Why Internet companies are abandoning home energy plans

Throughout 2009 and 2010, Internet companies like Microsoft (s MSFT), Google (s GOOG) and even router giant Cisco (s CSCO) launched experimental software and hardware to help building managers and home owners monitor and control their energy consumption. While Microsoft and Google focused on consumer-facing software, Cisco decided it would build a home-energy dashboard and also sell building-energy-management products.

But now, 12 to 24 months later, all three of these players have ultimately made the decision to abandon those projects. Cisco was the latest one to jump ship, and on Wednesday afternoon it penned a blog post announcing the choice. Cisco plans to move away from both its building-energy tools, which it purchased via Richards-Zeta back in 2009, as well as its Home Energy Controller, an energy dashboard it had developed.

Little effort, little reward

First off, all of these firms were really just dabbling in and experimenting with the energy-management field. Cisco’s energy dashboard was actually a device created by Open Peak and customized by Cisco, and it was meant to be tested out in its smart-grid pilot trials with utilities. In Cisco’s blog post this week, it said after testing out the tools in its pilots that it decided it needed to evolve its strategy.

If you look at Google’s and Microsoft’s entire business lines — and balance sheets — their PowerMeter and Hohm energy web tools were minor projects. Google even launched PowerMeter out of Google.org, the company’s philanthropic arm, and actively said it had no business model for the software.

Lack of consumer interest

Ultimately Google and Microsoft shut down PowerMeter and Hohm, partly because not enough consumers signed up to use the service. The tools were free and easily available on their websites, but at this point consumers just lack the fundamental interest in spending time managing their home energy consumption.

Cisco was selling its home energy controller through utilities rather than to consumers, but it indirectly faced this problem, too. I’m not sure what Cisco found via its pilot projects, but it likely wasn’t overwhelming consumer interest in the dashboard.

High-end dashboards are toast

As I’ve reported before, creating an expensive energy dashboard with a lot of functions and trying to sell it via utilities or consumers hasn’t seemed like a good business model. Both utilities and consumers aren’t really willing to cover the high costs of these. The market for high-end home energy devices is more tied to new home sales, contractors selling renovations and tying devices to solar systems (basically tying the home energy device as an upgrade to a more expensive system).

Startup Tendril stopped selling its high-end device, and it shifted its strategy. GE (s GE) did as well. I’m not sure of the price point of Cisco’s energy device, but it looked like it provided a significant amount of function and power.

Utilities and the smart grid are difficult markets

Beyond consumers, utilities are also tricky customers to get used to selling to. As you can see from Silver Spring Network’s S-1, the company has had negative gross margins for years. Part of this stems from the fact that utilities take years to go through the process of a long trial and then a deployment. Utilities are also oftentimes highly regulated, so that can hold up the process, too.

Google and Microsoft both struggled to sell to utilities. Cisco has seemed to have more success with smart-grid pilots than with utilities, but it clearly didn’t find selling building-management devices to utilities a solid-enough business.

Unlike with Google and Microsoft, Cisco says it will still sell to utilities and the smart-grid market in general. But we’ll see how many utility trials Cisco ends up pursuing.