Navigant Research Blog

What Makes a Smart Thermostat Smart?

— April 1, 2016

Home Thermostat DialThere’s no clear definition of a smart thermostat. In fact, as more offerings have entered the market, the definition of a smart thermostat has become more unclear. Some consider a thermostat “smart” if it has two-way communications (i.e., you can view and change settings via a smartphone). However, according to Navigant Research, this type of thermostat is actually considered a communicating thermostat. A communicating thermostat is a device solely enabled to gather and transmit in-home temperature data in a two-way format that can be accessed and adjusted remotely via a web portal or mobile application. A handful of communicating thermostats on the market today have actually been labeled or marketed as smart thermostats despite their lack of smart features. So what is it that makes a smart thermostat smart?

The answer is algorithms. The algorithms hidden in the backend software of a device are what enable it to perform a variety of different functions that make it advanced, not just communicating. For thermostats specifically, algorithms tend to enable functionalities that can optimize heating, ventilation, and air conditioning (HVAC) settings for consumers.

Algorithms for All Occasions

There are algorithms for a variety of different thermostat functionalities. The Nest Learning Thermostat’s learning algorithm is what enables it to adapt to a user’s lifestyle and the changing seasons to optimize the user’s HVAC settings and minimize energy consumption without affecting comfort. EcoFactor uses a series of advanced algorithms alongside real-time data from communicating thermostats, weather conditions, and customer preferences to make automatic micro adjustments in temperature to save customers money and energy. The ecobee3 is advertised as smarter due to its support of algorithms for capabilities ranging from alerts and reminders to optimal humidity control to home/away sensing.

Algorithms are still improving and are increasingly supporting different features. Manufacturers of thermostats have teams dedicated to developing new algorithms and adjusting existing ones to best serve their customers. Similar to updates in apps like Instagram, these algorithms can be added or modified on devices already in use. What developers can do with algorithms and the value they add to thermostats make these devices unique and desirable to consumers. Without its learning algorithms, the Nest thermostat would only be a well-designed on/off switch controllable through a smart phone instead of the learning thermostat that has driven the market and become one of the most popular smart devices available today.

Smart or Communicating?

The value that algorithms add contributes to the importance of differentiating smart thermostats from communicating thermostats. The difference between the two is commonly misunderstood. In fact, the Environmental Protection Agency has not created a definition of “smart” as it applies to smart devices (including smart thermostats), and there is no regulation over the use of the term. This can have negative implications on the market, from frustrated consumers to inaccurate quantification of devices. For simplicity’s sake, Navigant Research categorizes smart thermostats as those with the same functionality as a communicating thermostat (i.e., two-way communication), but which are enhanced by data gathering and analytics that optimize HVAC settings for efficient and automated energy consumption.

Where greater specificity is warranted, Navigant Consulting has defined a smart thermostat as having at least three of the following features (enabled by algorithms): occupancy detection, heat pump lockout temperature control, upstaging and downstaging optimization, optimal humidity control/AC overcooling, fan dissipation, behavioral features, and free cooling/economizer capabilities. To learn more about smart thermostats and how they are different from other thermostats, look for the upcoming update to Navigant Research’s Smart Thermostats report.


Lone Smart Devices Less Effective than Those Paired with Programs and Services

— March 17, 2016

Home Thermostat DialThere is a wide variety of options on the market for consumers interested in better managing their energy consumption, becoming more environmentally friendly, and generating their own energy. Enabling technologies such as smart thermostats can help customers achieve these goals. They can also be a point of contact for utilities that want to increase customer engagement and improve customer satisfaction, a concept that is covered in Navigant Research’s recent Residential Customer Engagement research brief.

However, the problem with the way these technologies exist today is their lack of integration with other enabling technologies, demand-side management programs, and other energy services. In essence, enabling technologies themselves may not be as useful to consumers as one might think.

