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You wait months for a smart thermostats report and then several arrive together, just like London buses​


via Flickr © C Jill Reed (CC BY-SA 2.0)

  • North America leading the world in deployment of smart thermostats
  • Uptake benefitting manufacturers and utility companies the most
  • Consumers also benefit but are worried about hacking, security and privacy
  • British public shaping up to be smart home refuseniks

New research from Berg Insight of Gothenburg, in Sweden, shows that the number of homes in North American and Europe now equipped with smart thermostats is rising rapidly. Overall the sector grew by 81 per cent over the course of 2015 with uptake in North America increasing by 78 per cent and in Europe by 90 per cent year-on-year.

They are impressive figures but it has to be a said that they begin from a very, very low user base. The reality is that at the moment North America has a mere 4.5 million smart thermostats deployed while Europe has just 1.4 million. All in all some 5.8 million smart thermostats are in use and that's a miniscule number given the size of the two huge markets.

Nonetheless, the smart home market is on the move and Berg Insight's forecast is that  that the number of homes in Europe and North America with smart thermostats will grow at a compound annual growth rate of 54.5 per cent over the next five years to reach an installed base of 51.1 million by 2020.

Unsurprisingly Berg expects North America to remain the biggest market and has calculated that 32.2 million homes there will have smart thermostats by 2020 while Europe will have 18.9 million of them.

Basically, a smart thermostat is a connected technology that permits a home owner remotely to control the temperature in a house or apartment via a tablet, smartphone or desktop device and so exercise improved management of domestic central heating to make savings on home heating bills. Thus, one of the most popular items used in a so-called smart home is a smart thermostat. Being snazzily designed most of them are undeniably good to look and do their job well - up to a point. As people are finding out, smart thermostats have some serious drawbacks, not least of which being their potential to be hacked and so compromise the privacy of the home owner and the security of the premises - of which, more later.

So, homeowners certainly do derive benefits from deploying a smart thermometer but it is the manufacturers and vendors of the devices, as well as utility companies, that are making the most noise about them because smart thermostats are a huge and lucrative opportunity for the burgeoning smart home market.

Energy utilities in particular are banging the drum for smart thermostats because it is to their advantage to do so as data available to them from a widespread network of connected smart thermostats permits them to introduce energy efficiency programmes that will save them a lot of money in terms of both capex and opex while predictive maintenance and remote diagnostics can facilitates the rationalisation of repair and maintenance routines.

Hacking: the cuckoo in the Nest

The new smart thermostat report from Berg Insight is but the latest in a series of similar analyses that have been published in recent months. For example for a slightly earlier one IoT Analytics and Priori Data joined forces and published the results of the first-ever app-usage based market model for smart thermostats. It examines the market in Brazil, Canada, China, France, Germany, India, Italy, Japan, Korea, Mexico, Russia, Spain, the UK and the US. and concludes that the total smart thermostat market will be worth US4.7 billion by 2021.

The report also shows North America to be the strongest and fastest-growing market for smart thermostat  technology. It has 70 per cent of the global market share and is dominated by American vendors including market leaders Ecobee, Honeywell and Nest.

Meanwhile, and coming to broadly similar conclusions, another report, “Communicating Thermostats, Smart Thermostats, and Associated Software and Services: Global Market Analysis and Forecasts” from Navigant Research concludes that the trend towards smart homes (whether manufactured by marketeers or genuinely consumer-driven) is pushing the uptake of smart connected thermostats because of their ability to allow consumers to cut the costs of their energy bills even as energy utilities use them to improve meet demand-side management and energy efficiency requirements. Perhaps most interestingly, Navigant says other and emerging distribution channels are playing an increasing role in the growth of smart thermostat sales.

The report says, “Telecommunications and broadband service providers, home security companies, and heating, ventilating and air conditioning installers are racing to incorporate advanced thermostats into their solutions. Software and services — especially those that are cloud-based—have become a vital part of these more intelligent thermostats, providing data-based insights and opportunities that increase the value of these devices.” The survey, shows that 18 per cent of US homeowners are "strongly considering" buying a smart thermostat product in the next next year.

