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Will Smart Homes Contribute to Smart Cities?

January 15, 2014


Google recently announced that it was going to buy smart thermostat and smoke alarm-maker Nest Labs Inc. [“Google to acquire Nest for $3.2 billion in cash,” by Alexei Oreskovic, Reuters, 13 January 2014] Google has a pretty good record of getting involved in ventures with a promising future and Oreskovic reports that the Nest Labs deal is the second largest in Google’s history. Clearly, Google is placing a big bet on the future of smart homes. Shyam Patil, an analyst at Wedbush, told Oreskovic, “Home automation is one of the bigger opportunities when you talk about the Internet of everything and connecting everything. This acquisition furthers their strategy around that.”


One of the biggest surprises about the deal between Google and Nest Labs is the fact that Tony Fadell, Nest’s CEO, once worked for Apple, which is another huge player in the connected home field thanks to the iPhone. Peter Shipp, a smart-home installer and board member of the Custom Electronic Design & Installation Association (CEDIA), states, “The Apple iPhone has singlehandedly raised the bar for smart homes’ ease of use and aesthetic quality. You used to just control systems with touch panels, and the client’s reaction was, ‘This is adequate’ or, ‘This is good.’ Now it’s: ‘Wow – this is great!'” [“5 smart-home systems: From cheap to ultraluxe,” by Jerold Leslie, MSN] Leslie reports, “Smart-home systems start at around $2,000 and top out at more than $1 million, offering homeowners remote-controlled lighting, window shades, swimming pools, door locks, thermostats and security cameras – not to mention cutting-edge sound systems and home theaters.”


The real question is whether smart home systems will help advance the smart cities movement. David Bartlett writes, “We have the opportunity to make our infrastructure smarter by applying digital technologies to the physical world. New technologies — big data, analytics, geospatial, cloud, mobile — can help us reimagine how we can build and operate the built environment in a more sustainable manner.” [“Why we need a shift to a smarter physical infrastructure,” GreenBiz, 27 February 2013] Bartlett understands that the public, commercial, and private sectors all need to jump  onboard the smart infrastructure bandwagon if the vision he sees is to be achieved. He concludes, “We are at the dawn of a new opportunity where we can truly drive transformative change. It will be a new day where technology can help fix the very problems we have inherited from past approaches.”


Right now I suspect that it is the “cool” factor that is motivating most consumers to join the smart home movement. At this year’s Consumer Electronics Show (CES) in Las Vegas, there were plenty of smart home systems and appliances on display. During the CES, Samsung was one of the companies that demonstrated a large commitment to the smart home movement. At the show, BK Yoon, president and chief executive of Samsung Electronics, stated, “I believe that the home of the future has to protect, be flexible and be responsive.” [“CES 2014: Samsung launches ‘smart home’ initiative,” by Tim Bradshaw, Financial Times, 6 January 2014] Bradshaw reports that Yoon identified four trends that would make the home important to consumers: widespread mobile device usage, urbanization, ageing populations, and growing environmental risks such as freak weather.” According to Bradshaw, “Samsung’s Smart Home service will offer a new application for its TVs and mobile devices that allows people to control lights or heating, made by itself and partners.”


ABI Research predicts, “The smart home appliance market, defined by products with built-in connectivity, will witness substantial growth over the next five years, reaching nearly $25bn by 2018.” [“Market for ‘Smart’ Home Appliances Predicted to Reach $25Bn Over Next Five Years,” SupplyChainBrain, 4 November 2013] The article notes, “Currently limited to the top-end luxury models, wireless connectivity will slowly permeate to lower tier brands and models.” I suspect that most analysts would agree that the greatest contribution that smart home systems will make to the smart cities movement will come as they are connected to the smart grid. Olivia Choong writes, “Smart grids are here to stay.” [“Future cities: the rise and rise of smart grids,” Eco-Business, 18 December 2013] She explains:

“Faced with a burgeoning urban population and the need to achieve resource efficiency, city planners are increasingly seeking solutions to green their infrastructural systems and smart grids are poised to play a key role in this transformation. A recent report by GTM Research estimates that the global smart grid market is expected to surpass US$400 billion worldwide by 2020, with an average compound annual growth rate of over eight per cent.”

The smart home device most likely to contribute in the near-term to the smart grid is the smart thermostat, like the one made by Nest. According to the company’s website, “The Nest Learning Thermostat learns your schedule, programs itself and can be controlled from your phone. Teach it well and the Nest Thermostat can lower your heating and cooling bills up to 20%.” By using energy more efficiently at home, consumers contribute to the overall goals of smart grids (i.e., reducing the amount of energy required to be produced and reducing the chance of power failures during peak usage times). Another company involved in the smart home systems sector is Nexia. On its website, it notes that “home automation has evolved over the years. Today’s systems could be grouped into [three] categories to make it easier to understand.” Those groups are:


  • Monitored security: This is a home alarm system monitored by a third-party provider who contacts the appropriate responders (fire, police) when an alarm is triggered. Generally you can expect a higher monthly fee for this service and typically a long-term contract. These services are great for households that want to know someone else is watching their home however some customers may complain of false alarms and limited flexibility when adding new products to their system.
  • Self-monitored security/home automation network: Self-monitored systems are typically work with a variety of products, are modular/scalable and easy to setup. These systems are sold through retailers, e-tailers, and local dealers. They can be installed and maintained by the homeowner and enable remote control and monitoring via a smartphone, tablet or computer. These systems typically have a ‘hub’ or ‘gateway’ in the home that wirelessly speaks to the smart products throughout the home. Nexia falls into this category.
  • Custom home automation: This type typically includes monitored security, options for managing entertainment and media systems, and whole home integration. These custom systems are designed and installed by professionals and may require a high, upfront investment.”


Also discussed on Nexia’s website are products currently available in the areas of lighting, locks, sensors, thermostats, and video. Many of these systems can be seen in a model home that Nexia helped sponsor in a Walt Disney World Epcot exhibit. Inevitably, the connection between smart homes and smart cities is going to be important — primarily in the area of efficient energy usage. Supplying clean, affordable, and reliable electricity to the world’s growing urban areas is one the greatest challenges that energy companies are facing. That challenge could be reduced significantly if more consumers would buy energy efficient appliances and commit to smarter energy usage. The installation of smart devices will make smarter energy usage much easier — saving consumers both effort and money.

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