In fact, smart thermostats on their own may actually result in increased energy consumption, despite the popular belief that owning these devices will reduce a consumer’s energy use and energy bills. This increase in consumption can occur because of the remote control capabilities of smart thermostats, which allow consumers to adjust their thermostats preemptively (or before arriving at home), whereas traditional programmable thermostats can only be adjusted once a user is home. Because of this, on December 31, 2009, ENERGY STAR required that manufacturers cease the use of the ENERGY STAR label for thermostats, asserting that although thermostats do have the potential to save energy, it is not the thermostat itself so much that saves energy, but the behavior of the consumer and the thermostat’s connection or integration with other devices and systems.

This lack of integration between energy services and enabling technologies not only causes problems for consumers, but also vendors and companies. In a survey of 423 web and mobile application stakeholders, 74% reported that the lack of integration in existing tools affects their ability to use data effectively. Essentially, the existing technologies that we have today are not integrated, which leads to the data becoming siloed. This makes devices and enabling technologies themselves less valuable and less effective to the consumer.

Startup Solutions

However, several vendors in this space are offering integrated enabling technologies and energy services. Quby, a startup company founded in 2004 and acquired by the Dutch Utility Eneco, offers a white-label smart thermostat and energy display device where consumers can subscribe to energy services, such as monitoring power generated by rooftop solar panels and tracking home energy consumption. The company has seen success with utilities in Europe and plans to spread to the United States later this year. Salus, a subsidiary of Computime, manufactures devices, sensors, and control switches and offers an integrated energy management solution that utilizes combinations of its manufactured hardware devices with software to form a complete platform.

The growth in enabling technologies is allowing consumers to participate in energy activities that were not possible or accessible before, and they are enabling additional points of contact between utilities and their consumers. However, it is important to keep in mind that these technologies are much more useful to consumers, vendors, and utilities when integrated with programs, energy services, and other enabling technologies. The integration of these devices is the key to saving energy and reducing consumption, not necessarily the device itself.


Technology Issues in Smart Devices Can Cause Major Problems for Consumers

— January 29, 2016

close up of man hands touching tablet pc screenOver the past few years, there has been an explosion of devices that have the potential to revolutionize our daily lives. Smart devices promise to help us piece together a smart home, manage our energy consumption, and track our health and fitness at the push of a button. My 82 year-old grandmother has an iPad Air, which she uses every day to play games that keep her mind sharp, browse movies online that she can send to her entertainment console, and track her vitamin and medication intake. She once casually commented, “I don’t know what I would do without my iPad now.”

While embracing smart devices can lead to a bright future of connectivity and convenience, the technology may not be developed enough for us to so readily welcome them into our homes. Lately, there have been several cases showing that these so-called smart devices sometimes have serious flaws.

Out in the Cold

For example, the Nest Learning Thermostat—a smart thermostat that can be monitored and adjusted via a smartphone app—recently experienced a software glitch that left many of its customers in the cold. This may seem like a somewhat trivial issue—unless you are elderly, have an infant, or fear your pipes may burst. Nest reported that the issue had been fixed for 99.5% of customers, yet the fix involves a complicated nine-step manual restart (to Nest’s credit, it does offer to send an electrician to your home for assistance), and 0.5% of customers still did not have a solution.

Though Nest is arguably one of the best smart thermostats on the market, its technology issues don’t stop there. In January 2016, it was reported that Nest Learning Thermostats were leaking ZIP codes over Wi-Fi, meaning that any person walking or driving by with the right equipment could intercept that information. While leaked ZIP codes are probably not the most serious security concern, it does lead back to one of the main issues around smart devices today: are these devices secure, and can consumers trust them?

Nest is not the only company experiencing technology issues. Researchers who discovered the Nest ZIP code leaks also found the Sharx security camera and the PixStar photo frame were sending unencrypted data that could potentially be intercepted. The Honeywell Lyric, a rival smart thermostat to the Nest product, was reviewed as having glitches in its flagship geofencing feature. In April 2015, Nick Bilton—the New York Times writer who covered the Nest glitch—also reported on the security flaws he had experienced with the wireless fob for his Prius. Finally, the Fitbit, a fitness/health-focused wearable, was recently hit with a class-action lawsuit over its supposedly inaccurate heart rate monitoring.

