I recently wrote a blog on why disruption is so hard to predict, and it got me thinking about consumer adoption. Why do people spend $10,000 on an Apple Watch? Or $3,500 on a battery? We know that technology diminishes in value over time, so these purchases are likely not about economic value or investment—something else drives them. We see this in the energy market too.

When the Nest Learning Thermostat came out, Nest made a big deal about energy savings and did some studies to prove it. I think at the end of the day, however, if you are after savings, you can get most of those savings with a $35 programmable thermostat instead of spending $250 on a smart thermostat like the Nest. The differentiator is ease of use. If you use the cheaper model properly, you don’t need to buy a smart thermostat like Nest to get the savings, but Nest provides consumers with a smart device that does the work for you.

So why did so many people buy Nest thermostats? Because it’s easy. You “just put it on a wall and go about your business,” and you’re saving energy and money. No programming needed and it easily integrates with your home and your devices. Looks good, and hey, it’s also pretty cool.

In the past few years, demand for smart thermostats and other connected home devices has expanded quickly. A recent survey by Icontrol found that nearly three-quarters of North American homeowners want a smart thermostat, making it the most coveted connected-home device. The global market is also estimated to grow to $1.4 billion in 2020 with 32 million thermostats installed, up from $100 million in 2013. Google sees this—they bought Nest for $3.2 billion last year. Just wait… the Google Smart Home is coming.

Smart home automation
Is smart home automation “just another toy” for the rich? Can industrial design as well as savings lead to mass adoption?

This demand growth isn’t just about energy savings, although that’s a part of it. Interest in connected-home devices is growing for entertainment, convenience and productivity purposes, on top of savings. It’s not just about the money. Brand, ease-of-use and environmental factors drive consumer decisions alongside financial savings. The question is how to fuel continued growth. The key is pushing past the early adoption phase and into scale.

A lot of fuss has been made about how much Tesla’s Powerwall costs. At $3,500 plus installation, some estimate each Powerwall ends up being about $7,000, and that most houses will need two of those to go off-grid. Once it’s up and running, the average cost of stored electricity could be 15 cents per kwh (plus whatever you’re paying for electricity already, which can take you up to 30 cents per kwh, unless you’re off-grid). This is higher than the American and Canadian averages of around 10-12 cents per kwh. But we are looking at savings in the renewable space—Powerwall costs over 60% less than previous residential solar power storage systems.

So is it so expensive that it’s “just another toy for rich, green people?” Maybe, maybe not. Sure it’s not going to be economical for a lot of people. But less than two weeks after the Powerwall was announced, over 38,000 reservations had been made, worth approximately $625 million. That’s not just about energy savings or going green. It doesn’t have to make economic sense. It’s because Tesla is cool and sleek—industrial design is in.

But does this offer enough value to fuel continued growth? New research suggests that it may not. A recent report shows that consumer interest in smart home devices fell for the first time this past May, to a level 15% below what it was 12 months prior. Early adopters already bought them, and the rest of us aren’t so sure.

I think sometime in the next six months, I will be invited to someone’s house, will be poured a Manhattan, and asked to go down to the host’s basement to check out his Powerwall. We’ll talk more about how cool it is than about the energy savings. I don’t know about you, but for me that doesn’t happen with most electrical stuff in the house. Will that be a common experience for most people? How many of us will invest in the Google Smart Home?

Clean technologies are breaking ground in the energy market. Industrial design, convenience, integration with devices, going green, savings… it’s unclear if these create enough consumer will to lead to mass adoption.

Is home automation just for the rich and nerdy?

Ron Dizy

Ron is Managing Director of the Advanced Energy Centre. He is responsible for all activities at the AEC, focused on two priorities. First, working with a diverse group of public and private sector partners to assist utilities, energy users and energy innovators to adopt new technologies faster, Mr. Dizy is passionate about making our energy system more cost effective, more resilient and more reliable. Second, he is driving international opportunities for Ontario and Canadian energy innovators by leveraging our domestic successes and experience. See more…