The smart home was supposed to be big business by 2017, especially now that most Americans have smartphones in their pockets and millions of connected home devices like washing machines and thermostats have been sold. There's been traction in voice-activated devices, but they're not necessarily used to control smart devices in the home and are really built to be speakers and personal assistants than smart-home hubs. But with names like Amazon.com (NASDAQ: AMZN), Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL), and Apple (NASDAQ: AAPL) leading the smart-home charge, it's surprising the idea hasn't gained more traction.
In 2018, there could be a new hub making its way to the market, and it could take the smart home to the next level in some locations. Don't underestimate energy storage's importance in the next generation of the smart home.
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What is the smart-home hub?
One challenge is that different companies view the "smart home" differently. Amazon's Alexa platform is the largest in the smart-home business, with millions of devices sold. It's also a very open platform that can control thermostats, lights, and even locks with little more than your voice. But Alexa's platform and APIs are built to connect people to a central hub that will interpret voice instructions, not to automate control of the home in a "smart" way.
Apple has tried to make Home Kit its smart-home hub, and has the capability to bring automation to the home, but hasn't put much energy into making the platform a valuable tool for Apple device owners. There are lots of devices that connect to Home Kit, but it still isn't a central app on the iPhone, making it a disappointing development for the smart home.
Alphabet tried to make its $3.2 billion acquisition of Nest the center of its smart-home plans, a hub that would learn and adapt to users over time, but has scaled back on those ambitions recently, even reportedly trying to sell Nest. Voice-activated devices may now be the new smart hub, but the company has a lot of work to do to compete with Alexa on that front.
Tech companies are trying to build a home platform that people will communicate with, which could be viewed as smart home technology, but it's not actually making the home smart. That's why I think the smart home could grow on a different platform.
Could energy storage be the new smart-home hub?
One intriguing option for an automated smart home in 2018 is to have an energy storage system control the home. It could interface with multiple third-party platforms, like Amazon, Apple, and Alphabet, sending out signals to increase or decrease energy demand on the fly, but it would be in control.
What makes energy storage intriguing for smart homes is that its algorithms will be built to optimize energy consumption to maximize value for customers. It'll turn air conditioning or heat down when electricity prices are high or turn on dishwashers and washing machines and even charge an electric vehicle when energy prices are low. If you're charging an electric vehicle and don't plan to make a trip for a while, the energy storage system can optimize when to charge your EV and even send electricity from your EV to the grid if you choose to use your car as a money-making storage device.
The ability to control the home is what's exciting and the economics of energy storage make more sense for making homes smarter than the incentives for tech companies. The incentive for companies developing energy storage solutions like SunPower (NASDAQ: SPWR), Tesla (NASDAQ: TSLA), or Sunrun (NASDAQ: RUN) isn't to have the biggest platform, it's to minimize energy bills. This makes the fundamental incentives for energy companies different than tech companies.
Energy could be the key to the smart home
If energy storage developers can integrate the smart devices starting to be sold around the world, they'll be able to act as a smart-home hub working in the background without necessarily being the interface customers use every day. A customer could tell Alexa to turn the lights on in the morning and have Apple Home Kit control the thermostat, all while the energy storage hub in the home optimizes energy usage across these platforms.
Maybe 2018 will be the year the smart home takes off and energy storage could be the key.
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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Travis Hoium owns shares of Apple and SunPower and has a family member who works at Amazon. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Amazon, Apple, and Tesla. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy.