As recently as a decade ago, the smart home market was largely reserved only for the high-end luxury segments. Today, smart home serveillance solutions are not as cost-prohibitive, and have become more readily available to the middle-class sectors. No longer just a luxury toy, it has also brought about a realization that energy management and energy savings are fast becoming not just a new trend, but a new way of life.
With rising electricity costs, as well as regulations and awareness of global warming, adoption of smart home systems in Europe are being realized. Although most of the market is still dominated by high-end systems in luxury homes, the barrier is fast opening up for middle-class sectors to enter the market, especially because of trending energy saving solutions, which have recently begun to spring up all around the EMEA region.
Keep the Future Bright, Turn Off Your Lights
The Europeans are especially concerned about energy savings because of their feelings of environmental responsibilities and also because of lower energy costs. When we look at the German market, Ana Cristina, CMO for BrightOn, further points out that with Germany being arguably the biggest market in Europe, especially in regards to consumer electronics, it is definitely important to take a broader look into the country. Furthermore, according to BSRIA, Germany accounts for roughly 45 percent of the European smart home market, followed by France and the U.K. at 10 percent and 8 percent, respectively. Europe's smart home market is expected to grow to about US$0.6 billion by 2014, with mid-range systems contributing much to the growth.
The German market will be up near $416 million by 2015, which is around 50 percent of Europe's smart home market. While commercial light applications are still the predominant market for smart homes, demand in the residential sector is rising, as Germany's transition to renewable energy and phasing out of nuclear power has driven up the cost of electricity, which is now the second highest in Europe. Homeowners are increasingly looking for other methods to save on electricity bills. An industry expert further explains that Europe is becoming increasingly sensitive about nuclear power, with the consensus that there needs to be a need to look at other alternative sources of energy. He further added, "there's definitely a high density of people concerned about fossil fuels. Not just with governments, but also the people are looking into renewable energy sources. Germany is the leader into this research now." The expert also cites the fact that this could have economic benefits also. "We see this as an opportunity. We have the engineering capabilities."
The UK market is projected to grow to near $70 million by 2015. With energy prices rising, and people becoming more and more acutely aware, the technology has become even more advanced. However, Philipp Schuster, Regional Director of Loxone U.K., believes that the U.K. is still lagging behind other European countries, especially in countries like Germany, Austria, and Scandinavia. However, he does mention that people are becoming more and more conscious of their energy usage, and they are looking at extra services to save on energy and heating costs. "The market is certainly expanding," Schuster says. Some of the reasons that the U.K. currently lags behind other European countries is also because of extreme temperature climates experienced in the northern parts of Europe, where places like Scandinavia experience far colder temperatures than the U.K., thereby forcing them to look into better heating efficiency, as their energy bills are higher and they feel the pinch earlier. Another factor is older housing stocks, which lack modern house construction styles.
Government Incentives Pushing For Energy Management Solutions
Governments, not just companies and the general population are taking notice of this issue. Providing incentives and passing regulations to new building codes are just some examples. In Germany, there are building regulations now with strict laws regarding electrical installations in new infrastructures that make the entire house very safe. This is also a way to manage energy usage and conservation of energy. The industry expert explained that there are "standards of technology," which is basically a gentleman's agreement but not officially law.
However, it is widely followed in Germany now, which mandates everything from renewable energy solutions to upgrading new construction and installation practices to the so-called "independence of energy," which according to the source, is an independence from Russian oil and fossil fuels. However, not all of it is working. An example of this is the Green Deal, an incentive passed in the U.K. and launched in 2012 that has largely been ignored. While ideal in theory, it is mostly nonexistent in practice. The basis of the proposal is, Green Deal products that are purchased through an accredited dealer and installed and fitted through a Green Deal-certified installer qualify for purchasing without or with highly reduced VATs. However, while great in theory, this whole structure does not really exist to the physical people that do the installations and the people that provide these products do not really exist. In the end, the lack of access to Green Deal-certified products presents a great barrier to the whole incentive, as well as the fact that in reality, no money is being saved. In short, what the deal stipulates is, users who wish to take advantage of this incentive would still need to pay back the government for the certified product, but instead of paying in regulated monthly installments, users would pay back what is saved by usage of the better and more efficient greener product. In the long run, people are not saving any money anyways, so there is no motivation to go through the trouble.
Europe and North America are the biggest adopters of smart meters, which gives utility companies the opportunity to offer more diverse and value-added services to their customers. In fact, Juan Madrid, West Europe Area Manager for Fermax, explained that smart meters have already become part of the standard on new medium and high-end construction projects going up in Spain, with retrofitting of older properties already taking part. The eventual goal, he explained, is a complete distribution of smart meters across every single residence in Spain. This, according to Madrid, is a good start towards energy management, just by simply giving everyone easy access to their details about energy consumption and usage.
Utilities and Telcos Pushing Towards Smart Home Services
Lux Research estimates that total revenue for utility companies in Europe is roughly $265 billion. Schuster added, "utility providers in the U.K. are now also offering services for energy management. Utility providers like British Gas and Southern Electric have gone beyond only offering Smart Meters, but with systems like Hive, they are also trying to offer 'smarter' heating solutions." Telecommunication companies like Deutsche Telekom are also highly interested in this space. Telcos have already invested a great deal to build their infrastructure and already have a large user base that use their subscription-based services. In an interview with IP&TV News, Jürgen Hase, VP of Deutsche Telekom's M2M Competence Center, said that he anticipates a number of changes for the German smart home market over the next few years, including the emergence of new service-based models.
