Report Examines Bring Your Own Device DSM Programs for Utilities and Retail Energy Suppliers
Smart Thermostats, Hot Water Heaters, and Appliances, Energy Storage, and EVs and EV Supply Equipment: Global Market Analysis and Forecasts
November 16, 2018 -- Editor's Note: The following is an excerpt from Navigant Research's recent report on the BYOD market. Reprinted with permission.
The global electric power industry is shifting away from centralized power generation toward a mix of distributed energy resources (DER) and smart energy management solutions. Known as the Energy Cloud, this shift positions the bring your own device (BYOD) market to allow customers to take advantage of a diverse range of smart, grid- interactive technologies. Such solutions enable customers to manage their energy consumption while maintaining optimal comfort.
BYOD refers to utility and non-utility programs that allow customers to purchase their own pre-approved, grid-responsive devices from a vendor of their choosing. Customers can integrate the technology into demand response (DR) or energy efficiency programs managed through the utility, an energy supplier, or a third-party systems integrator.
Three fundamental shifts are taking place in the bring your own (BYO) market:
- Devices beyond thermostats are increasingly communicating with the electric power grid. BYOD broadens the range of consumer technologies eligible to participate in programs. Smart thermostats still constitute the majority of BYOD programs, but battery storage, EVs, water heaters, smart appliances, and smart solar inverters also present opportunities through which to manage energy usage.
- Bring your own thermostat (BYOT) programs have traditionally been utilized for DR electricity events. The broader BYOD programs are exploring the energy efficiency applications of these programs.
- BYOT programs initially required utility participation to verify customer eligibility for load curtailment efforts. Today, BYOD programs are expanding to include retail choice electricity suppliers in deregulated markets and energy service providers.
The shifts from the BYOT programs toward broader BYOD initiatives suggest continued growth of the BYO model to secure energy and cost savings for customers and energy providers.
Market Drivers
The drivers of emerging BYOD initiatives largely depend on the regulatory landscape and business model contexts where a program operates. BYOD programs have increased in number following the success of utility DR programs and increased investment in distributed energy resources management system (DERMS) platform capabilities. Overarching drivers for the transition to BYOD for DR and energy efficiency efforts include the following:
- Multiple device synergies: As a variety of grid-communicative devices enter residential and commercial energy management ecosystems, utilities and program developers can optimize BYOD program signals to maximize load shift or curtailment. Further, multiple devices within one behind-the-meter ecosystem can increase the value of each device, improving customer comfort and energy resiliency.
- Product diversification: BYOD programs will require program managers to approve a range of suitable technologies for DR and energy efficiency efforts. By evaluating options, the customer remains confident that they have invested in a solution that will streamline home or commercial energy management. Further, the utility can diversify its portfolio of DR and energy efficiency grid assets to include technologies such as battery storage, EV supply equipment (EVSE), and water heaters.
- Customer choice: Inherent in any BYOD program is the customer’s ability to choose an appropriate device from a range of program-approved technologies. Since participants can purchase technologies from a retailer other than the utility, customer choice expands the geographic scope of BYOD programs to areas that might not have been eligible for direct install. Meanwhile, customers can take advantage of product diversification.
- ROI and performance incentives: Many BYOD programs offer customers the ability to add value to smart device purchase rebates by earning rewards for enrollment. Participation incentives often come as one-time or annual enrollment rebates, occasionally with bill credits or cash awarded for participation in DR or energy efficiency events. By rewarding customer enrollment in BYOD programs, utilities can hit energy efficiency or load goals while paying less upfront to run BYOD than direct install or self-install programs.
- Non-utility programs: Though early BYOT programs required a utility to enroll in DR programs, new BYOD initiatives are expanding the scope of partnerships to include retail electricity suppliers in deregulated markets and energy service providers. Utility programs still lead the BYOD DR and energy efficiency market. However, removing the need to bring a local utility onboard might increase the number of operating BYOD programs.
Market Barriers
As BYOD programs expand the scope of the BYOT model to include more technologies, energy efficiency and DR programs, and non-utility programs between retail suppliers or aggregators and customers, challenges are bound to arise. Several barriers evident in the early shift toward BYOD programs include the following:
- Prohibitive costs: Adding new devices to BYOD programs results in direct costs to the customer and the utility. Larger BYOD-eligible devices such as water heaters or home battery storage often require customers to make a substantial upfront investment despite available rebates. Utilities wishing to incorporate new devices into their programs must pay the costs of integrating the technology’s software, either directly or through a third-party systems integrator.
- Customer enrollment challenges: Successful customer enrollment requires customers to own a utility-approved device and take steps to join a BYOD program. Customer enrollment rates in BYOD programs hover around 10%-15% of the eligible base, in part due to lack of knowledge of the program and customer challenges securing the information necessary to verify eligibility.
- Resolving customer issues: As BYOD expands the DR, energy efficiency, and load shifting programs available to customers, dispute mechanism channels may become challenging to navigate. Program satisfaction might dip if customers are unsure of who to call when problems arise or they have questions about program function and billing.
- Lack of reliability in load reduction: Program implementors often discount load curtailment certainty in BYOD programs when compared to direct install initiatives. Despite the possibility of using identical hardware in both types of programs, BYOD relies on customers to install and configure their own devices for program participation. While self-installation reduces program implementors’ upfront costs, it increases risks of improper installation and efficiency that are mitigated by professional installation in direct install programs.
Market Forecast
Navigant Research expects nearly 1.1 million BYOD devices installed globally in 2018. Growth is expected to be robust during the forecast. In 2027, 5.5 million total devices are anticipated globally. The largest region is expected to be North America, reaching 4.1 million devices in 2027, primarily in the US. Though other regions will start to implement BYOD programs, North America is expected to lead throughout the forecast.
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