Opportunities for next-gen thermostats could bloom this spring December 22, 2011

A new image of the smart thermostat was planted in the popular imagination in November.

The introduction of the Nest – a sleek, circular wall-mounted unit designed by former Apple designer Tony Fadell – was one of many notable stories this year in the field of home energy management, including the launch of EnergyHub’s Mercury thermostat and a new partnership between Honeywell and Opower to produce similar products. All this excitement could yield utility investment, especially if the EPA revives Energy Star certification for these devices in the spring.

Even the massive hype surrounding the Nest’s launch and the thousands of homeowners who flocked to buy them didn’t revive the faith of many utility executives. They asked: Where is the field test data?

The reason for the question is this. In 2009, the EPA stopped granting Energy Star certification for programmable thermostats because field tests by utilities – most notably Florida Power & Light – showed that the homeowners who used them actually burned through about 12% more electricity than folks without the supposedly cost-saving thermostats. As it turned out, users generally programmed the thermostats to perform in very energy-inefficient ways.

Whether the new generation of thermostats – or their users – will perform better remains unclear.

For one, EnergyHub claims that its Mercury thermostat platform has solved the usability problem. David Wechsler, vice president for business development, says that in field tests conducted last year by the company, 85% of users picked comfort settings that met or exceeded Energy Star efficiency recommendations. This compares to 71% of users in the Florida Power & Light study who either didn’t program their thermostats at all or created settings that were so slight their effect was negligible.

Nest, meanwhile, only started field testing in the second half of 2011, so the data is not yet available.  Instead, the company uses computer models to demonstrate its cost savings.

Utility company executives say that, in the way that doctors should not prescribe untested medications or therapies to their patients, they are themselves unwilling to prescribe thermostats as a cure for high bills without some sort of official endorsement of their effectiveness.

Such endorsements may be coming soon. This spring, the EPA is expected to begin issuing Energy Star certifications for “climate controls” – a category of products distinct from “programmable thermostats” whose criteria were set in 2004.

The criteria that this new generation of thermostats must meet are at least as concerned with ease-of-use and intuitive programmability as they are with energy efficiency, says Abigail Daken, an environmental engineer with EPA’s Energy Star program.

What does all of this about thermostats – consumer products that anyone can buy over the Internet or from a home improvement store – have to do with utility companies? In my opinion, a great deal.

Of the articles and blogs I have seen on the subject so far, none has remarked on the family resemblance in system architecture between the new thermostats and advanced metering systems.

In the place of a smart meter is a smart thermostat that tracks energy usage. In place of a meter data management system is a cloud computing system that records and analyzes that data. And instead of communicating on the Zigbee protocol that most utilities have chosen – and is used by EnergyHub’s own HAN offering – the Mercury uses WiFi to interface directly with the customer’s home wireless router.

Of course, a smart meter tracks an entire home’s usage while a smart home thermostat only tracks the power used by the heating and air conditioning system. But climate control represents about 44 percent of the average home’s energy usage, according to the Energy Information Administration.

“It can be thought of as ‘load control as a service,’” says Wechsler of EnergyHub.

This service can be provided to customers with or without utility partnerships. Wechsler’s company has partnered with several utilities because the same system, with permissions from the customers, can be used for demand response.

That is, if customers agree, utilities themselves can reduce peak demand by turning down or switching off thousands of residential and customer heating and air conditioning units at critical times of day. And all of this is possible with or without installing smart meters, which utilities themselves usually pay for.

Of the 128 utilities contacted for Chartwell’s 2010 Smart Grid Survey, 38% of respondents reported that they were not considering investments to manage and store data related to customer end-use devices such as smart thermostats. About 17% said they were considering such investment, and 3 percent said they were in the process of taking such action. Times may be changing, though. Chartwell’s 2012 Smart Grid Survey will provide new findings early in the year.

It seems likely that more utilities will enter into partnerships with companies in the crowded home energy management market, but they may watch for a while to see which companies thrive and grow and which get trampled. Chartwell certainly will be watching that process in 2012.