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Bill Melendez

Smart Appliances may not see the light of day anytime soon…

A recent Park Associate report, “Consumer Attitudes and the Benefits of Smart Grid Technologies,” stated that the market for smart appliances will evolve slowly for the following reasons:
• Consumers are unlikely to replace existing appliances with smart appliances
until existing appliances fail or become too expensive to maintain
• The premium most consumers are willing to pay for smart appliances is
unlikely to cover additional material costs
• Public utility commissions (PUCs) will have to approve rate structures that accommodate smart appliances, a potentially time-consuming process
• Many consumers balk at allowing utilities to control their appliances

While smart appliances is the way to go eventually, there are other reasons, I think, for this approach to be a long term, futuristic:

(1) New larger appliance life cycle is normally 10 years and then it moves into the secondary or “used” markets.
(2) Smart appliances need HAN systems in place to work. This area is vague and shifting continuously with no known winner or market dominant or business strategy for implementation.
(3) The relationship between utilities, smart appliance, and consumer interactions have not been defined nor is there a business model that delineates a clear path for all to follow. This may require more regulatory moves to outline relationships.
(4) Current business models assume or require government subsidies or incentives to offset pricing. Most consumers in this report said that they were willing to pay more for smart appliances but only if the amount of difference was “7.5-8.5% of the total cost of the appliance. Such a small premium is unlikely to convince appliance manufacturers to develop such appliances without accompanying utility or tax incentives.” Relying on subsidies may be a slippery slope for many who include such in their market launch strategy.
(5) Smart appliances seem slated for developed countries such as USA whether consumers tend to purchase the latest in gadgets and electronics. That limits the market substantially since developing countries tend to avail appliance manufacturers a larger market. Add to that the current economy situation and the launch of smart appliances in significant numbers would be questionable.

It is too early to tell “when” smart appliances will succeed in the market — the industry as a whole seems to be taking baby steps, full of caution. The biggest push that I’m seeing is the smart water heaters that are being marketed — that may well be the best approach for now.

Most studies tend to be bias in responses. Take the idea of external control of appliances — consumers don’t mind a security company monitoring their home and infringing upon their privacy via video and other devices but “balk” at someone controlling their appliances. So the real issue seems to be a manner of how the concept is presented and positioned to consumer and less of a privacy dilemma. Yes, appliances can lead to “activity” monitoring of electricity use and by fault, infringe upon occupant privacy. But the thought that comes to mind is not one of privacy but of “control” and how consumers respond to “loosing control” of another facet of their life. Americans really don’t like external controls. Take the American Revolution and the Tea Party. As a society, we don’t like others telling us how to live our lives – which is the basic crux of the issue here. Smart appliances manufacturers and sellers have to address this perception before acceptance of such technologies becomes the norm.

Many in the industry misunderstand the term “smart.” Smart is used in many ways — Smart Energy, Smart Meter, Smart Sockets and so on. Doesn’t make it “smart” just that it’s labeled so — marketing at its best. This brings up a point that many do overlook — most appliances can be easily controlled by individuals without much “smartness.” We can easily conclude that using the term “smart” is really about utilities and the industry and how they relate to appliances — not how consumers relate to appliances. That’s another world completely.

As to energy efficiency…well that is misleading. What we really mean is “consumption efficiency.” And here’s where it gets even more vague — consumption efficiency in comparison to what? The efficiency rating here in the USA are based on a national average and on assumed usage tests. Electricity rates vary dramatically so an average would not be a good indicator of “local” efficiency. Nor is the usage test — it is also an average. Bottom line, energy efficiency is a term used as a benchmark of a typical appliance used under certain specific conditions. And conditions do vary dramatically based on weather, region, and demographics.

The best and only way to measure true efficiency is at the location where the appliances are being used. Appliance efficiency also changes over time as the appliance ages or the lack of maintenance impacts it. How efficient the entire home is also has its impact on appliances. An improperly insulated home would make the refrigerator work more (as well as having teenagers in the home!) or having a refrigerator in the garage –which lacks insulation would also impact the efficiency of the appliance.

So the term “smart” should now carry a more meaningful use. And hopefully we all have a better understanding of the complexities that utilities and consumers deal with when interacting with appliances.

In Texas (I live here) ZigBee based Focus meters are now being installed. To date, I have not received any interfacing options. That’s because in a deregulated market, my T&D provider may change. Who then is responsible for the maintenance and sustainability of the ZigBee interface? No two providers agree on what hardware/software would be acceptable unless such device(s) goes through a certification process.

It’s true people buy millions of appliances (49 million were projected for 2007 based on AHAM ) but it is also true that of the millions bought, those qualified as high end appliances, may not be that many. The type models being bought and the price range of those models is important when considering incentives for purchasing smart appliances. Obviously household income and ability to sustain smart appliances (repair and maintenance) is crucial.

The two most important factors for explaining appliance sales trends are the annual number of new households formed (housing starts) and the number of appliances reaching the end of their operating life (replacements). These will play a significant part in smart appliance purchases regardless of what the experts forecast. One last factor that plays a small part is the number of “used” appliances being sold or retained within the market.

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