I don't think gas boilers particularly benefit from small size.
Smaller units cost less. Units with properly utilized burners are more reliable, burn cleaner, and save energy. 1 added year of life and 0.6% net thermal efficiency don't matter per unit, but add up over installations.
why can't I use cheap gas heated water?
I don't know why you have that limitation. However, small hot water draws have disproportionately high % of energy loss. Resistance heating a 1L load may not be that costly compared to losing 80% of your gas-heated water to warm up room temperature pipes.
However, at this point it's less "internet of things" and more "internet of select heavy appliances"
Yes. Compressors, Fans, Pumps. Maybe lights, maybe temperature dead bands.
But an awful lot of the IoT hype is amazingly faddish and appears to me to be utterly pointless.
I would be surprised if we have already recognized the main benefits of cheap connected things. Although I agree that it is unlikely to be the type of hokey consumer garbage that dominates headlines.
Likewise with the internet connected dishwasher and washing machine. I have to stand right next to them to fill them up and put detergent in. I really don't know what use having them internet connected would be
You put them on fast DR mode because you actually don't care when they run, the utility neatly staggers run times within your acceptable parameter windows for 10,000 customers with the net result a better managed and less expensive grid. Your wife complains about noise so they run when she leaves the house. We eventually saturate the grid with renewable energy and with your agreement, the utility will let you run them for free to soak up peak solar/wind output. Your hot water heater is connected to your end use devices, your hot water loads communicate so lower priority (dish/clothes) services will not interfere with your main hot water needs. Now you can downsize equipment. You will save money. Your rightly sized equipment will operate in narrower (design) boundary. It will be efficient. You will save money. Now lets do this with all our compressors, motors, and fans. We can now work together. Save energy. Save money without really doing anything but coordinating with each other on a level that is basically invisible to the end user. And if you don't want to participate? Sophisticated pricing mechanisms will allow for that. You can pay more to fund your all your personal priorities. It works for everyone.
I really find it strange that some eschew and then actively campaign against advanced voluntary technology simply because they can't imagine how they will use it. Think of the things we would have abandoned in the past had we listened to people that thought this way about technology, would there be any progress ever? I also think these arguments of big data are very over played. The space is very big, trendy, and it will be very crowded. There are low enough barriers to entry that even paranoid privacy fanatics will get their doodads too. This amounts to a crowd of old people complaining about trampling the grass.
Saliva causes cancer, but only if swallowed in small amounts over a long period of time. -- George Carlin