Dealers Share How Home Energy Management Solutions Pay Off
Successful dealers share how they are making home energy management solutions pay off monetarily — for them and their clients.
While most people like the idea of conserving energy and going green, moving from theory to practice in their daily lives requires more than just a philosophy. “Everybody likes being green if it’s not too much work,” explains Gene Jordan, president of Advanced Security Engineering, an Alarm.com dealer located in Pleasanton, Calif.
Offering home energy management options integrated with security systems can be a lucrative way for dealers to provide homeowners with greater convenience and control of their homes while reducing energy costs. “When you talk about green, it’s not saving trees, you are talking about greenbacks,” says David Johnson, principal at Grand Electrical Services, an HAI by Leviton dealer, based in Tabernash, Colo. He adds, “The real green movement is the opportunity to save money.”
Taylor Syphus, vice president of Lifestyle Electronics, a Custom Electronic Design and Installation Association (CEDIA) member based in Park City, Utah, points out that the great advantage of having home energy management system tied to security is the convenience, “It thinks for you, so you don’t have to.” Tying automation to the security panel allows homeowners to rein in energy savings without having to work at it.
“We’re seeing a lot of people excited about it,” says Ben Edstrom, chief executive officer of Elite Home Security, a Security Networks affiliate located in South Jordan, Utah. Edstrom estimates that his customers are spending 10 to 20 percent less on energy costs by incorporating home energy management features into their security systems.
With energy management tools like Alarm.com’s Smart Schedule Activity Patterns, homeowners can see how much power they are using, Jordan explains: “It gives them the tools to articulate the true cost of what they are using in their home.” He adds, “It’s a valuable tool. Then they are motivated to do something about it. Now it’s got impact.”
Home energy management solutions allow homeowners to use automation and remote access to become more efficient in their energy use. “This provides a huge element of control. I can make a choice that affects my energy bill. That’s the psychological advantage our customers get in energy use,” Johnson says.
Customers are especially interested in remote services, which keep them connected with their homes and give them a greater sense of control. “Everybody is asking about green technology, but not as many people want to invest in it because of the expense. We focus on the cool factor and interactivity,” says Jacek Zaworski, president of Procom Enterprises, an AiN Group dealer located in Elk Grove Village, Ill.
Although many people feel that the idea of going green is a noble one, that alone does not motivate them to invest in it. Most dealers lead with other benefits and then appeal to the desire to go green. “We sell on connectivity, then we show them the green,” says Rob Sheldon, Jr., president of Protection By Design, an AiN Group dealer based in Williamsburg, Va.
The most popular energy-saving features are HVAC and lighting control. HVAC control is attractive because it offers the greatest energy savings. According to the U.S. Department of Energy, heating and cooling accounts for 56 percent of energy used in the home. Homeowners can achieve significant cost savings by setting back thermostats when the home is unoccupied, but homeowners don’t always remember to do so, even with devices designed to help them. “Nobody programs their programmable thermostats,” Jordan says.
Integrating HVAC control with the security platform makes it easy for homeowners to reduce their energy use by automatically setting back the thermostat when the security system is armed.
Homeowners can manage the amount of electricity used for lighting by employing schedules, dimmers and LED fixtures. With lighting control, customers can see fairly direct savings. “There’s almost a one-for-one savings on being able to control dimmers,” says John Bringenberg, president of sister companies Home Talk and Sun Talk Solar, located in Denver, noting that dimming the lights to 70 percent brightness yields 30 percent savings in electricity.
Lawrence Josey, president of Wescom Systems, Corp., based in Kelowna, British Columbia, says his clients see savings of about 20 percent across the board, from lower HVAC and lighting energy costs to reducing the amount of money spent in replacing light bulbs.
A substantial amount of energy can be wasted in heating water when it is not needed. Managing energy used for hot water heaters and hot water recirculation pumps can be another opportunity for homeowners to save money, especially in vacation homes.
Because of the differences in climate, energy management needs vary widely across North America. In the southwestern United States, optimizing air conditioning control and running pool pumps at off-peak hours are top priority. Automatic shade controls can be programmed to complement thermostat control to moderate cooling costs in the hot climate.
In Virginia, where the summers are very hot and humid, Alarm.com’s Extreme Temps is a popular feature. With this tool, homeowners can use the online interface to set rules in which the thermostat is adjusted a few degrees higher when the outdoor temperature exceeds a specified temperature. In doing so, they can reduce energy costs during peak hours by allowing the temperature in the home to rise a few more degrees during the day when no one is home.
At ski destinations in the mountains, efficiently controlling energy-hungry devices like driveway snow-melting systems or heat tape on roofs can save homeowners money.
Homeowners are not the only ones who have a range of options in home energy management. From initial sales to recurring monthly revenue (RMR), dealers working in this channel have the opportunity to make money on several fronts. Revenues can be increased substantially on the initial installation. “You can almost double the size of any security system,” Jordan says.
