Tendril Networks - being smart about energy
Saturday, August 2, 2008
Tendril Networks is a smart energy startup based out of Boulder, Colorado. Tendril was started with the intention of providing Zigbee middleware that can enable a multitude of applications. Since Adrian Tuck came on board as its CEO, Tendril has turned around and solely focused on the smart energy vertical. Smart move, I should say. Today, the company seeks to be a niche player offering a complete end-to-end solution for the utility company and the consumer.
Tendril, unlike other players in this market, has taken a customer-centric approach to the smart energy problem. The company’s philosophy is simple – give the consumer the choice. Consider the following situation -
It is peak summer and you cannot stay inside your home without the air-conditioner. It is very likely that your neighbors think the same way. The resulting peak utilization leads to capacity limitations. In a model being promoted by Tendril’s competitors such as Comverge (NASDAQ: COMV), the utility company steps in and turns off these high utility devices. This outage helps the utility company recover from this peak capacity crisis but may potentially ignore consumer inconvenience.
Tendril’s Residential Energy Ecosystem (TREE) begs to differ by passing the control and choice onto the user. The in-house display, Insight provides usage and cost details to the user. Examples of such data include variable electricity prices, current and projected usage and costs, price increase and emergency situations. So, if the utility company senses peak hours, it can send out warnings and spike the price and let the user react to it as against forcing an outage.
Besides the residential gateway that controls the devices and their usage, Tendrils’ USP comes with its backbone software portal. This portal, aptly named Vantage, allows the users to remotely control these devices and define rules for various signals from the utility company. You may, for example, decide that you want your heater turned on when you come home from office, no matter what the current rate of electricity is.
Tendril does have its share of challenges. It has to compete with existing metering and devices companies to gain foothold. Besides, it has its task cut out in terms of being able to convince the consumer of its benefits. If the device is not mandated at homes, the utility company may not see value in its solution. After all, if it can neither prevent outage nor monetize it enough if the consumer does not feel the need for TREE, then the entire model fails. Perhaps a work-around would be for the utility company to mandate TREE with subsidies for the devices.
Tendril looks to deploy its end-to-end solution in around 50000 homes by the end of this year by partnering with utility companies. The company has grown from less than 20 beginning this year to about 60 employees to match the rapid recognition and success it is gaining in the smart energy market. Adrian expects the company to grow to around 150 by the end of 2009 commensurate with the 10-folds deployment increase that it hopes to achieve during the same period.
[Note: In case this article sounds too esoteric, I would encourage you to read the previous Smart energy articles I have published here, here, here, here and here]
Smart Energy and Cellular - a study of parallels
Friday, August 1, 2008
The basic issue
The utility companies fear that they will be capacity limited in the future and wish to use smart metering as a way to slow the process. If, for example, the grid supported 20 users previously, they now hope that with ‘smart’ usage, 25 users can be supported. This will also guarantee a delay in the deployment of additional infrastructure. This, in turn, translates to a delay in Capacity Expenditure deployment.
This is very similar to the capacity problems that 3G network carriers will face as more users begin to extensively use their smart-phones for data. The carriers will turn to advanced transmit and receive techniques so more users can be supported for the same power expended at the base-station. This, in turn, will delay the deployment of more base-stations. Advanced receiver techniques like interference cancellation will assist the carriers to get a higher RoI as well.
The Value Chain
The cellular value chain, in my mind, comprises of four players namely the service provider, the cell-phone maker, the chipset/technology provider, and the consumer. In a model which is driven by the service providers trying to reduce CapEx, they will be driving the chain. In the US, for example, the service provider determines technology, the devices and the usage model. Until Apple changed the name of the game with its iPhone, the service providers called the shots here. Though the iPhone is tied to AT&T, it has been driving the increase in the latter’s customer base proving the power of brand and user experience.
