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Smart Thermostat Market Heats Up: Why Utilities Need to Embrace New Connected Technology

Electrician Working On Panel

By Stuart Lombard & Debbie Kimberly

It should come as no surprise that the smart thermostat industry is heating up. According to Navigant Research, nearly 32 million smart thermostats will be installed worldwide by the year 2020. It is forecasted that global revenue from smart thermostats will grow from $85.5 million in 2013 to $1.4 billion in 2020.

As smart thermostats become more ubiquitous, this connected technology will play a massive role in increasing energy savings in the home. It also means the utility industry is poised for significant change, providing better connected technology to improve customer relationships and ultimately meet aggressive load reduction goals.

Why smart thermostats?

In a typical U.S. home, heating and cooling accounts for more than half of the energy use, making it the largest energy expense. With smart thermostat technology, utilities can help their customers reduce their energy bills.

One of the newest thermostats to enter the market is a smarter wi-fi thermostat with remote sensor (full disclosure: ecobee has one on the market called ecobee3). This thermostat measures temperature and occupancy in multiple locations, which results in increased comfort when homeowners are at home and energy savings when they’re away. In addition, homeowners can monitor and control their thermostat anytime and from anywhere, using their smartphone, tablet or computer.

A thermostat-connected web portal may also provides valuable insights on how much energy is conserved each month and lets homeowners make more informed decisions about their energy use. According to the Smart Grid Research Consortium (SGRC), utilities can potentially reap large savings by implementing smart thermostat programs that take advantage of increased functionality and optimize control for customers.

Utilities across North America are partnering with smart thermostat makers on a number of different initiatives, with a particular focus on peak demand management through demand response programs. One example of a popular initiative is the Bring Your Own Thermostat program. In this model, customers are incentivized for purchasing a smart thermostat and participating in demand response events that allows customers to learn how to better manage their energy use, while ensuring the reliability of the energy grid when demand is at its highest.

When choosing thermostats which are the best options for Bring Your Own Thermostat programs, always look for OpenADR 2.0b certification. OpenADR 2.0b is a standard-based communication protocol that helps improve energy savings and ease of participation in demand response programs.

Utility program success with smart thermostats

Austin Energy is the eighth largest publicly owned electric utility in the U.S. and provides electricity to more than 420,000 customers. It was one of the first utility companies to get on board with the Bring Your Own Thermostat demand response program when it launched its Power Partner Thermostat program in 2012.

Now in its second year, the program helps customers reduce energy use when it matters most–during high-use periods. Customers can choose to enroll in the program and install their own smart thermostat. Once installed, Austin Energy provides a rebate of $85 as well as additional energy-saving opportunities on their monthly bill. Participation is voluntary and customers can choose to opt-in or out of a demand response activity when necessary.

According to a recent poll taken by Parago Energy, 87 percent of utility customers said they would take part in a demand response program if the incentives were right, including prepaid and cash-back rewards. In this particular rebate program by Austin Energy, the company has seen customers install smart thermostats at rates beyond expectation. In the first year of the program, Austin Energy was able to meet their enrollment goals within the first two months.

Participation continues to increase, making the Power Partner Thermostat program an attractive replacement for Austin Energy’s early version of its residential demand response program. The early version of the program relied on communication through a one-way radio signal making it difficult for Austin Energy to confirm the number of active thermostats in the field or measure energy savings during a demand response event. With new smart thermostats, Austin Energy can precisely determine the number of participating thermostats and track energy savings during demand response events.

By allowing customers to participate in demand response events, Wi-Fi thermostats play a significant role in helping Austin Energy achieve its aggressive demand response goal of 150 MW by 2020. The program also supports its customers by improving system reliability and reducing transmission expenses and fuel charges billed to the customer.

Smart thermostats have given Austin Energy customers greater control of their comfort and savings. When their customers choose to participate in the demand response events, they are helping to delay the need to acquire additional peaking power and are helping to prevent unplanned outages.

It is more important than ever for utility companies to fully realize the advantages of implementing smart thermostat programs. As this kind of technology becomes the norm across homes in North America, utilities must get board now to improve their customers’ comfort, energy savings and ultimately meet today’s massive demand on the energy grid.


Stuart Lombard is CEO of ecobee, and Debbie Kimberly is the vice president of customer energy solutions at Austin Energy.

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