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A smart pellet stove that combines efficient heat generation with IoT

Periodic Reporting for period 1 - Laelia Due (A smart pellet stove that combines efficient heat generation with IoT)

Reporting period: 2017-04-01 to 2017-07-31

Wood is the oldest type of biomass used as a source of renewable energy. For thousands of years people have been heating their dwellings and cooked food by burning wood at campsites, in fireplaces or stoves. Wood is a renewable resource – trees can be replaced on the timescale of human lives, and often much quicker. However, contrary to the wide-spread belief, wood is not necessarily a carbon-neutral resource and can cause substantial pollution and health damage, when burnt incorrectly. One old inefficient wood stove produces the same amount of fine particulate matter as five old diesel buses.
Since the oil crisis, a lot of development has taken place in wood-based heating technology: more efficient and less polluting wood stoves and especially pellet stoves showed up on the market. Given their low emissions and high efficiency, pellet stoves gained popularity in the last decade both in EU and US, but the wide-spread adoption is still lagging due to high prices and lack of innovation.

At this purpose, Vesta Srl is developing the Laelia Due project, a highly efficient and environmental-friendly heating stove IoT enabled and perfectly integrated within the IoT ecosystem, which will enable smart assistance, remote control and an efficient maintenance, with the ambition to reach both the 20% of the Italian market share and the 15% of the EU market share by 2025.
The commercialization of Laelia Due, will be boosted by engaging users via a dedicated web and mobile (smartphone app) e-commerce channel, allowing them to configure and visualize the stove in their interior using augmented reality. After choosing the aesthetic for the stove fitting their own room, the users will be able to buy it directly, without going through intermediaries allowing us to be able to lower the price by ±20% compared to our competitors. Around this sales platform, we would create a dissemination activity, to inform the prospect customers about the correct heating approaches and air pollution issues, using various web and social instruments (like blogs, forums and social media), to generate an on-line marketing activity. In this Phase 1 project we have validated this approach, collecting additional data and devising a detailed go-to-market strategy.

Our ambition is to achieve a level at which the use of pellet stoves will be recognised as the most sustainable way to heat homes, to reduce air pollution that stems from usage of inefficient old wood stoves and to generate both direct (design, development and manufacturing) and indirect (stove maintenance, pellet production and transport) jobs.

In this Phase 1 project, we have validated the business potential together with the commercial and economic feasibility of Laelia Due stoves, and in particular the competitive advantage of the web and mobile direct sales channel, the additional value-added smart services and related business partners to implement them and the value proposition, with 50+ prospects in the target market. In particular, we have:
1. investigated barriers and risks of implementation of the direct-only channel;
2. run customer validations to ensure the willingness-to-buy with the proposed approach;
3. accurately determined the possible cost reductions reachable with large scale manufacturing;
4. prepared partnerships for delivery in our targeted geographical segments;
5. prepared partnerships for deployment of additional IoT-enabled smart value-added services.

The aforementioned achievements pave the way for further developments in the Phase 2 project, where we will Implement the validated disruptive direct channel, establish benefitting partnerships, implement a large-scale trial of Laelia Due stoves in EU, incrementally improve the stove efficiency and enabled services while lowering its manufacturing costs and prepare for the market launch.

Finally, in the Phase 3 project, we will enhance company growth by commercializing the stove in 5+ key geographical markets in EU and scale the production to reach the company market share objectives in Italy and EU.

The successful commercialisation of Laelia Due will contribute to address 3 major challenges for EU. Specifically, it will reduce dependency on energy imports, contribute to decrease air pollution and offer a valid opportunity to create new jobs.
During the past 4 months, we had the opportunity to validate the commercial and market feasibility and the economic and financial feasibility of Laelia Due project.
The approach adopted is twofold: on one hand we validated the feasibility of a web and mobile direct sales channel via 50+ prospect interviews, in fact, we:
a) Carried out additional business validation of Laelia Due’s product/market fit, analysing the prospects’ current approach to heating homes, validating Laelia Due parameters and visual characteristics, assembling a list of additional hardware and UX requirements for the stove;
b) Got in-depth information about buying behaviour when shopping for household appliances from our target segment. To do this, we performed more than 50 interviews (online and in person) with prospects and organized from them a list of requirements, needs, barriers and buying triggers;
c) Validated the mobile augmented reality sales channel, with an analysis of the prospect’s interaction with the prototypes of the mobile app and software, collecting their feedback;
d) Discovered additional value-added services enabled by IoT, gathering a list of prospect-validated services with specific requirements and establishing a willingness-to-pay analysis;
e) Discovered additional integration partners with a list of promising smart home appliances for integration and analysing a preliminary approach on integrating them with Laelia Due stove and the app;
f) Discovered fitting service and maintenance partners, thanks to the build of a list of service and maintenance partners, capable of installing and maintaining Laelia Due at customer sites;
g) Refined the commercial plans based on the collected feedback and identify new risks. For this we took as model the 2nd and 3rd iterations of the value proposition and business model canvases and updated the risk registers based on the new founding;
h) Extended the protection of our intellectual property and review local emission regulation for target markets, thanks to the PCT patent filing, as well as internal invention disclosures that have been produced. Furthermore, the list of local regulation requirements has been collected and analysed;

