Smart panels are not a smart bet.

As the electrification wave begins to sweep through homes, the idea of ​​a smart electrical panel seems like a no-brainer. The electrical panel is the nerve center of a home, meeting the demands of heat pumps, electric car chargers, and electric stoves. Surely a company could do for this forgotten device what Nest did for the thermostat, turning it into an indispensable smart device for managing home energy.

We recently analyzed the value proposition, products, business landscape, and alternatives to smartboards to test this hypothesis. We came to the somewhat counterintuitive conclusion that smartboards have poor long-term prospects unless they are significantly stripped of cost and functionality.

To begin, it is important to understand that smart panels offer less value than cost avoidance The idea is a suggestion. By monitoring the home’s electricity demand and cutting back when necessary, they enable customers with 100-amp utility service to avoid a costly upgrade when electrifying their homes. This is a much bigger issue for customers installing electric car chargers and electric cooktops than for heat pumps and heat pump water heaters. Similarly, for customers installing a home battery for backup power, the smart panel could ensure that only priority appliances run during a power outage, eliminating the need to invest in a second battery.

But the way smart panels achieve this load management is problematic. Instead of communicating with a device, they simply open the circuit breaker on the device, abruptly cutting off power. Obviously, this is not a good idea. Cutting power to motor-driven appliances like heat pumps, dishwashers, and pool pumps can damage them. And even vendors that avoid this problem by detecting motor cycles and cutting power in between can leave customers with flickering lights, reset hours, and dirty laundry. A positive customer experience requires that appliances respond seamlessly to and recover from load management—and that their user interfaces be in the loop. That means integrating device APIs, not removing power from circuits.

But smart circuit breakers are arguably the main driver behind the exorbitant prices of smart panels, which typically exceed $3,000. The only other major capability of smart devices is real-time circuit level monitoring, and today’s modified devices offer this capability for less than $200. That means a modest upgrade to a traditional panel, coupled with API integrations, can match—and in fact surpass—the capabilities and user experience of a smart panel, for a fraction of the cost.

There are two challenges to this argument. The first is that a software-based solution would not allow customers to avoid utility upgrades. In fact, recent revisions to the National Electric Code (NEC) allow software-based load management solutions to manage EV charging demand rather than upgrading service. And UL, the standards body that the NEC defers to on safety issues, is working on a new load management standard under which, according to early indications, software solutions would avoid utility upgrades altogether.

The second challenge to this argument is that generous federal and state incentives, coupled with energy-efficiency opportunities, are driving down the cost of smart panels enough to make them attractive to homeowners. Under the Inflation Reduction Act’s Sections 25C and 25D tax credits, customers will get a credit of up to $600 when installing a smart panel with a heat pump, and about $1,000 when installing solar or storage. Once states begin rolling out programs under the U.S. Retirement Administration’s High-Efficiency Home Electricity Rebate Act, customers in participating states will get point-of-sale rebates of up to half the price of a smart panel, as well as a tax credit of nearly $500 when installing a heat pump, solar, or storage.

But our analysis of pre-IRA tax returns shows that less than 3% of customers who make tax-credit-eligible energy efficiency investments, including heat pumps and water heaters, actually claim those credits on their taxes. This suggests that unlike solar and storage, energy efficiency tax credits may not be a strong sales driver. Moreover, a long-running Alliant Energy energy efficiency study found that only 40% of customers who took advantage of accurate home energy monitoring were even willing to accept the credits. Cost sharing An energy management device costs several hundred dollars. Now imagine asking customers to pay $1,000 to $2,000 after receiving the incentive. Convincing people to pay money to save money is always difficult.

This brings us to a more important point. While progress has been slow and uneven, the deployment of smart meters is inevitable. The second-generation meters being introduced today, widely referred to as “AMI 2.0,” have unprecedented sensing, computing, and networking capabilities. Do we really need a second piece of expensive energy-related hardware in the home? And unlike AMI, which utilities happily buy and price based on, are homeowners willing to pay for it?

Consider how today’s smart meter 2.0 manufacturers, including Landis+Gear and Itron, are positioning their devices not just as meters but as platforms for third-party energy applications. The companies have teamed up with Sense to host its hardware-decompression software on the meter, enabling real-time device-level energy monitoring that goes straight to your phone. It turns out that measuring the load of a whole house thousands of times per second provides good accuracy, but not perfect accuracy at the device level. But pairing meter data with real-time device data from smart thermostats, electric vehicle chargers, and other distributed energy-generation devices—the data these devices communicate today—can provide the precision needed to manage load. As an added bonus, remember that investing $200 in traditional “dumb” panels can provide circuit-level metering, which ensures accuracy.

Now imagine that smart meters host not just unbundling applications, but integrated applications with major DEM brands and appliances, enabling seamless demand management. Such integrations are prevalent in DEM management in utilities today: they simply need to be implemented by smart energy management solution providers or their partners. This is a compelling vision for the future of home energy management, matching the functionality of a smart panel but with a superior customer experience—and, crucially, without relying on a second piece of expensive hardware.

But what about the electricity panel? It’s mostly unchanged, but perhaps with circuit-level monitoring and a Wi-Fi radio that can send readings to a smart meter. It’s not as transformative as many make it out to be today, but it’s fit for the role that customers should be asked to pay for.