Microsoft enters energy management with Hohm app

Redmond, Wash.-based Microsoft (Nasdaq:MSFT) launches the beta version of its new Hohm online energy management application today.

Flying under the radar for the last two years code named Niagara, the startup project’s details were unveiled yesterday by Microsoft’s Product Unit Manager Troy Batterberry in a pre-announcement briefing. The code name references Nikola Tesla, who did much of his research and designed the first hydroelectric power plant at Niagara Falls.

Hohm is designed to help U.S. utility customers better understand their electricity and gas usage, receive recommendations, and start saving 5 percent to 10 percent on their bills, Batterberry said. The program is expected to eventually be offered worldwide and include water usage.

The announcement was officially made this morning by Microsoft’s Chief Research and Strategy Officer Craig Mundie at the Edison Electric Institute 2009 Annual Convention/Expo in San Francisco. Batterberry said the announcement marks the software giant’s move into the home area networking and demand response space, possibly as a platform provider.

The free Hohm application, available to anyone in the United States with a modern Internet browser, is expected to be available within the week at www.microsoft-hohm.com. Batterberry said the application “caters to the mass market, not just the greenies.” It is expected to remain free, he said.

Hohm’s business model is expected to generate revenue from advertising. The site includes a section for sponsored and general vendors compiled from Microsoft’s Bing search, along with a rating system. Hohm is built on the Windows Azure cloud operating system, a platform for developers of Web applications.

According to the U.S. Energy Information Administration, U.S. residential users consumed 1.39 billion megawatt-hours of electricity in 2007, compared to the commercial sector with 1.33 billion and industrial with 1.03 billion. Despite residential making up the largest portion of the $365 billion in electricity consumed every year, the residential sector is the most underserved, Batterberry said.

As users contribute energy input and feedback into Hohm, the double-encrypted system is expected to become increasingly more accurate and relevant in its energy saving suggestions. Hohm uses advanced analytics licensed from top energy experts at Lawrence Berkeley National Laboratory and the U.S. Department of Energy.

Users can load their energy usage directly from their utility into Hohm, if their utility partners with Hohm. But users can still take advantage of the application even if their utility doesn't partake. If a utility doesn’t provide data, Hohm bases its suggestions to customers on local and national averages.

Utilities are expected to be able to leverage Hohm to encourage customers to reduce their energy consumption during peak periods, through pricing signals. Utilities would not control or own the energy management system, and it wouldn't cost the utilities to input or receive data. However, Batterberry said selling the software to utilities could be part of Hohm’s long-term business model.

“We have a bias toward pricing signals,” said Batterberry, adding that the California Public Utilities Commission (CPUC) is going to be rolling out more pricing signals to handle demand response (see What's so smart about smart metering?). In 2008, CPUC approved a $1.63 billion funding program for Southern California Edison to place 5.3 million smart meters in homes and small businesses from 2009 until 2012 (see $1.6B smart meter program starts in California).

Microsoft is in talks with utilities and telecommunication companies across the United States and internationally, and has announced four utility partners: Puget Sound Energy, Sacramento Municipal Utility District, Seattle City Light, and Xcel Energy. Hohm is also working with unnamed electric vehicle manufacturers. Batterberry hinted Microsoft is working with a home area networking engagement, related to one of California’s largest utilities, without naming which one.

Batterberry said partnerships with about six other utilities are expected to follow through the remainder of 2009. A lightweight standards-based software development kit from Hohm is available for interested utilities, as they roll out meter management and smart meter systems.

Microsoft isn't planning a pilot program. Instead, all users in the two Washington state-based service territories can participate in the application with their participating utilities. Not many utilities were initially invited because Microsoft was still working out the system’s kinks.

Competitors are still in trials. California’s 4Home’s technology is being tested by major electric utilities including Alabama Power and Cleco (see 4Home, Sensus unveil partnership details).

The recommendations Hohm generates are based on a business or home's features, usage patterns and appliances. Batterberry said the devices Microsoft is most interested in connecting to the network first include thermostats, smart plugs and smart meters, through ZigBee communication.

“You don’t need a smart meter. It’s not required,” said Batterberry, adding that Hohm is protocol agnostic and can support all wireless devices.

Earlier this month, Charlotte, N.C.-based Duke Energy struck a three-year deal with California’s Cisco Systems to develop smart grid infrastructure based on Internet Protocol technology. The companies plan to jointly evaluate software and hardware options before choosing partners. That equipment is likely to include smart meters, distribution automation, and weatherproof communications equipment at the utility's electric substations (see Duke Energy taps Cisco for 3-year smart grid project).

Other Hohm partners include Itron, the largest smart meter company in the United States, as well as Switzerland’s Landis+Gyr, the world’s leading smart meter company. Landis+Gyr signed an advanced metering contract with Arizona utility Salt River Project in 2008 (see Landis+Gyr lands Arizona smart meter contract).

Boulder, Colo.-based Tendril Networks also secured partnerships with Itron and Silver Spring Networks (see VantagePoint leads $30M round in AMI solution leader).

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