The New World of Energy Management

According to the Energy Information Administration (EIA) the relationship between electric power consumption and economic growth is changing after decades of being very strongly correlated. Between 1975 and 1995 the “two growth measures were nearly equal in value.” Looking to the future, EIA estimates that the “rate of projected growth in electricity use will be less than half the rate of economic growth.”

In its most recent Annual Energy Outlook, EIA projects that between 2012 and 2040, electricity consumption per household will decline even though total electricity consumption will increase between .2% and .7%. In the prior 30 years it increased 2% annually. This improvement in efficiency reflects the effects of regulatory impacts as well as the increased cost-effectiveness of energy efficiency measures, which include the growing impact of cloud technology. While EPA claims that household energy use could decline 10%-30%, EIA is more modest putting the savings at 4% annually.

The emergence of Smart Home technology reflects the convergence of ideas, technology across industries, and the development of new business models. In addition to utilities moving into the smart home space, so are firms like Microsoft, Samsung, and Google. Market forces are moving faster and more efficiently than regulatory approaches aimed at constraining energy use to reduce greenhouse gas emissions.

MIT’s Technology Review has run articles on the Smart Home. It has observed that companies are competing to provide systems that link utilities, appliances, thermostats, security systems and network home entertainment systems with environmental controls. These features are just the tip of the home technology iceberg. According to MIT advances in smart home systems will include “domestic awareness systems” that warn of events like appliances being left on or basements that begin to flood. In the past, smart thermostats, light and environmental sensors were individual components and were expensive. The future will offer opportunities for integration that make the home a complete system.

One example of tech companies entering the Smart Home space is Samsung’s recent acquisition of SmartThings – a smartphone app that can coordinate all home electronics and appliances through location. At IFA in Berlin, Samsung vowed to open its Smart Home portfolio to developers at its Developer’s Conference in November paving the way for more collaboration of ideas and technologies. Similarly, Microsoft launched a start-up accelerator program to create new Smart Home technologies.

With high tech firms competing in the same space, it is almost a sure thing that innovation will be rapid and cost competitive. While this future is bright, MIT points out that firms will have to put “more focus on security, usability, and privacy to earn both customer acceptance and trust.” The recent hacking of Apple’s cloud is just one example of the security challenges that face companies that want to provide a menu of consumer benefits from cloud technology.

While consumers will benefit from advances in Smart Home technology, assumptions about that technology leading to overall reductions in energy use and greenhouse gas emissions are nothing more than wishful thinking. A growing economy and growing population mean that overall energy use will increase with coal and gas providing the backbone of the electric power system for decades to come. Mark Mills, a Marshall Institute Board member, in a 2013 report, The Cloud Begins With Coal: Big Data, Big Networks, and Big Power, demonstrates that the world’s information-communication systems will consume “massive” amounts of energy. Mills’ conclusions were consistent with those of organizations such as the Breakthrough Institute.

Until some advanced energy technologies are developed that have very low of no emissions, the by-product of economic progress will be continue to be increased energy consumption and increased global emissions of CO2. Even with wasteful subsidies, renewables like wind and solar will still only make up a small percentage of the world’s energy budget in 2040. Rather than continue to subsidize uneconomic renewables, our future would be improved more by increasing investments in basic research and avoiding barriers to innovation and knowledge creation.

The advances in cloud technology and the benefits that come from it came about without the guiding hand of government. That is an important lesson.

This article appeared on the FuelFix weblog at

Partner & Fellow Blogs