However, it's not all unalloyed good news for the sector. Back in 2104 Google spent $3.2 billion to buy the smart thermostat start-up company Nest and later placed it under the aegis of Google's parent company Alphabet, which is the place where Google's most experimental "moonshot" projects are housed. In the year since, Nest, has missed analyst's expectations and strong rumour has it that Nest only beat Google's own internal revenue target of $300 million for the year by acquiring security-camera start-up Dropcam, whose revenues were folded into those of Nest itself.

Furthermore, Nest has been getting some bad press on the security and privacy front after several reports were published claiming that its smart thermostats are east to hack. Indeed, a demonstration that surfaced on social media showed one expert hacking a Nest thermostat in  15 seconds flat!

Consumers might think that someone hacking into their central heating system is nothing much to worry about but the thing about smart thermostats is that they collect and transmit data on everyone living in the house. They know when someone is at home, where they are in the home, when they leave and when they return and what their schedules are as well as the temperatures they like their rooms to be at. Access to such data is obviously potentially valuable to hackers and criminals and dangerous to homeowners who either can't or don't know how to control and manage their smart thermostat systems properly.

The smart thermostat market is important and will become very important in the near future. However, it is immature, suffers from a lack of standards, is liable to hacking and is of limited consumer demand at present. Furthermore the devices are expensive (many cost hundreds of dollars) and, as manufacturers and vendors are beginning to discover the device-replacement cycle is very long indeed. Once a householder buys a costly smart thermostat they are not going to replace it every time a new model with a few extra (and expensive) bells and whistles come along.

And then of course, there's the elephant in the room, or more properly the elephant that isn't in the room yet but soon will be. Many consumers are waiting to see what Apple's smart-home framework and devices will do before making a personal investment in new kit. If consumers like the upcoming Apple products its a racing certainty that the the market will quickly consolidate and existing players will leave the field.

No smart stuff for us please, we're British

Stop Press! This very morning, even as this article was being written, a new smart home/smart thermostat survey, this time from PwC, plopped into the editorial inbox. It pretty much confirms the impression that many people around the world have of British attitudes to high-tech in the home. It seems we band of brothers, we happy few, don't care very much about technology for its own sake or about possessing the latest trendy smart gizmos, preferring instead to ascertain for ourselves the veracity of marketing claims about practical applications and cost savings f before putting our hands in our pockets.

The PwC report shows that 72 per cent of survey respondents are not in the slightest bit interested in making their homes smart, never mind smarter. They are not intending to buy any smart appliances, renewable energy devices or automated cleaning appliances over the course of the next two to five years. After all, most of us have maids and butlers for that sort of thing.

Furthermore, fewer than than 10 per cent of consumers feel any sort of pressure to keep-up with either tech-savvy Joneses, family, or friends who may be heading down the smart homes route and profess themselves to be unimpressed by and uninterested in devices or apps to control heating levels or that turn appliances on or off. "We can do that ourselves", they say.

But, of the relatively few British householders that do have smart technology in their homes, 95 per cent admit to 'noticing' its benefits while a further 81 per cent acknowledge a "positive experience" with smart heating.

There is perhaps a bit of good news for the manufacturers and vendors , although it is nothing for them to get excited about. The Brits,say they might be tempted to give the new technology a bit of a try if they were to be offered financial incentives to do so, preferably in the form of free devices and enforceable guarantees of reduced energy bills. "Hoorah for Yorkshire", I say, being a Yorkshireman myself.

Commenting on today's report, Richard Hepworth, the head of digital utilities at PwC, said, “While people have been quick to embrace smart tech lifestyle products such as phones and tablets, many still don’t really understand the range of smart energy products on offer and the potential they have to ease their busy lives in a practical way or even reduce their energy bills. And therein lies the challenge – how can companies change this lack of knowledge into real know-how?”.

Missionary work in Yorkshire might help here but over many centuries many of those that have tried it have crossed the Humber only to disappear without trace into the wastes of Holderness  -never to be seen again.

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