A Growing Market

Pointing out these technology issues is not meant to scare consumers away from buying a smart thermostat, a keyless car, wearables, or any other popular smart device. These devices will inevitably become a part of our lives. Navigant Research estimates that the global market for communicating and smart thermostats (and their respective software and services) alone will reach $2.3 billion by 2023. The point is that it is our responsibility as consumers to not only understand and be aware of the risks associated with connected smart devices, but also to demand that these devices be safe and secure if we are going to embrace them.


IoT Momentum Is Building—Even if Trend Is Overhyped

— October 12, 2015

Momentum keeps building for the Internet of Things (IoT) market—even if the concept is overhyped. Recent moves by market stakeholders point to significant investments and noteworthy strategies. In addition, there are important implications for the utility sector, particularly the residential segment.

Google’s strategy combines hardware and software elements for connecting things in the home. The company is expected to release Brillo, a slimmed-down version of the Android operating system designed for smart home applications, by year’s end. Brillo will be coupled with Weave, a protocol developed by Nest Labs, which is to be integrated into OnHub, a router that can control IoT devices. As part of Nest’s initiative with Weave, General Eletric (GE) and Procter & Gamble will be partners in the effort.

Comcast has made the IoT a key part of its strategy over the past year. Executives with the cable giant have said they want to become the conduit, or highway, that carries all the data back and forth among IoT devices. Also, the company’s Xfinity service is being positioned as a platform for IoT functionality, with the company having announced partnerships with Nest, August (locks), and Lutron for lighting.

Also, Intel is acquiring chipmaker Altera for nearly $17 billion with the aim of enabling new classes of products “that meet customer needs in the data center and Internet of Things (IoT) market segments,” according to a release. Altera is an attractive buy for Intel because its chips are used widely for networking and wireless applications. Similarly, United Kingdom-based Dialog Semiconductor, which supplies chips to Apple, announced in September its acquisition of Atmel for $4.6 billion in a deal to strengthen both companies’ efforts to compete in the IoT space.

Furthermore, the Smart Grid Interoperability Panel (SGIP) says it will expand its cooperation with the Industrial Internet Consortium (IIC) to focus on technologies and testing to promote the adoption of the IoT in the energy sector. The two organizations plan to identify ways members can take part in an array of new and established testing activities.

Among utilities, Commonwealth Edison (ComEd) in Illinois has a partnership with Comcast to leverage the interconnectedness of smart thermostats in a demand response program. The program, similar to other bring-your-own-thermostat (BYOT) setups, is a basic example of linking things, thermostats in this case, with as service that can increase energy efficiency.

With this kind of momentum, it seems clear the IoT trend has legs, but there are hurdles that could inhibit market adoption. First, there are many protocols in play, such as ZigBee, Z-Wave, Bluetooth, and Wi-Fi. These present interoperability issues. Second, many IoT devices are more costly than current alternatives, such as high-end smart thermostats. Third, some consumers have real concerns about potential loss of privacy or security breaches when so many devices are interconnected.

Despite these hurdles, the IoT market drivers seem strong, and important companies are placing big bets on it. Navigant Research expects global revenue attributed to residential IoT devices to grow from $7.3 billion in 2015 to $67.7 billion in 2025, based on our own focused definition on the built environment of things. For those interested in learning more about the IoT market, Navigant is hosting a webinar highlighting IoT trends on October 20 at 2:00 PM EST. My colleague Ben Freas, senior research analyst, will bring his building automation perspective, and we will be joined by Matt Smith, senior director of utility solutions at Silver Spring Networks, who will discuss the utility’s role in the connected IoT home.


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