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A Smart Energy Ecosystem Presentation to the Ontario Smart Grid Forum Scott Stewart November 25, 2008 Telco – The Ecosystem Evolution Circa 1980 – Regulatory barrier Residential Connectivity Residential Connectivity Local phone Long distance 2 Post AT&T breakup Telco - consumer choices and solution Ecosystem Evolution of the Telco market Comm. Act of 1996 1984 With limited sources for network connectivity, resellers’ attempts to compete are limited as they work from the same cost basis and have little ability to differentiate themselves. Communication Network Connectivity Customer Twisted Pair Wiring As additional forms of connectivity are introduced to the market, the competitive landscape changes dramatically, with multiple competitors able to differentiate themselves by both price and service. Communication Network Connectivity Customer 3 Cable Ethernet Cellular BPL WiMax Ecosystem 2008 - Consumer choices and solutions Broadband Cellular Residential Services Hardware Land Line 4 The impact of the Ecosystem expansion (Really Approximately 50% of gain through M&A Approximately $30B in new products and services that did not exist in 2000 Local phone Long distance phone Local phone Long distance phone Internet Wireless hotspots Cellular Home Security Hardware TV services (2000) $51.5 B revenue (2007) $119 B revenue 5 ) The Parallel: Telco and Energy In much the same way that the Telco industry was constrained by a single source of communication network connectivity, the energy markets are constrained by a single source of energy supply – the generator through the local wires and poles company. Customer Generation In order to relieve the constraint, alternative forms of energy supply must be introduced to the market. The alternatives can come in the form of alternative supply or demand reduction (Virtual Generation). Customer Alternative Supply •Solar PV •Micro-Gen •Battery Storage •Hybrid Cars Demand Reduction •Energy Efficiency •Load Management •Virtual Generation Generation 6 VC Investment Telecom vs Cleantech VC Investments in Cleantech 2003-08 VC Investment in Telecom 1995-98 $4,000 300 $3,500 250 $3,000 $4,000 $3,500 300 Investment ($mil) 250 Deals $3,000 200 $2,500 200 $2,500 $2,000 150 $1,500 Investment ($mil) $1,000 100 $2,000 150 $1,500 100 $1,000 Deals 50 $500 50 $500 $0 0 1995 1996 1997 $0 1998 0 2003 2004 2005 2006 2007 – VC investment in telecom peaked in 2000 just prior to rapid growth in mass markets – VC investment in Cleantech advancing at a rapid pace although some slowing due to recent economic downturn – VC investment in Cleantech expected to peak in 2010 – Federal and provincial subsidies will act as accelerators for innovation 7 2008* Mass Market Emerging Energy Ecosystem It’s just another point in the cloud Retail Consumer It’s just another retail transaction It’s our “core” business It’s just another managed service 8 State of the Connected Home – Summary 2008 Online consumers cite safety alerts and home energy conservation as the top benefits of having an integrated home control system that enables control/monitoring via the Internet from any device. Mass market consumers are a bit more positive (and less negative/more neutral) about safety/security and energy conservation than other benefits, such as one-touch control/scene setting. Energy-related products and services—and one security product—are the top-rated concepts tested in this research. – – – Consumers are most able to envision adopting new products and services that are simple and compatible with their current ways of doing things. They warm to the idea of using technology to improve how they do specific tasks that are typically done on paper, on the phone, and/or on a computer—such as paying bills, communicating with others and managing to-do lists. By contrast, they have trouble envisioning how to use technology to streamline routine tasks that traditionally involve physical activity, such as lawn mowing, meal preparation, dishwashing, etc. A home energy management gateway that delivers a reduction in energy costs. An energy-saving power strip that allows users to turn-off devices drawing power and monitor energy usage. A programmable thermostat and a home zone sensor system, both of which allow monitoring/control via computer or cell phone. 9 Interest in Home Energy Management System % Savings on Annual Home Energy Bill Required to Consider Buying a Home Energy U.S. 2008 Management CanadaSystem 2008 Total Online HHs (n=625) Mean: 41% 0% 3% Total Online HHs (n=222) Mean: 38% 7% 33% 1%-25% Target consumers have high expectations for payback on investment in a home energy management system—on average, they expect to see about 40% annual savings on their home’s annual energy costs. – 32% The average U.S. household spent $1,493 for household fuel in 2001 (the latest year for which data are available), according to the U.S. Energy Information Administration Residential Energy Consumption Survey. – 45% 26%-50% 43% 51%-75% 76%-100% QY42B. 10% 7% 9% 11% More than two-fifths expect savings in the 26-50% range. On average then, consumers expect to recoup at least $600 per year from their energy bills when buying a home energy management system—likely an unrealistic expectation. Mass market consumers have higher expectations for payback than primary market consumers, particularly in the U.S. 10 Current satisfaction with home energy management systems 11 What is next? Continue to deploy AMI as rapidly as possible – this is the key enabler. Employ standards based open architecture to encourage innovation and non-traditional market entrants. Customer expectations must be met for wide scale adoption. Wide scale adoption will bring prices down both in the wholesale market and aggregate KWH’s. 12