Electricity Data is the New Oil

Last week, the Wall Street Journal published an article exploring the idea that the smart home is really part of a bigger strategy for Google and Amazon to enter the electricity industry. This has been talked about for a long time amongst people in the space as it’s always been clear Amazon and Google have an interest in becoming major players in energy.

Utilities have made their usage data hard to tap into for decades. Instead of playing a key role and monetizing that data, Google and Amazon have started going around them and, just as both have collected data on our purchasing trends for years, they’ll soon be able to not only understand when we consume energy but where and how.  Energy consumption is a “footprint” of our daily lives inside of our homes.

For example, how valuable would it be for a restaurant to know I get home on average at 6P every day, go to my kitchen looking for dinner, while listening to the jazz music station on Alexa?  You can extract all of that information from the following: connected locks or garage door openers, smart lighting, smart thermostat, and Alexa or Google Home.  Or, as a TV add exec – I want to know when you are in front of your TV and buy things on Amazon.  If you use a Fire Stick, smart lights, and your phone.  I now have a pretty good idea of when to place my ads.

Additionally, only 3 areas make up most of our residential energy consumption – HVAC, water heating, and lighting.  Now that we have “smart” versions of all three algorithms will begin to estimate usage in a far more valuable way than the current techniques used by utilities.  The current methods are optimized for commodity trading, the new methods will be optimized to capture the value in our purchasing and living trends.

It’s also important to note, but not talked about here that consumer expectations are changing. Google and Amazon aren’t just tapping into data, for the most part, they make customers happy across a variety of other products. To this point, they’ve built up enough consumer trust that we’ve allowed them to enter our lives in a deeply personal way without much push back.  Meanwhile, utilities are often at the bottom of customer satisfaction surveys and only thought about when things go wrong (outages and high bills).

Add these issues to things like the emergence of microgrids, storage, and more stringent rate regulations and it becomes easy to see why the current utility model is in big trouble despite increasing demand for its product and the value that can be extracted from our energy consumption data.