Apple (NASDAQ:AAPL) is now officially an energy company. As a result, it can sell energy into the wholesale market, just like any other independent power producer.
Google (NASDAQ:GOOG) was really the first tech company to be approved as an independent power producer, but Apple may have bigger ambitions than just developing solar for its data centers. It may eventually become an energy hub itself.
The possibilities for HomeKit in energy
If you look at how HomeKit is being positioned by Apple, it's going to be the brains behind everything in your house. Lights, heating, cooling, washer, dryer, dishwasher, and even your security system connect to HomeKit. It knows when you're home and what your preferences are on a daily basis. For homes with solar energy and battery energy storage, why wouldn't Apple control those devices as well?
As companies like Telsa Motors (NASDAQ:TSLA), SonnenBatterie, and Sunverge start to launch energy storage businesses, they need to figure out how they're going to control batteries and supply energy to the grid when it's profitable. Revenue sources like offsetting demand charges or performing arbitrage between times of high prices and low prices are both possibilities for generating revenue from a battery. But the greater value may be in aggregating thousands of batteries or EVs together to act as one to supply a service utilities are willing to pay for.
Aggregating hundreds (or thousands) of battery systems could allow utilities to lower energy production when it's most expensive, or delay investing in new power plants and transmission lines. If Apple can aggregate the batteries and demand devices of thousands of homes across the country, it could provide valuable benefits to the grid as well as HomeKit users.
What if Apple borrowed a business model from the App Store?
One thing that's not yet clear in energy storage is how consumers will be compensated for having energy storage in their homes. If you install a Tesla Powerwall...now what?
If customers see reduced bills, the "revenue" could really be in the form of an expense reduction, like it is with solar energy. But if an aggregate of batteries supply a service to the utility that generates real revenue, the aggregator will likely share the revenue with the homeowner somehow.
What if Apple instituted the 70/30 split it uses with homeowners in revenue generated from HomeKit? The company already has approval to supply power in the wholesale market to utilities, it has a payment system and millions of consumers' financial data on file, and it has the platform to control assets as well. Apple could become the power company of the future, if it wanted to.
What is Apple's vision for the energy future?
We don't know if Apple got approval to be a wholesale power producer because it wants to maximize the value of its own energy assets, or if there's a bigger goal in mind. But don't count out the possibility that Apple could be building an energy platform that would bring together consumers, innovative companies, and utilities. Few companies have the reach to make that happen, but Apple can.
What we do know is that HomeKit's potential is just starting to show itself to consumers and app developers. And someone will figure out a way to use its capabilities to advance energy to another level. Why not Apple?
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Travis Hoium owns shares of Apple. The Motley Fool owns shares of and recommends Alphabet (C shares), Apple, and Tesla Motors. The Motley Fool has the following options: long January 2018 $90 calls on Apple and short January 2018 $95 calls on Apple. Try any of our Foolish newsletter services free for 30 days.
More from The Motley Fool
1 Stock I'm Buying More Of in 2018
One airline stock is trading for less than 7 times trailing earnings -- even though the company is likely to achieve double-digit EPS growth in 2018.
Vermont Is Legalizing Marijuana in a Unique Way
No state has ever done this before, and it could pave the way for other states to follow in its footsteps.
This Top Dividend Growth Stock Sees No End in Sight
After growing its already lucrative payout 30% last year, this 4.6% yielder sees at least 20% annual growth for the next five years.