Brady Elsenpeter, owner of Maximized Media, a Buffalo, Minn.-based HAI by Leviton dealer, estimates that his company can make 40 to 45 percent profit on installation of custom systems: “The knowledge we provide is how we make our money.”
The financial benefits of offering energy management solutions extend over time as dealers who add energy monitoring or remote services can typically add $5-$10 per month to their basic security monitoring fees. “It makes the customer a lot more valuable because they’ll stay with us longer as they see the savings,” Edstrom says.
Combining energy management features with interactive services can also help reduce attrition. “People want to feel the savings. It creates a stickier client. They feel it every day,” Sheldon explains. “Our number one goal is to keep recurring revenue.”
Sheldon shares that the cancellation rates for customers with interactive services are only 1.5 percent, as compared to 4.5 percent for POTS (plain old telephone service).
While there’s little money to be made off of the installation of basic alarm systems, dealers can significantly increase revenue by adding home energy features and increasing monthly monitoring fees. “The days of selling straight security systems are over,” Zaworski says. “Clients are looking for add-ons.”
“In the adoption curve, we are still in the early market, which is why having it bundled in a system is a very nice way to ease people in to awareness of energy management features,” Bringenberg explains.
Josey recommends including energy management options in every quote, noting that most people don’t know what options are available, but when they do, they want to add them.
Sheldon agrees. He views the basic security system as a gateway to additional sales. Even if customers don’t take advantage of the system’s full potential at the time of installation, they often return later to request add-ons. “It’s a way to future-proof our clients,” he says.
A large part of selling home energy management products and services is simply educating the customer about what is possible and available. “On the marketing side, everything we do is geared toward educating the consumer,” says Peter Hudson, director of marketing for Gilbert, Ariz.-based HAI by Leviton dealer Benson Systems.
Zaworski concurs that educating the customer is a big part of selling home energy management as part of a security system. “We sell the panel, but people don’t know what they can do with it,” he says, sharing that selling security establishes the relationship with the customer and creates opportunity for future sales when the customer learns what is possible with the system.
Understanding the business and technology is critical to becoming successful in this market. “Before stepping into it, invest the time and money to get the training and know what you are getting into,” Hudson says.
Edstrom advises dealers to ensure that their technicians have a good understanding of not only the products they sell, but also the systems they control, noting that the technicians at Elite Home Security receive training from certified HVAC installers to give them a better perspective on the system as a whole. This knowledge can provide a good foundation and complement manufacturer training on the energy management products being sold. “You’ve got to learn about energy. It takes insight to understand the how, what and why,” Johnson explains.
Edstrom recommends that dealers getting started in home energy management evaluate the platform they want to use and look at the associated costs of adding new features, then seek training in the technology to do the job. If the dealers are comfortable with the technology, he says then they have to look at the business side, addressing the associated costs of adding the new features and ensuring that they charge enough for the additional services they are providing.
“It’s a lot different than just security. You change to thinking in the world of ‘what if/then,’” says Steven DiProsperi, owner of Automation Systems, an HAI by Leviton dealer in Scottsdale, Ariz. He adds that the right training and a little creativity is what it takes for security dealers to move into energy management.
Ultimately, home energy management solutions can create a greener bottom line for both the homeowner and the security dealer.
For the consumer, it makes financial sense, so they won’t mind spending money on energy management when they know they will see returns on it. “Dollar for dollar, it’s a fantastic investment in the home because of the savings on the back end,” Sheldon says.
“Until people have a reason to make changes, they won’t. They don’t want to give up comfort and other things. If you can save them money and they’re not losing anything, it’s an easy sell,” Jordan shares.
Whether customers are looking to save money or do their part in reducing their carbon footprint, the energy management business is just beginning, now is the time for security dealers to take advantage of the potential profits in this segment. “Get into it as soon as possible — it’s going to accelerate,” Zaworski says.
Research Reveals Consumer Views on Energy
In a February 7 webinar presented by industry research firm Parks Associates, “Business Models for Energy Services,” Tom Kerber, director of research, home controls and energy, discussed recent findings in the energy management market.
One of the challenges facing providers of home energy management systems is that their customers are naïve about energy usage, so they do not understand the value of products and services available. “Consumers are not naturally in the market for energy-saving products,” Kerber says. Consequently, integrators have to help consumers bridge the knowledge gap before they can turn them into customers.
There are a growing number of ways for homeowners to access information about their energy usage, from utility-provided services to systems inside the home. Kerber points out that even when this data is available they might not take advantage of it. In a survey of homeowners who have electricity usage monitoring, more than half did not take advantage of the available data, with 12 percent never looking at it, and 42 percent looking at it less than once a month. Kerber explains that one reason for this is that often the data is not presented in a format that is useful for consumers, and that there is a need for the data to be disaggregated and presented in a common format to help customers understand it.