"We expect four key segments in the smart home market to account for 89 percent of the market: home automation (40 percent), smart energy (20 percent), ambient assisted living and digital health care (15 percent), and self monitoring and control (10 percent)," Hase said. He also points out that cooperation will be critical in the smart home market, saying: "We expect to see a fragmented supplier structure: no single player will cover all smart home segments. Cooperation will be the key to success."
Rise Of The Middle-class Sector
Fast on the rise, the middle-class sector is taking notice of the need for energy management solutions. Because of the shrinking upper-class, which began in 2009 due to the global recession, the rest of the market sectors are rising. This has forced companies like Loxone to develop new business strategies, with the European-based company, founded in 2008, starting out by focusing completely on the middle-class sector. Schuster further elaborates that their products are being mostly marketed as more affordable, simple solutions.
Because of the attention being focused on energy savings, security solutions (such as alarm or video surveillance systems) as it pertains to home automation have become secondary. "Security is mainly a peace of mind kind of thing. 15 years ago, there was still a real drive for it. However, looking at the amount of people that have alarm systems installed but don't use it percentage wise, the U.K. is the highest," Schuster explains. "This can be attributed to generally low crime rates in the U.K., but also to the fact that alarm systems are actually too complicated to use," he added. More and more, the British people are starting to inquire about energy management solutions when it comes to home automation solutions.
Looking at things on a broader scope, the requirements between the upper-class sector and the middle-class sector still differ in many aspects. On the luxury market side, there is a much greater demand for aesthetics and customization. They also require turnkey automated and integrated solutions, with everything available on one device. For the middle-class sectors, there is still that focus on flexible solutions, with easy retrofit applications into existing homes and systems. Examples might include things like inexpensive mini-servers that can control aspects in your smart home, like lights, doors, and window blinds.
Looking into the Future
All in all, the future of the European home automation market seems to lie in energy management and finding other renewable sources of power. Look for trends in continuing development of energy management, and simpler, more affordable and more integrative solutions. Another key thing to point out is, because of the recent explosion of smartphones and tablets, it has become obvious continual development of these features will be based off of these devices. In a matter of fact, the eruption of smart home devices, systems and services in 2014 is a culmination of maturing technologies, environment-friendly regulations and the ubiquity of mobile devices.
Looking deeper into energy management, Schuster added, "With the next review of UK building regulations in 2016 and the 2020 initiative, energy awareness will continue to rise and standards are bound to emerge. Only time will tell if these standards will become widely adopted or if many proprietary solutions will compete for market dominance." An industry expert also mentioned the important need of weaning Europe off nuclear power and fossil fuels.
Realizing the Value in Value-Added Energy Management
At its core, home automation is still a comparatively new market for the security industry in Europe. Because of the global economic recession, security companies have started looking elsewhere for other ways of kick-starting their businesses. One of the things trending right now in the EMEA region is energy management and energy savings. As an added-value service, it is not hard to picture that bundled with security could be a number of simple energy management devices that could easily be installed. Juan Madrid, West Europe Area Manager for Fermax, mentioned that energy savings is becoming a real trending topic. Along with various government directives being implemented, he also says, "it's more related to added-values from integrators and how fast end-users can get their returns of investments. It's growing, and we cannot expect that it will stop." Rishi Lodhia, CEO of Panasonic Cameramanager, also emphasized the importance of looking into value-added services, and how it can incorporate attractive and affordable solutions for their customers. Lodhia also explained that energy savings is very important, being much more attractive now than home security solutions.
Renewable Energy a Reality?
At first glance, renewable energy sounds like another word for expensive, inefficient energy that is still technologically unrealistic and unproven. The fact is though, we are burning through fossil fuels at an alarming rate, and are projected to run out by around the year 2100. Because this is an endlessly debatable subject, we will not delve too much into it. Coupled with the nuclear disaster in Japan a few years back, people in Europe are starting to take notice of the issues.
Currently, renewable energy makes up less than 2 percent of the world's primary energy supply, according to an article published by Forbes. Although growing very rapidly, it is not on course to fill the fossil fuel gap, at least not yet. Renewables Directive, established in 2009 and made up of roughly 27 European countries, is a directive aimed at mandating levels of renewable energy used in the European Union. The current target is 20 percent. Germany, the current leader in Europe, has risen from about a 6.3 percent share in 2000 to about 25 percent by the first half of 2012, according to an article published by Spiegal Online. In fact, Germany now invests over US$35 billion a year in its renewable energy sector. By 2020, Siemens CEO, Peter Löscher believes that Germany will be generating over 35 percent of its energy through renewable resources.
One of the most recently discussed sources of renewable energy lies in a technology that is actually one of the oldest. Wind power, with its infinite pool of resources, has made a comeback in recent times. Largely replaced in the mid-to-late 1990s by nuclear power, it has begun to be researched again, to some success already. More than 21,607 wind turbines are currently located in Germany, and the country is on track to build more. A major challenge to overcome, however, is the subject of space. Because wind turbines are not exactly small, one of the methods being utilized is offshore wind farms. Of course, this presents its own problems, predominately the issue of developing sufficient network capacities for transmitting the power generated in the North Sea to the consumers in Germany.
Other methods currently being used or looked at include hydroelectricity, the world's oldest source of renewable energy, with the prime example being the Hoover Dam in the U.S. Other methods include Photovoltaics, which means converting light to energy, a form of solar power. The largest example in the world, Moura Photovoltaic Power Station, is located in Portugal. Other EMEA countries, like the U.K., are looking into bioethonol, a form of biofuel. All said, renewable energy still has some hurdles to cross, some examples being the issues of cost-efficiency and the production efficiency of energy, especially because nuclear power is so cheap, efficient, and reliable.
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