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Capturing Value in the Transition: Unlocking New Revenues in the Evolving Landscape of Home Energy Management (HEM)

Summary

In this blog (the second in the Capturing Value in the Transition blog series) we show home energy management will turn from a niche product to an essential component of the energy system, and discuss how transition companies can capture value from this emerging technology. 

As we march towards achieving net zero targets, it’s becoming evident that the transformation requires not only cleaner energy sources but also a fundamental shift in how we power, heat, and cool our homes. With increasing adoption of electrified heating, solar panels, battery storage, and electric vehicle (EV) charging, there’s a growing demand among customers to make the most of these assets. The goal is clear: enhance the quality of consumption while simultaneously reducing energy bills. 

But it’s not just individual households who stand to benefit. There’s a broader, systemic imperative at play here. This will be enabled when we optimise how residential energy is consumed and produced to harness the power of variable renewables efficiently and economically. 

Enter Home Energy Management (HEM). Imagine a scenario where a home not only consumes energy but also contributes back to the grid during peak demand. HEM is the gateway to realising this vision, transforming customers from passive consumers into active participants in the energy ecosystem. HEM systems allow households to manage their bills and earn additional revenue by offering services back to the market – HEM providers and energy companies can support households to do this, earning a share of these bill savings and revenues. 

At LCP Delta we cover HEM from a strategic point of view – not only to assess its potential role in the future energy market but also how this presents new revenue generation opportunities to various players across the energy value chain. 

From niche product to essential component

We estimate that in 2022, c.1.6m HEM and appliance optimisation systems are installed in Europe. This would grow at CAGR of 40% to 2030 to around 24m households with HEM and home automation. So, what was once a niche product is now on the cusp of becoming an essential component of household’s energy demands, and those who act decisively stand to reap substantial benefits. This means a remarkable opportunity awaits energy suppliers and technology companies to play a pivotal role within the energy system. 

3 key challenges must be addressed by the sector drive it forwards

We see three strategic challenges that must be addressed to realise this value: 

  1. Intensifying Competition: With major players entering the field, competition is heating up. Energy suppliers, technology companies and telcos must stay agile and innovative to maintain their edge in this rapidly changing landscape.
  2. Interoperability: Achieving seamless compatibility between various products, software solutions, and platforms is essential. The ability of different components to work together harmoniously will be a crucial factor in delivering a cohesive and efficient Home Energy Management (HEM) system.
  3. Monetisation Dilemma: An intriguing challenge lies in monetisation. Customers are often reluctant to pay directly for HEM services, yet there is substantial value to be gained both within the household and for the broader energy systems through optimisation. Striking the right balance between providing value to customers and sustaining the business model will be a critical aspect of the journey ahead.

 

As we delve deeper into the world of HEM, these challenges become not only hurdles but also opportunities for forward-thinking companies to make their mark in a transformative industry. To thrive in this evolving landscape, energy suppliers and technology companies must navigate these challenges through strategic partnerships, the creation of compelling customer-centric offerings, and the adoption of sustainable business models. Success in the realm of Home Energy Management hinges on the ability to collaborate, innovate, and deliver value that resonates with today’s energy-conscious consumers. 

LCP Delta through its advisory services has been helping clients address three strategic questions: 

  1. Choosing the Right Partners and Acquisition Targets: One of the pivotal decisions lies in selecting the right strategic partners and/or potential acquisitions. Who are the players that can complement your vision and capabilities in this evolving market? What synergies can you leverage to create a stronger and more comprehensive HEM ecosystem?
  2. B. Anticipating the Future Customer’s Needs: As the energy landscape continues to evolve, understanding the evolving expectations of the future customer is crucial. What will the customer of the future demand from a Home Energy Management system? How can you tailor your offerings to meet their evolving needs and preferences?
  3. Cracking the Monetisation Puzzle: What is the right business model to strike a balance between delivering value and ensuring the sustainability of our efforts?

 

These strategic questions serve as compass points on your journey to navigate the evolving HEM landscape, and finding the right answers will be instrumental in shaping the future of energy management.  

Proof points by LCP Delta to advising clients on HEM strategy

HEM business development

Client: UK based Low carbon technology company and developer 

LCP delta undertook a critical review of their current business model and made strategic recommendations for improvement. We also conducted a revenue assessment, including modelling the value of energy bill savings for customers with different technology suites (including PV, EV charging and heat pumps) and assessed the drivers and barriers, including future electricity prices and regulatory and policy for the uptake of this bespoke solution. Finally, we advised the client on build, buy, partner assessment including the identification of potential partners for the roll out. 

HEM strategic advisory

Client: Major European heating manufacturer 

By leveraging our deep expertise of European HEM, heat and flexibility markets, we helped our client, a leading provider of heating technologies across Europe, re-think and develop their business strategy on HEM solution. We analysed their recent investment in a HEM player to identify key growth opportunities and customer propositions and new value-generating opportunities. This empowered our client to make informed, strategic decisions to re-evaluate their business plan while driving their growth and competitiveness in the European HEM market. 

Other blogs in this series are: 

 

If you have any questions or require assistance in any of the areas outlined above, feel free to get in touch with us at andrew.conway@lcp.com or shaz.shamim@lcp.com. Discover more about our Consulting capabilities, and our Home Energy Management research service 

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