On the other hand, we assessed cost/sales prices and other financial implications of a direct sales channel. In fact, by deploying a detailed financial analysis, breakdown of costs of development and payback periods, we have been able to accurately estimate the costs of implementation of the proposed mobile augmented reality e-commerce platform. Moreover, through an analysis of further price reductions (validated by the performed willingness-to-pay studies) and updated sales forecasts, we have been able to estimate the feasible price reductions enabled by the direct channel.
Laelia Due stove was designed to showcase the following commercial and technological novelty in the market:
• Mobile-first augmented reality direct sales channel, allowing a personalised configuration and previewing experience of the stove in the household interior exploiting augmented reality, direct configuration and straightforward purchasing via the mobile app.
• An IoT-enabled service management where Laelia Due will automatically report its state, energy performances and any diagnostic issue directly to the user and to Vesta’s maintenance partners, allowing remote diagnostics and preventive maintenance.
• An IoT-enabled analysis of pellet quality and stove emissions through continuous monitoring of pellets quality and reporting of any deterioration.
• An IoT-enabled air quality monitoring system, able to adjusts the combustion parameters to keep the emissions at the expected level and reporting to the user any cases of PM/NOx exceeding levels.
• A novel patented design of the stove turbulator, allowing the automatic cleaning of the stove, increasing efficiency of thermal exchange and simplifying the overall maintenance.
• A novel patented design of the air suction system, able to guarantee the ignition at first attempt with a 50% reduction in starting burning time, also providing a quick extinction of fire in case of failure through an automatic shutter mechanism.
• Novel materials such as flexible concrete, used in Laelia Due, which have never been adopted by pellet stove manufacturers.

Next to best-in-class performance of the heating engine and improved combustion, Laelia Due provides a series of value-added services enabled by combination of on-board IoT features and the mobile app, such as:
a) Placement of installation orders from the local service providers;
b) Remote monitoring, diagnostics and preventive maintenance of the stove;
c) User notifications on the quality of pellets and automatic adjustment of burning temperature (with notifications);
d) Measurements of the indoor air quality, automatic notifications and emergency shutdown;
e) User notifications on pellet consumption rates and automatic pre-orders of the resupplies from local providers.
These services will be accessible to the Laelia Due users via a smartphone app.

Laelia Due is designed to cover the needs for residential heating in a cost-efficient way:
a) Energy efficiency: According to the Alliance for Green Heat, a typical pellet stove is 80% efficient, expensive high-end stoves are 90%+ and a lot of popular low-end models are below 70%. In contrast, Laelia Due will provide 96% efficiency due to its novel turbulators, air suction system and embedded sensors.
b) Smart services: Laelia Due’s IoT-enabled services simplify maintenance, notify about performance issues, and save time on ordering pellets. Additional services will be provided via integration with other smart home appliances (e.g. smart thermostats Nest, Quby and others).

The Biomass magazine estimates that an average pellet stove can pay itself back in 4-5 years, depending on the heating source it replaces. Our preliminary estimations show that due to its higher efficiency Laelia Due payback period is 3-4 years, with a 30-35% decrease in energy costs.
As pellet stoves are the most environmentally-friendly option of heating by burning wood, they are exempt from shutdown countermeasures to reduce pollution in different areas (as happened in London and Paris during recent spikes in air pollution, when the owners of older stoves were getting fines).
Automatic pre-ordering of pellets will not only save time/effort on pellet delivery, it will also ensure that the source of pellets is within 500-600km range to ensure that pellets are transported sustainably. Transparency of pellet supply chains will be enabled using track-and-trace systems, such the one rolled out by Enviva in US.
Although the willingness of our target customers to pay for Laelia Due was validated via the sales of the 20+ previous generation stoves, we intend to use the benefits of the direct channel to be able to reduce the proposed price by 20% and scale the business EU-wide.