Sure smart home tech is cool. But how much does it save you?

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July 6, 2014

Smart home tech­nol­o­gy is con­ve­nient, state-of-the-art and unde­ni­ably cool. But does it help where it real­ly matters—in con­sumers’ pock­et?

The grow­ing mar­ket ranges from Wi-Fi ther­mome­ters to auto­mat­ed kitchen appli­ances and air con­di­tion­ers. Yet a cen­tral ques­tion remains: Do these bells and whistles—and the tech­nol­o­gy that helps them run—actually help con­sumers save mon­ey at a time when heat­ing and elec­tric­i­ty bills are soar­ing?

Ener­gy effi­cient homes are gar­ner­ing more atten­tion in the face of a wave of high­er util­i­ty costs. Res­i­den­tial elec­tric­i­ty prices are expect­ed to rise near­ly 4 per­cent this year, accord­ing to data from the Ener­gy Infor­ma­tion Admin­is­tra­tion, a func­tion of a bru­tal win­ter that lit a fire under oil and nat­ur­al gas costs.

Read More Smart homes aim for con­sumers’ wal­lets as ener­gy costs soar

Smart tech helps give con­sumers the abil­i­ty to mon­i­tor their ener­gy use, and down­shift accord­ing­ly, thus help­ing save mon­ey in the long run. Still, the over­all trap­pings of ener­gy effi­cient homes and their ini­tial invest­ment costs don’t come cheap, and cer­tain­ly sug­gests ener­gy effi­cient tech­nol­o­gy is out of reach of a broad swath of con­sumers.

Mean­while, most smart tech providers have a built-in bias toward home­own­ers, who have the means to make upgrades that can eas­i­ly cost buy­ers thou­sands of dol­lars. Although smart ther­mostats are rel­a­tive­ly inex­pen­sive, a user has to own a home—or at least be respon­si­ble for the elec­tric meter—in order to get the ben­e­fits.

Some peo­ple are moti­vat­ed pri­mar­i­ly by dai­ly piece of mind and the con­ve­nience of a real­ly great pre­mi­um secu­ri­ty sys­tem,” said Jere­my War­ren, vice pres­i­dent of inno­va­tion at Vivint, a com­pa­ny that pro­vides ener­gy sav­ing appli­ca­tions, solar pan­els and home sur­veil­lance equip­ment.

Mar­ket par­tic­i­pants say smart home users are moti­vat­ed by a host of con­cerns, includ­ing cost sav­ings and the envi­ron­ment. A study last month by the Uni­ver­si­ty of Michigan’s Ener­gy Insti­tute found that con­cern over the toll ener­gy use is tak­ing on the envi­ron­ment cut across income lev­els.

Still, War­ren acknowl­edged a neb­u­lous “cool fac­tor” that lets users take con­trol of your home with a com­put­er or mobile device most used by upper income home­own­ers. That helps with prod­ucts like Vivint’s new Sky plat­form, a cloud-com­put­ing solu­tion that gleans infor­ma­tion from appli­ance and ener­gy use, then makes sug­ges­tions on how to save ener­gy.

A lot of peo­ple com­ing to pur­chase the prod­ucts are doing it for the sta­tus sym­bol and the it fac­tor of the prod­uct and the waste, more than they are for raw sav­ings,” War­ren said in an inter­view, “but it’s a com­bi­na­tion of all those things.”

Eco­Fac­tor, a smart tech­nol­o­gy com­pa­ny that pro­vides soft­ware to util­i­ties and com­pa­nies such as Comcast—the par­ent com­pa­ny of CNBC—touts sav­ings of 10 per­cent on ener­gy bills, which aver­age rough­ly $100 per year.

Those are mean­ing­ful sav­ings for some peo­ple,” said Roy John­son, EcoFactor’s CEO, in an inter­view. How­ev­er, sav­ings “depends on what­ev­er region you live in,” which can vary accord­ing to city and state, he said. Util­i­ties can pro­vide added ben­e­fits and incen­tives to make smart home costs worth­while.
Low income oppor­tu­ni­ty?

Smart homes encom­pass a large cross-sec­tion of soft­ware and hard­ware, mak­ing the sec­tor ripe for com­pa­nies to cater to the needs of key demo­graph­ics will­ing to pay for the com­bi­na­tion of ener­gy effi­cien­cy, lux­u­ry and con­ve­nience.

The mar­ket for light con­trols alone is an esti­mat­ed $1.7 bil­lion, and Nav­i­gant Research expects auto­mat­ed ther­mostats to gen­er­ate $1.4 bil­lion by 2020. The increas­ing inter­est in home tech­nol­o­gy, and the sharp rise in ener­gy expens­es, cre­ates a poten­tial­ly vast untapped mar­ket, accord­ing to experts.

At least for the moment, how­ev­er, the costs asso­ci­at­ed with retro­fitting hous­es with new tech­nol­o­gy make it near­ly impos­si­ble for every­one to ride the wave of its pop­u­lar­i­ty. Low­er income families—which data sug­gests could ben­e­fit the most from ener­gy efficiency—are the ones miss­ing out.

A June report by Opow­er high­light­ed how in some instances, low-income fam­i­lies con­sume even more elec­tric­i­ty than those at upper lev­els, even as they lack the means to upgrade and retro­fit home appli­ances to make them more effi­cient. Yet Opow­er, a cloud-based soft­ware provider that pro­motes ener­gy sav­ing solu­tions, says that ener­gy effi­cien­cy isn’t nec­es­sar­i­ly all about high priced tech­nol­o­gy.

Small changes in behav­ior based on per­son­al­ized infor­ma­tion and advice can go a long way in nudg­ing [con­sumers] toward actions help­ing them save mon­ey on their bills,” said Bar­ry Fis­ch­er, Opower’s head writer, said in an inter­view.

Using appli­ances at cer­tain times of the day can help save a lot of elec­tric­i­ty, he said. Mod­est house­hold adjust­ments “are fair­ly light­weight, and tend to be of inter­est to a select group of cus­tomers already extreme­ly engaged in their ener­gy use.”