The Smart Energy is closest to the cellular carrier-centric model. The utility company is akin to the service provider. The back-end software infrastructure and platform provider is parallel to the technology provider (e.g. end-to-end CDMA-based network for cellular). We have zigbee chipset companies such as Ember. I also like to use the cell-phone analogy to describe the two hardware components installed at the consumer site – the in-house display is parallel to the cell-phone and the gateway that controls the devices is similar to a femtocell or an in-house base-station.
The drivers
The Smart Energy value chain is slightly different in that the energy company has a monopoly. In other words, it is unlikely for the user to be able to pick the utility company. This implies that at least initially, the utility company will drive the value chain. A sound business case and monetization capabilities become imperatives. It is also the task of the technology providers (software platform makers, for example) to make their case with the utility companies. Their task is cut out – why is their system the best method for monetization? At the same time, how attractive is it to the consumer? How do they sell the devices and the services to the consumer?
These technology companies are hence in a position similar to Qualcomm’s about 15 years ago when the latter was trying to pitch CDMA to carriers world-wide. The difference, however, is that the utilities companies are more local and regional in scope. So, the technology companies will have to win over multiple utilities companies to grow market share. Hence word of mouth and deployment success become very vital.
Word of mouth will be driven by consumer feedback and user experience. So, much like the iPhone that has given 3G a big impetus in the US, devices with a great UI, look and feel become important as tools to mold consumer mindset much. The utility companies, in order to maximally monetize on ‘Smart Energy’ will go with the solutions that gain maximal consumer traction. Of course, devices/services that offer great consumer experience without much for the utility companies will automatically be sieved out of the equation.
The gateway companies will directly interface with the utilities companies to sell themselves. Gateways will be similar to the modems that Comcast installs at consumer sites. So, its capabilities will be driven by the needs of the utility company.
Clearly, while the technology and devices companies have the potential to drive the value chain at various points, I am not as optimistic about chipset companies. Though they will ride on shipment volumes, they will never be in the driver seat since the chipsets already seem to be commodity products.
A final word
So, while there are differences in the value chain between the cellular and smart energy industries, there are many similarities that cannot be ignored. On the contrary, companies should actively learn from how the cellular industry has evolved in the last fifteen to twenty years as they look to gain foothold in this promising new technology frontier. Feel free to contact me if you need additional insights along these lines. For now, let me throw in some future questions whose answers may well lie in past lessons –
How do companies protect themselves from another intellectual property war?
How about sustained consumer interest? Device churn etc.?
Smart Energy - Business Case
Monday, July 7, 2008
Why would the energy/utility companies implement Smart Energy? What sense does it make for them? Fair questions to ask! I will attempt an answer here.
Despite the ‘green’ benefits, the most important thing to make this concept fly is for it to make business sense to the utilities companies and the slew of start-ups that have created an elaborate value chain.
The first argument is the ability of these devices to delay capacity expenses for the utility company. What does this mean? The energy companies have already invested substantial money in the infrastructure. For them, as the number of users increase, it will help them until they hit maximum usage. Once the usage hits this point, there are only two ways to go. If it has more money, and if it makes economic sense, the company will roll out infrastructure to support the load increase. If not, the user is faced with power outage. The smart energy systems present an alternate route for the utilities companies. If the usage is controlled to a point that the capacity is reached five years later rather than today, then it delays the additional roll-out thus saving these companies billions of dollars temporarily. Of course, the additional roll-out of capacity is inevitable. So the utilities companies should analyze what, if any, are the additional economic benefits of such a system. While I am sure there are research studies with cost-benefit analysis, the usage models and the consumer participation levels are unclear. So, the energy companies are likely to roll out minimal monitor systems to experiment and add incremental features to get a sense of what the consumer wants and what he is willing to pay.
To conclude, Smart Energy can make very good economic sense to the companies involved if they can combine creativity, common sense and a basic understanding of consumer behavior.
