Can Tendril Sell Smart Grid Directly to Consumers?

SGN’s Vendor Watch articles evaluate leading Smart Grid vendors, assessing their long-term prospects and viability.

We’ve talked before about the evolution from point solutions to platforms – from standalone, single-purpose applications to systems that can host a variety of applications.

First-generation cell phones were point solutions. They solved one problem. Second-generation cell phones included a few additional applications, but only ones selected by the phone companies. Today’s third-generation smart phones are open platforms on which others can build. You can download thousands of applications for the Apple iPhone, for instance.

Boulder, CO-based Tendril Networks produces hardware and software for demand response, load control, energy monitoring, and energy management. But the firm’s ambitions go much further, hoping to become the standard platform for the demand side of the energy equation.

Tendril At-A-Glance
Headquarters	Boulder, CO
Employees	Approx. 80
Ownership	Private
Funding	$12M Series B in March 2008 RRE Ventures Vista Ventures Access Venture Partners Appian Ventures
CEO	Adrian Tuck
Category	Demand side and distributed resources hardware and software

Tendril wants to be the Microsoft Windows of the sector, providing an open architecture and foundational technology on top of which everybody builds their own offerings. The goal is to give utilities more control, integrators more tools, vendors more power, and customers more visibility.

Core Offerings

Tendril's product line covers a wide range of functions:

•  An energy management system for utilities that lets customers, control energy usage for peak shaving and efficiency.
• An energy management system for consumers that uses the Zigbee Home Area Network standard.
• Smart thermostats.
• Smart plugs that can remotely measure and control whatever has been plugged in.
• In-home displays that show energy consumption and prices for money-saving adjustments.
• Desktop, Web, and iPhone applications for consumers that provide an alternative way to see usage information and to set rules.
• Applications for utilities including network management, direct load control, customer load control, and usage presentment.

Key Differentiators

Tendril hopes to distinguish itself in the market place in a number of ways:

• Strong standards support. In the standards debate, Tendril sides firmly with Zigbee.
• Open architecture. Tendril is developing open APIs to give developers access to the power of its system.
• Updateable devices. In theory, Tendril’s devices can be upgraded in the field over the home area network.
• Consumer orientation. All vendors claim to be consumer friendly, but Tendril has worked harder than most at refining its user interfaces.
• OEM programs. Tendril wants to license its technology.
• Direct-to-consumer ambitions. Tendril sells to utilities at the moment, but it hopes to also sell devices directly to residential customers through home centers and consumer electronics stores.

Current Status

Tendril claims that 5 major utilities are in significant pilots and another 15 are conducting tests of one kind or another. Its seven-year deal with Houston-based Reliant is its biggest win so far and should eventually result into hundreds of thousands of its devices moving into homes. The company says its equipment is in tens of thousands of homes already and will be in more than a million by the end of 2009. Tendril started 2008 with 17 employees and is at roughly 80 today. CEO Adrian Tuck told SGN that more than 40 of them are engineers working directly on product development and support.

Strengths

Tendril appears to have a sturdy platform architecture for low bandwidth networks. It is well on the way toward a robust set of applications programming interfaces (APIs) to let integrators and partners access that architecture. It has partnerships with three of the sector’s most important metering firms: Itron, Landis+Gyr, and Silver Spring Networks.

Tendril’s early and prominent involvement with the Zigbee Alliance offers hope that it will be able to deliver on the Zigbee promise – that is, a home area network (HAN) that is dead simple to use.

Weaknesses

Tendril is biting off big challenges for a small firm. The first is constructing a platform architecture powerful enough for ambitious developers yet reliable enough for risk-averse utilities.

The second is the goal of selling directly to consumers. That approach requires Tendril to initially find those pockets in the country where utilities offer time-of-use pricing or other programs that justify the purchase of a Tendril device. Those jurisdictions are few and far between right now.

Then they must find the much smaller subset of consumers savvy enough to grasp the long-term savings potential; manage the tech support nightmare of home installations, and navigate the shark-infested waters of the big-box retailers, who operate more like a consignment operation, with most of the risk pushed back onto the suppliers.

It may be safer for Tendril to rely on OEM manufacturers to build Tendril-compatible equipment into their appliances and circuit breakers. The manufacturers would have the job of selling through retail – a place where they have much more experience and leverage than a small startup. Tendril is in early talks with a few manufacturers.

We also think Tendril is weak in systems integration skills. If Accenture and IBM can’t find enough people – and they can’t – it will be even harder for small firms such as Tendril. As we leave the pilot phase and enter the rollout stage, systems engineering skills will become a gating factor.

Threats

The slow utility sales cycle threatens Tendril and all other small firms. It can be two to three years from the first engagement to volume deployment.  As a young firm, Tendril does not have long relationships or much influence over the final selections.

Tendril also has to manage its growth. Tendril quadrupled in size in one year and continues to hire. That’s a lot of new people to bring up to speed while maintaining quality.

We also believe that Tendril is threatened by the high costs of the equipment. All of the pieces – the communications, the meters, the thermostats, the load control, the smart appliances – are priced too high for utilities to afford. Since utilities are unlikely to get big rate increases approved, the entire sector could be slowed down and Tendril along with it.

Opportunities

Tendril’s end game is to become one of the surviving platform players and then to do a Microsoft strategy – to allow other vendors access while also building its own high-margin products. It also has a chance to become a leader at the residential end. As noted above, the residential market has many pitfalls. But it also has big rewards for the firm that can navigate around them. Right now, this sector is all about the plumbing. Soon, we’ll start to think about the customer experience, and Tendril could be a leader in that arena.