Some dealers are seeing this as well. Rather than the specific energy consumption data, consumers are more interested in what it means to them in terms of their energy bills. “At the end of the day, what really matters [to customers] is lowering their energy bill. They don’t care about therms or kilowatts; they just care about saving money,” says David Johnson, principal at Grand Electrical Services in Tabernash, Colo.
Kerber shared that Parks Associates’ research indicates that consumers view security professionals most favorably in three areas of concern: security, sales approach, and installation. In this nascent market, homeowners favor professional monitoring over self-monitoring for security, a face-to-face over online sales approach, and professional over do-it-yourself installation, a pattern that mirrors the business model of many independent security companies.
These findings, combined with the enhanced functionality gained by tying energy management systems to the security panel, point to opportunity for security dealers. “Security and energy services are intertwined, both from the technical and consumer perspective,” says Kerber.
Clearly, opportunity exists for security dealers in this market. When consumers were asked about their interest in energy and security services, Parks Associates found that 18 percent indicated security services have high appeal, while another 17 percent indicated energy services have high appeal. An additional 30 percent indicated an interest in both security and energy services. “The idea that security providers can add energy services and expand their market is definitely there,” Kerber says.
The greatest revenue opportunities for providers of home energy management services are those that provide the most savings.
“Services that automatically adjust the operation of the thermostat, turn off devices that are left on when no one is home, and that help people stop wasting money are services that provide real savings,” Kerber explains. Indeed, consumers like to be able to control their energy consumption and costs, but they like it even more when it is automatic. Kerber describes the attitude of many homeowners: “Engagement is nice, but do it for me if you can.” He adds, “I think knowledge-based, automated solutions are where it’s at.”
Creative Applications Solve Real Problems
❶ A Texas homeowner wanted to find a way to conserve energy and reduce his cooling costs. During the hot Texas summers, he was spending a lot of money on keeping his garage cool because every time he pulled a car into the garage, heat emanating from the cars, as well as hot air from outside, rapidly increased the garage temperature, forcing the air conditioning system to operate excessively to cool the space again. Steven DiProsperi, Automation Solutions, came up with at creative solution to the problem. Using data from temperature probes installed in the garage directly above the cars, the air conditioning system was programmed to shut off when the sensors detected a jump from 85 degrees to 125 degrees. Then, high-powered exhaust fans engage and blow the hot air out of the house through an attic vent. In only three minutes, the hot air can be completely evacuated, and the air conditioning system will turn on again at its regular setting.
❷ While homeowners enjoy the beautiful view, the spacious feel, and natural lighting provided by extensive fenestration in a home, all that glass also creates challenges for heating and cooling a home. David Johnson, Grand Electrical Services, describes an installation in which he modified a standard HAI by Leviton water temperature sensor to detect radiant energy in one mountain home. Using feedback from the sensor, the OmniPro II panel automatically raises and lowers shades of south-facing windows to optimize room temperature and reduce the demand placed on the HVAC system. By actively utilizing or blocking the sun’s energy, consistent room temperatures can be maintained while saving the homeowner money on energy costs.
❸ A Williamsburg, Va. homeowner grew increasingly frustrated by the impact on his HVAC costs when his kids would frequently leave the garage door open, allowing the buffer of temperate air between the home and the outdoors to escape. Rob Sheldon, Jr. and his staff at Protection By Design devised a simple solution. They installed a GE Concord system with Alarm.com advanced interactive service. Now, whenever the garage door is opened, the homeowner receives a text message. If he does not receive a message that it has been closed within a reasonable amount of time, he can call home to find out what the situation is and remind his family to close the door if necessary.
❹ In ski resort towns in the mountains of Utah, many homes have radiant heat systems built into the driveway to keep driveways free of snow and ice. When a heated sensor on the surface detects moisture, the snow melting system turns on. However, even small amounts of snow, which could drop off a car or be blown over the sensors by the wind, can activate the system when the driveway is not actually covered with snow, wasting energy and increasing costs. This is especially problematic for vacation homes because the absent owners are unaware of the actual weather conditions. To manage this problem, Taylor Syphus, Lifestyle Electronics, says his company installs cameras that capture a view of the driveway. Homeowners can simply use the remote access options on their smartphones to view the images and turn off the system if needed.
Here’s a sampling of SDM articles found at www.sdmmag.com exploring other aspects of the energy management market, including additional perspective on green options and market factors, the benefits of security platform-based systems, and how home technologies are being received in the real estate market.
“Green and Growing? A Closer Look at the Industry’s Green Opportunities” www.sdmmag.com/greenopportunities
“Home Energy Management: It’s All About The Platform” www.sdmmag.com/home-energyplatforms
“Realtors Look to Installed Technology, Including Energy Management, to Drive Home Sales” www.sdmmag.com/home-energysales