Smart Energy - Convergence and consumer awareness
Saturday, July 5, 2008
In the two earlier parts of this series here and here, I had talked about various aspects of smart energy. In this part, I will look into smart energy and convergence devices and will touch a little bit on consumer awareness.
7. How about a more advanced use case?
That brings me to my favorite topic – convergence devices. It is very easy to foresee a remote application that will interface with the backend platform and help you control your electrical appliances through your convergence device. A very appropriate example is to have a smart energy iPhone Application, right?
8. What part should the consumer play? Will this be thrust on us?
Well, like I mentioned earlier, this is very much a part of the ‘green’ initiative. But its implementation will be successful and pervasive only when there is a win-win situation for the consumer and the utility company. While the utility company and the value chain will seek to monetize smart energy, they will have to ensure that the consumer will also benefit. The ideal situation will be for the industry to give back to the consumer rather than merely benefit from his/her philanthropic nature. So the consumer, in his part, should make sure that the utility company does not take him/her for a ride and that there is a value proposition for all parties.
Smart Energy - FAQ Part 2
Wednesday, July 2, 2008
4. How does the energy company communicate with the user?
There are two main components that help the energy company achieve its objectives.
Smart energy gateway: This is typically connected to your broadband connection and serves as an access point for the energy companies to talk to you. In the future, we may have carriers providing zigbee-enabled gateways for the user to have a single device that provides broadband also communicates with your energy company.
In-house Display: This is essentially the smart-energy equivalent of a mobile phone. This wireless device can be a kitchen-top device or a device attached to your refrigerator. The gateway can communicate raw data to the device which can process and provide information for the consumer to assimilate. Examples of such information include peak hours, rates, usage, usage projections etc.
5. How are the devices controlled?
A rudimentary model would be to assume that once the information is provided, the user will use his discretion to manually turn off devices. A more advanced model would be to provide control features in the display either through buttons or touch-screens. The control information is the stimulus for the gateway to communicate with the intelligent or smart devices installed in your house.
6. That is in-house control. How about remote control?
Smart Energy - FAQ Part 1
Tuesday, July 1, 2008
I have so far in this blog talked extensively about the mobile wireless space. Mobile wireless is very near my heart since my engineering specialization is in this field. Of late, there is one other industry that has caught my attention – Energy management and smart energy. So, I have put together a FAQ for the ‘smart’ reader that I will publish over several parts.
1. What is energy management?
Energy management is the concept that allows residential and business consumers to monitor and control the way their electrical appliances are used. The control mechanism may be in-house or remote-platform based.
2. Why would we need to control electrical appliances?
There are several reasons we want to be able to do this. Firstly, as responsible citizens of this world, we ought to give Mother Earth the respect she duly deserves. As we strive to go ‘green’, we should collectively work towards energy efficiency. Where else to begin this but at your home? Like someone said, ‘Charity begins at your home.’
Secondly, the energy companies are perennially running out of capacity and we are hit by power outages. Not only is the population growing, but the per-capita consumption of energy is also increasing by the day. The power companies are trying to device a more efficient, graceful strategy. If they can have nominal electrical usage per household, then such outages can be avoided or at least reduced. One scheme that the power companies are toying with is the idea of differential rates during peak hours. If the energy company communicates peak hour information to the user, this will encourage him/her to turn off electrical appliances that are unnecessarily running during those times.
Thirdly, there is the luxury angle. How many of us would like to have our house temperature right when we step in after an exhaustive work day? Or would you not like the A/C or the heater to fall back to a nominal temperature when you are not around?
The smartness can come from several short-range communication mechanisms. A good emerging example is the use of Zigbee which is a short-range radio communication standard being promoted for home networking. Once your thermostat is equipped with a zigbee radio, it can be controlled by a central device which will also be zigbee-enabled. Suppose you have set a timer in this central device to turn off you’re A/C at 8AM when you step out of the house, zigbee signals are sent out to the A/C at the right time to enable this automation.
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