart meter manufacturers.

  • In December 2009, Tendril announced that GE Energy Financial Services made a new equity investment in Tendril Networks. While the amount of financing was not disclosed, this investment further the GE Five pillars strategy for smart grid that includes: performance optimization of transmission, distribution, demand, assets as well as the smart grid design and workforce productivity to grow wallet share and market share for GE’s energy business lines.
  • In June 2009, Tendril secured a $30 million Series C financing.

Communications providers seek to leverage their networks to create a sticky environment for end users of smart grid services who will depend upon communications connections to the utility, vendors and other players in the smart grid value chain to realize their benefits.  Telecoms want a share of revenue for creating that stickiness in the smart grid future.

A smart GE appliance, for example, is useless unless that usage information can be communicated to the web enabled service providers, utility suppliers of commodity energy, and other vendors.  But knowledge about home energy management and usage creates opportunity for services both for end users as well as for the utility, technology and other providers from the optimization strategies that create savings or avoid costs.  That is the space GE seeks to carve out for itself across the entire energy manufacturing, transmission, delivery and services value chain. Partners like Tendril make that GE strategy easier and faster to roll out without the complications of competing alliance relationships.

EnerNOC helps commercial, institutional and industrial organizations use energy more intelligently, pay less for it, and generate cash flow that benefits the bottom line. EnerNoc technology enables energy management solutions to manage the real-time balance between supply and demand. It now manages more than 2,000 megawatts that it can curtail through a range of demand response programs.

  • In December 2009 EnerNoc extended its contract to provide demand response capacity to Puget Sound Energy (PSE) through April 2011.
  • Also in December 2009, EnerNoc acquired Cogent Energy, Inc. By integrating Cogent Energy’s solutions and its 200 customers into EnerNOC’s MBCx energy efficiency application, EnerNOC will be able to serve smaller facilities with less sophisticated controls systems, which significantly increases the size of the addressable market for EnerNOC’s MBCx energy efficiency application.

EnerNOC has competition in this fast growing energy demand management space from players like CPower and Comverge. As efficiency and demand response become more important to utilities in reducing emissions expect to see more of these players. Comverge in particular has entered the residential aggregation space.

Verdiem, provides enterprise software solutions to reduce energy consumption of PC networks. Verdiem’s SURVEYOR for PC (next version will manage switches, routers, IP cameras and phones) focuses on distributed devices connected to the network. Verdiem’s Edison product is a marketing variation for the home user without the same performance that more muscular SURVEYOR has when installed. It was launched to enable home users to monitor PC power usage, reduce energy waste, save on energy costs, and help preserve the environment according to its product description.

  • Unlike others focused on acquisitions or avoiding being one, Verdiem just seems to keep plugging away deploying its solutions to help business customers manage their PC network energy costs successfully.

Who will control the gateway to the customer in the future?

There is an active competition underway for control of the gateway between utilities, telecom companies, IT providers and a wide range of services companies seeking to capture wallet share from the communications, energy management, entertainment and environmental responsibility services we seek to buy.

Eight months later, I repeat my hypothesis that the place to be—the sweet spot—in the coming convergence of energy, environmental economics, entertainment and communications is to focus on the Home Area network and the interconnection of end users of smart grid technologies, smart meters, monitoring devices and the software and services with the service providers and utilities that are needed to support a Home Area Network.

The segment continues the process of consolidation but Federal stimulus money has distracted many players and slowed down deployments as utilities lined up with their hand out waiting for Federal subsidies for the smart meter procurements.  Meanwhile, the quest for end to end solutions continues with no clear winners as yet.  As you see from the update, this group of players are all prey for the larger end to end solution providers to come, but for now, they seek growth and market share to improve their valuations.

NOTE:  The Verdiem description above was edited on 12/20/2009 based upon feedback that I  misunderstood the differences between SURVEYOR and the Verdiem Edison product.  Thanks to JP for keeping me honest.