For years, the U.S. smart home industry has been eyeing Europe with a mixture of exasperation, frustration and resignation. But the tide is turning as a growing number of European utilities embrace connected home services. In the first of a two-part series, Eva Munk reports.
On Jan. 6, GreenWave Reality, an Irvine, California-based connected lifestyle innovator announced that it was extending its partnership with E.ON to deliver smart home services across Europe.
The partnership, which started in late 2011 with a 75-home trial in United Kingdom’s Milton Keynes and made it possible participants to monitor and control the energy use of their home appliances, now allows E.ONto license GreenWave’s hardware, software and Cloud services to drive development of a wide range of consumer-facing energy management applications including solar, home automation and connected lighting.
A week later, Google stole the spotlight by announcing it was buying smart thermostat maker Nest Labs for $3.2 billion. The announcement came on the heels of Nest introducing a software update to integrate its smart thermostat and smoke detector technology with time zone and weather support for ten European countries.
For years, the U.S. smart home industry has been eyeing Europe with a mixture of exasperation, frustration and resignation. While millions of gadget-crazy Americans have been installing smart home technology, and Asia is all over the assisted-living market, Europe’s response to connected homes has been a big collective “Ho-Hum.”
But the tide is starting to turn. A growing number of European utilities is embracing connected home services to attract and retain customers, and the likes of Nest and GreenWave are being joined by a host of European companies, including British Gas and Germany’s Tado – all looking to gain a beachhead in the largely unexplored market of Europe.
Europe: A potentially rich market
And a rich market it potentially is.
According to a 2013 report by BSRIA, a Britishconsultancy owned by the Building Services Research and Information Association, the connected and smart home product market grew by almost 19% between 2010 and 2012 to reach more than €510 million. It is estimated to continue growing at an 8% compound annual growth rate to reach €620 million by 2015.
Lighting controls are the main application in Europe, followed by environmental controls, according to BSRIA. (Assisted living home is an important market in the Netherlands where it receives a great deal of government support.)
Still, it’s early days for Europe as device costs remain high and vendors struggle to overcome the market’s complexity, fragmentation and inertia. “The current Connected & Smart home market still remains a niche high-end market, with penetration in light commercial applications growing since 2010,” the BSRIA report says. “Residential consumer awareness has been increasing across Europe, not least due to the widening popularity of smartphones/tablets and their role as possible user interfaces (via apps) in smart home solutions. Nevertheless, in these austere times in Europe, the high cost of the smart home solution prevents these solutions from reaching the mass market.“
In other words, smart gadgets are a lot more expensive than dumb ones. “That’s a real issue that home automation is struggling with,” says Nick Hunn, a British expert on wireless communications. “These are products that most people have never bothered about. The [connected] Nest smoke alarm costs £120, or I could get a little stand-alone one for £3. I don’t think many people are going to say it’s worth paying that extra £117 to get the sexy connected product.”
To be sure, that may be beginning to change as price points for entry-level smart home systems are beginning to come down. This is partially because smartphones and tablets that connect to these systems take a lot of the cost and complexity out of them, Hunn says.
Complexity and fragmentation
Still, other, potentially greater problems remain. According to Matt Hatton, director of Machina Research, three things have been stalling the European market.
The first is complexity. “Installing a connected home is quite a complex thing, which has been plagued by a lack of standards and general difficulty for the end user,” he says. “This is being worked out [in the U.S.] with solutions such as AT&T’s Digital Life and the Iris system from Lowe’s.” (Now, in Europe, with utilities eager to sweeten the deal for customers by joining forces with smart home designers, that may be changing.)
The second is fragmentation. “The problem is that there is no guarantee that different devices and hubs will interoperate,” Hatton continues. “All use different protocols and will not work well together. That means that specific point solutions around, say, alarms have been quite successful, but the wider connected home hasn’t really taken off.”
In many ways, this is where smartphones can work their magic. While individual smart appliances may not be able to communicate with each other, they can communicate with an iPhone or an iPad. “The fact that smartphones can be used as remote controls for a very wide variety of things is an important catalyst for the smart home market,” says Lars Kurkinen, senior analyst at Berg Insight.
It is partially for this reason that the industry is turning hopeful eyes to the Google/Nest duo. “They tend to create open platforms, like Android,” Jeremy Warren, vice president of innovation at Vivint, told Bloomberg on Jan. 15. “That’s great for us. It’s like Wi-Fi, a technology that we can all use to make the process of connecting more and more devices easier and faster.”
But that still doesn’t solve the third problem: inertia. “Where is the big incentive to sign up for home automation?” Hatton asks. “While there are [market] drivers, such as security or wanting to reduce home energy bills, they are easy to put off and will often depend on people moving home. While most households may think that a connected home solution is a good idea, there’s a big difference between that and them actually getting their act together and doing it.”
This is especially true considering that smart home technology is designed for newly built homes or refurbished ones. Europeans live in old houses, and they don’t change them as often as Americans do. “Normally, in the U.S., people buy a home and resell it in five years,” says Hakan Kostepen, executive director of product strategy & innovation at Panasonic Automotive Systems America. “The construction pace in the U.S. is much, much faster – in Europe that’s not the case.”
On the upside, tricky installation in European houses has opened the door for do-it-yourself projects.
(For the second part of the series, see Smart homes connect to Europe's power grid, part II.)
Eva Munk is a regular contributor to Open Mobile Media.
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