CEO Interviews

Aquanta – Building an Intelligent Water Heater Controller for the IoT Domain

Aquanta helps solve a critical problem for utility companies facing stagnant or falling energy consumption, greater variation in energy demand, and increased use of alternative energy sources – such as solar, wind, and biomass – with an intelligent water heater controller system. 

Energy consumption in North America has historically been a story of growth.  Even during recessions in the 1950s and 1960s and during the oil crisis in the 1970s, overall energy demand continued to grow.  But, during the financial crisis energy demand fell for the first time in absolute terms here in the United States.  That a growing population – even accounting for cultural changes around delayed household formation – would consume the same or less energy per capita caught the utility industry off guard.

Currently, utility companies must build their infrastructure and manage capacity by first evaluating their maximum load needs and then match that capability to actual demand.  Utility energy storage is limited and perishable.  Consequently, balancing the production of energy – in an environment characterized by a lack of growth, emerging renewables at the household, township, and regional levels, and weather related swings due to climate change – has created an environment where finding operational stability and financial success is a much bigger challenge.  This utility demand side management challenge is Aquanta’s opportunity.

Aquanta’s intelligent water heater controller system was born out of an earlier focus in the solar thermal sector, when the company was called Sunnovations.  Hard lessons learned designing a monitoring system for that market allowed the firm to pivot and become Aquanta.  Their key technical insight – which serves as the foundation of their differentiating strategy – has been their ability to really understand what is happening inside of a water heater, regardless of brand.  Most controllers measure water heating energy via flow metering, which is inaccurate and expensive.  Aquanta’s controller measures changes in resistance via telemetry.  Resultant data sets are then stored, analyzed, and aggregated in a cloud based infrastructure.

Aquanta’s patented approach is different than competitors via the use of an “enthalpy” sensor that extends the full length of a water heater and is connected to a wireless smart controller installed on the top of the heater.  The sensor identifies how much energy is used to heat the water in the heater, how much energy is used under load, and energy loss when water in the tank is cooling while in passive or standby mode of operation.  As a result, the company’s enthalpy sensor and external controller can evaluate and map complete water heater operations cycles very accurately.  Energy usage and consumption patterns can be viewed with a web browser via an online dashboard.

While a variety of water heater manufacturing companies – Rheem, GE, Whirlpool – offer electronic controls and/or wireless connectivity, none of them provides the same functionality, depth of analytics, ease of installation, or reliability of Aquanta’s controller system.  The competitive focus of these firms is the water heater itself and not its wireless functionality or its inclusion in a broader product system.  As CEO, Matt Carlson, argued during our interview, these companies are most concerned about “bending metal” into a cylinder on a production line.  They not thinking about a water heater as a household IoT product system, an asset that can define and reshape energy consumption patterns, or act as a demand response system.

Aquanta does sell their intelligent home water heater controller directly to consumers – via their website and Amazon – and the firm enjoys strong reviews from IoT techies, energy conservation enthusiasts and do-it-yourselfers.  The firm’s Youtube channel highlights the ease with which the controller can be installed with some hand tools and plumbers tape in about an hour.

With approximately 100 million water heaters in operation in the U.S., some firms might be tempted to view the market as a home automation opportunity with early adopters acting as both evangelists and a gateway to much larger success. Yet the consumer IoT market has yet to materialize around this storyline.  While the reasons vary – lack of general interest, concerns about security, interoperability issues, installation hassles – the overall theme is one of poor adoption.  Despite sustained and significant hype, the consumer IoT space has been a clear disappointment.

Aquanta’s team appreciates the real market is with power utilities and has achieved this understanding through a combination of long-term due diligence and hard knocks entrepreneurship.  Utilities are under a lot of pressure and Aquanta wants to help address their key pain points.  The firm has created partnerships with some important participants in the IoT space, including Ayla Networks for seamless connectivity solutions, AWS for platform support and consumer distribution, and Creation Technologies for U.S based device manufacturing.  Early utility partners include Green Mountain Power in Vermont and Portland General Electric in Oregon.

As a strategist, I view the IoT enthusiast’s market as a dead end that in no way validates the wider opportunity for consumer IoT products.  Many startups and larger market participants have used this approach without success.  For example, SmartThings, began as an IoT platform and as a producer of several IoT gadgets to manage household lighting and other gear with an iOS app.  Their devices looked good, operated well, and their marketing materials showed people in Europe turning lights on and off in their Virginia homes.  Cool stuff.  They quickly grew their community to 10,000 members.  But soon thereafter, community numbers stalled.  A year or so later, they sold themselves to Samsung in order to become the foundation of the conglomerate’s global IoT buildout.  Being first to market provided SmartThings with a sustainable exit.  Others have been less fortunate.

Wisely, Aquanta is not taking this path.  Instead, their core focus is utility producers and their demand response needs, driven by increased variability in the power industry and a lack of innovation in the water heater market.  Water heater producers are neither focused on, nor internally organized to address the emerging needs of utility producers in product system or system-of-system IoT environments, despite the fact that 18% of all household energy use is consumed by a water heater.

Aquanta understands these unfolding dynamics and has positioned itself with a product system designed to solve several challenges at once in a North American market with 100 million water heaters, each with an average life span of 13 years.  Distribution is a challenge consuming much of CEO Carlson’s time as he and his team work to establish partnerships with utility companies whose customers are receptive to managing their energy consumption and saving money.  Scaling and managing resources wisely throughout 2018 will be the firm’s measure of success now that their product solution has established itself.

Like subscribers to this blog, I look forward to seeing how Aquanta gains additional traction in the utility marketplace over the next 12 months.

Stay tuned.

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