Smart Thermostats in 2016 report

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Thermostats are the center of the home when it comes to residential energy management. In the United States, heating and cooling account for about 48% of the energy use in a typical home, making it the single largest energy expense for most homes. Thermostats are the key to unlocking heating and cooling energy savings and mitigating these energy costs.

Thermostats have been around for decades, but only recently have these devices gained greater attention as vendors have added greater intelligence through hardware and software innovations. As thermostats become smarter, these devices better help consumers save money on energy bills, help utilities engage customers and meet energy efficiency and demand-side management requirements, and play a part in connected home solutions.

 New distribution channels are emerging for these devices as telecommunications and broadband service providers, home security companies, and retailers race to incorporate advanced thermostats into their connected home solutions, according to Navigant Research’s recent Smart Thermostats report.

Despite smart thermostats’ increasing popularity, it is still unclear how much thermostats can actually save consumers on energy bills and what effect they will have on utility savings goals. Leading smart thermostat vendors such as Ecobee and Nest have each released their own savings claims based on internal analysis; Ecobee claims customers can save an average of 23% on energy bills, while Nest generally claims between 10% and 12% energy savings for heating and about 15% energy savings for cooling.

However, several third-party evaluations have yielded different results. In a Navigant Consulting evaluation study of a pilot program involving Nest thermostats that were offered to consumers with a $100 rebate, results showed a decrease of average daily electricity use by just 1.5% over the 12-month study period. That equates to about 4.8% cooling savings, a value much lower than the advertised estimated savings of 15%.

Evaluation results for heating during the 12-month period showed just 6.0% average thermostat savings per customer per day during the heating season, which, again, is a much lower value than the advertised estimated savings of 10%-12%.

Nest is not the only company with savings claims that contradict evaluations results for heating and cooling savings. In a third-party evaluation of 123 Ecobee thermostats in a National Grid Wi-Fi thermostat pilot, electricity savings averaged 16% of the estimated cooling season energy usage per thermostat and heating savings averaged 10% per thermostat. These numbers are still relatively substantial savings percentages, but certainly not as high as the 23% that has been claimed.

Another leader in this space, Honeywell, has not made any specific savings claims for its Lyric thermostat, though studies have shown that the Lyric has seen relatively low savings results relative to its competitors, even seeing negative savings in a smart thermostats pilot conducted by the Energy Trust of Oregon that compared the Lyric with the Nest thermostat. It is worth noting that while there have been several evaluation studies determining much lower savings than expected, there also exist third-party savings results that do align thermostat savings claims with results.

This is not to say that thermostat vendors are trying to deceive consumers and utilities with false savings claims. Thermostat results can vary dramatically based on location, weather, program design, the user, and even the way a program is evaluated. For instance, a thermostat program in the New England area during winter will see dramatically different savings results than a similar program in California.

One explanation for the variety of results is growing adoption. As thermostat uptake has increased, a wider variety of consumers are using these devices. In earlier years, the adoption of thermostats was largely limited to early adopters and utility pilot deployments to targeted populations. These groups of consumers were more likely to actively use thermostats and participate in thermostat programs than the general population, thus driving higher savings.

Now, however, we are beginning to see larger numbers of consumers using more advanced, smarter thermostats. These more recent thermostat buyers might not be as engaged with their utility or excited to utilize the newest features and applications available through these devices, and thus savings results appear to be approaching values that are more realistic and reasonable to expect from a broader population.

For utilities and consumers, this is not a cautionary tale to avoid deploying and using smart thermostats. Many smart thermostats and smart thermostat programs have shown they can help consumers save energy and reduce their consumption, even if the savings might be somewhat lower than anticipated.

What this means for players in this space is setting more realistic expectations for seeing savings results across a utility service territory. Though the consumers across a service territory might not see thermostat savings ranging from 15% to 25%, they will likely still see enough savings and reductions in energy use from using smart thermostats and participating in energy reduction programs involving thermostats to make the switch worthwhile.