by Sheeraz Haji and Leo Zhang, Cleantech Group
Everywhere we look, more and more devices are connected. The cost of sensors has declined precipitously, and startups like Nest and Netatmo are creating devices that seamlessly talk to each other and to the cloud. Big companies like Apple, Google and Samsung are battling to own the connected home platform that will bring everything together. Another epic fight is brewing around autonomous vehicles. The Internet of Things (IoT) revolution is in full swing.
One aspect of this transformation that has yet to fully develop is the Internet of Energy (IoE) – bringing IoT to the industrial power and oil and gas industries. We believe this could be a massive opportunity for economic value creation, but the energy industry will need more security and reliability in comparison to what is adequate for consumer applications. Your Nest not realizing your home’s optimal temperature level is quite different from a hacker controlling a power plant or the electricity grid. These Internet of Energy applications will need to be incredibly secure, and that’s not trivial.
The concepts behind Internet of Energy are not new. We have been talking about digital oilfields for some time. What’s different is that the current combination of customer interest, startup execution and investor capital has made IoE a hot sector. Sensors and sub-meters have improved and come down in cost, resulting in a data explosion. Predictive analytics have improved to provide real insights and actions that create economic value. As the chart below illustrates, our i3Connect platform has tracked five years of steady growth of venture investment into IoE, culminating in $657 million invested across 106 deals in 2014.
Source: i3Connect Platform
Note that these numbers exclude consumer (and other) Internet of Things applications to focus our attention on Industrial IoE across a number of different sectors. For example, companies like WellAware and PetroFeed have raised capital in 2014 to bring IoE to the oil and gas industry.
Which IoE sectors are hot? We have observed five major themes in IoE that represent areas of opportunities for investors, and they are illustrated in accompanying chart.
Source: i3Connect Platform
Agriculture has been a particularly exciting sector. In California’s Salinas Valley, growers are responding to the California drought by actively engaging with innovative products and services. Companies like aWhere, CropX and Granular are helping farmers better understand weather data, water use and energy consumption. All of this helps them improve yields, conserve water, understand their supply chains, and ultimately optimize their business.
IoE has also made significant impact in the water sector. With the introduction of connected sensors and cloud-based data analytic systems, consumers and municipalities are now able to transform traditional sprinkling systems into dynamic smart watering structures to achieve the most optimal water usage. For example, Rachio’s wifi-enabled smart sprinkler controller uses weather data to automatically adjust a home’s watering schedule. Meanwhile, Opti has developed a stormwater management system to reduce the likelihood of flooding our current water infrastructure during storms.
Energy management is another key application for IoE. Companies such as Enlighted, Blue Pillar, and Simple Energy are helping enterprises to improve lighting efficiency, become more energy resilient, and engage with users to save more energy. This is now possible because of IoE’s ability to connect, manage, and automate complex assets and equipment, all in real-time.
Transportation is another important theme. IoE influences in transportation have primarily been based on telematics technology, with applications such as intelligent vehicles, fleet management and collision avoidance. In fact, autonomous vehicles may have a bigger economic impact on fleets versus the consumer space. Companies such as INRIX, Quanergy and Peloton are transforming the driving experience. Nevertheless, the influx of connected and autonomous vehicles has also raised numerous security issues, as evidenced by recent news on the remote hacking of Jeep’s Cherokee SUV and other self-driving car accidents.
IoE will continue to have a considerable impact. Cheap sensors, big data and great software will drive economic value for customers and equity value for founders and investors. The U.S. is already leading the way in IoE and this theme will continue to create significant economic development. IoE should have a strong positive impact on our environment (e.g., as we can more closely track resource use and industrial pollutants) and society. However, as we connect our critical assets, we will need to pay close attention to cybersecurity. Right now connectivity has moved faster than security and this opens our infrastructure up to a number of serious vulnerabilities. We need to invest to secure our IoE platforms, and the world will be a better place.
About the Authors
As Cleantech Group’s CEO, he was instrumental in conceiving, launching and growing i3. Before Cleantech Group, he served as co-founder/CEO of GetActive and president of Convio, the leading SaaS company for nonprofits. Convio became a public company on the NASDAQ, and was acquired in 2012 for $325 million. Sheeraz launched his career as an environmental engineer with Environ International. He has B.S. and M.S. degrees in environmental engineering from Brown University and Stanford University respectively.
Leo focuses on i3 network vibrancy and supports clients’ innovation-sourcing work. Prior to i3, he was a graduate student focusing on renewable energy and technology commercialization. Leo holds a B.S. in Biotechnology from the University of California, Davis, and an M.S. in Bioenergy from the University of Illinois, Urbana-Champaign.