Google To Buy Smart Thermostat Maker Nest For 3.2 Billion

The days of merely managing wires and selling a commodity are winding down for utilities. These companies must now compete with or embrace technology and services that give customers greater control over the systems that power their homes, making it easier to reduce energy consumption, increase efficiency and ultimately save money.

Google’s acquisition of smart thermostat pioneer Nest is a prime example of this, and NRG Energy’s purchase of solar installer Roof Diagnostics shows that some utilities are embracing distributed generation – literally seeking to “own it” – as opposed to fighting it.

These forward-looking utilities are precisely the ones energy management company Tendril is “carefully choosing” as customers for its new service platform. Tendril’s new Energy Services Management (ESM) offering uses data analytics and software to help utilities offer more customized solutions.

For example, based on a geographical query the software can mine large data sets to identify homes of similar size that heat and cool with similar systems, but exhibit variations in power consumption. These variations provide utilities opportunities to offer demand management solutions and other energy efficiency tools that help customers save energy and money.

“Utilities are moving to an energy services model and we’re helping them move away from a one-size-fits-all approach,” Tendril CEO Adrian Tuck recently told Breaking Energy in an interview.

The software gives utility managers a variety of ways they can message target customers, like estimating the return on investment associated with different energy efficiency upgrades.

“There is a trade-off between protecting capabilities of the incumbent, while allowing innovation to happen. Instead of incenting utilities to build things on a cost-plus model, do it based on outcome,” said Tuck.

The fundamental challenge utilities face as distributed generation and energy efficiency proliferate is the decreasing volume of kilowatt hours sold. The grid still requires capital intensive maintenance and upgrades, but the cost of those projects increases with lower total sales as people generate more of their own power and use less overall.

One possible solution to this challenge – the one being championed by the Tendrils of the world – is to partially make up that revenue shortfall by offering new services people increasingly need as they install solar panels and buy into energy efficiency programs.

The challenge for utilities is to recognize opportunities growing from this paradigm shift and seize first-mover advantages. As with any business cycle, some companies will do this successfully – remaining competitive and profitable – while those that fail will make room for new entrants specifically outfitted for the new business climate.