Smart Metering & the Smart Home Opportunity

Simon Harrison – Head of Technology, UK Innovation

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Smart Home World 2015 – London June 24

RWE & npower: who we arep RWE AG – one of Europe’s five leading gas and electricity

companies.p 59,000 employees.p 24m customer accounts in Germany, the Netherlands, the UK,

Poland, Czech Republic and across Eastern Europe.p €48bn revenues in 2014.

p npower is the GB energy retail subsidiary of RWE.p Around 4m customers for gas and electricity supply – including a

successful B2B business.p >7,000 employees.p €9bn revenues in 2013.

p RWE SmartHome is RWE’s own connected home platform –installed in over 80,000 homes and with hundreds of thousands of connected nodes.

p RWE SmartHome available in Germany and Austria.

The top management of RWE have acknowledged that change is critical for the survival of the group in the face of technology advances

A Dummy’s Guide to GB Smart Metering

p The new Government: confirmed every British home will have a smart meter by 2020.

p Creates 30m Home Area Networks with gas and electricity meters, a Communications Hub and an In Home Display – around 100 million connected ZigBee devices.

p Smart metering democratises energy data – with relatively cheap additional equipment it will be possible to link real time energy consumption to the internet and make it available for any number of use cases.

p The design allows for customers and third parties to tap into the metering data within the home – this isn’t going to be a walled garden

A generational and unique opportunity to reinvent how customers engage with our commodity

p The energy retailers in GB are uniquely placed to take advantage of this opportunity to become a service provider of energy, rather than just a commodity billing machine.

ADSL

Internet

CAD

ScopeoftheInternetofEnergyUsingThings

Products,ServicesandPartnerstohelpcustomersunderstandandcontroltheirenergyusage.

SmartMeters

CH

E G

ScopeofSmartMetering

DCC

Metering vs. Everything Else

Real Time & Mobile

Billing

IHD

The Other Smart Metering Paradigm Shift

Those are signficant, and upsetting, numbers – wrapped in jargon and completely beyond the control of customers (in their mind)

ENERGY BILL£600

ENERGY BILL £600

Even if you pay in monthly installments –the size of the bi-annual energy bill can be sobering

The Other Smart Metering Paradigm Shift

The traditional quarterly bill cycle still leaves customers disengaged from the actions that trigger the scale of their bill

ENERGY BILL£300

ENERGY BILL £300

Quarterly bills, particularly if you are paying cash, remain significanttentpoles in a household budget

ENERGY BILL£300

ENERGY BILL £300

The Other Smart Metering Paradigm Shift

Even at this level of engagement and awareness – the causal link to behaviour will be tenuous

Some customers may reconcile their energy spend to their Monthly Direct Debit – it is still likely to be one of the larger items of expenditure

ENERGY £100

ENERGY £100

ENERGY £100

ENERGY £100

ENERGY £100

ENERGY £100

ENERGY £100

ENERGY £100

ENERGY £100

ENERGY £100

ENERGY £100

ENERGY £100

The Other Smart Metering Paradigm Shift

This is the sweet spot of engagement – an obtainable and realistic weekly budget can be understood and cost conscious customers can take action

Weekly budgeting is likely to be the preferred method of monitoring on the smart meter IHDs

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The Other Smart Metering Paradigm Shift

Smart Metering will put this insight into every home – will it create eco-enthusiasts, penny pinchers or continued apathy?

Less than £3.60 to heat and power your home for a day

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Energy Engagement is Ripe for Disruption

p At the moment, people don’t really like their energy companies.

p Our touch points with customers are mostly negative or really dull – bills, errors, address or bank details, renewals.

p Renewable and storage technologies will continue to destroy traditional energy generation and retail revenue base.

p So, we need to change our fundamental approach – to become a trusted advisor and partner in the lives of our customers and their families – where they live and where they work.

p Even in a future ‘free’ energy model, people will need assistance with financing, installing, operating and optimising their energy assets.

p They will need companies to provide the essential services that connected propositions require – a natural progression from the bundling of energy with telecom, or internet, or boiler maintenance.

We have to capitalise on the opportunities that smart metering presents, otherwise we become an irrelevancy behind 3rd party apps that engage them

Customers are Ready to Take Ownership of Energy

44% 56%

Customers don’t expect us to serve up kwh, or a set of bar charts, they want tailored advice based on data about their individual energy usage

65%

35%65% of all customerssaid they were fairly, veryor extremely interested indetailed energy data

50% of all customerssaid energy insight andadvice was a relevantservice to them

44% of npower customers trust us to provide this type of advice – more than any other new service we have asked them about

In other markets, Energy advice contributed to reductions in key metrics

churn demandcalls

2.5% 3%10%

A significant step to connect the individual and the homep Early 2014: Rapid launch of Nest in GB NL and BE.

p Connected heating is a growing market: Nest offers the best designed and smartest thermostat in the world.

p ‘Works With Nest’ platform, opens up a world of possibilities for connected homes and customers.

p However, as with the mobile operators offering iPhones, customers focus on the product rather than the provider of that product – we were not engaging effectively post-installation of Nest.

p We have learned: working closely with Nest to develop ideas they explored in the US into solutions for Europe – enhancing association for our business with the customers that love their thermostat.

p Very interesting propositions and messages for customers that can only come from combining the heating data and energy data.

p Our customers will soon have: quantification of the savings they’ve made and have the opportunity to make further savings by opting in to energy partner exclusive features.

We are working at the best Smart Home company in the world, and will create unique propositions for connected heat and energy data for our customers

Exploring the potential of connectivity of the individual and their home– Pilots in 2015p Alongside working with Nest, we need to look at additional solutions for

customers.

p We are in the process of installing the first hardware and apps for pilot participants to engage customers on energy visualisation and home automation (security, health etc).

p We are taking a couple of approaches to these pilots:

p one with a global household name; the other with a small start up.p one is very modern and slick, and the other is deliberately simple.p Both include working with a variety of partner products and services.p Both will help us understand if and how customers will engage with

their energy consumption data, and embrace the IoT thinking that links discrete home automation hardware (thermostat, plugs, locks, cameras).

The energy utility play in connected home is not yet clear – What other products and services can energy companies offer to generate value?

Connected Heat

Thermal Insight

Plugs etc.

Biomass etc.

Storage

Time of UseSmart MetersEnergy Apps

How Far Will We Be Allowed to Go?

If we do the first steps well, we should accrue a cumulative and temporal opportunity to go beyond the existing customer utility comfort zone

Energy Billing

Heating System

Building Envelope

Controls

Solar

EV’s

Load Control

Smart Energy Service

Appliances

Insurance

Health

Entertainment

Monitoring

IoT Services

Moving Out of the Utility Safety Zone, and into the Real WorldCustomer Expectations Change

15

Expect consistent excellence from all service providers –

based on the best

Expect to be kept informed regarding their product or

service at all times

Expect best of breed digital interaction from all of the

companies they use.

The digital experience and interface has to be flexible

and consistent across presentation layers

Customers will control and configure their own services

using their devicesConnecting devices should

just work.

For utilities to survive and grow, we need as a minimum to match the best of breed customer experience – a significant challenge

Thank You

simon.harrison@npower.com @raygunsimon