To Save Energy, Users Let Smart Thermostats Take the Lead

People using energy-efficient smart thermostats are willing to sacrifice comfort and control to save relatively small amounts of energy that could add up if enough people sign on, a Georgia Tech economist reported in a recent study.

With federal and state energy policies targeting aggressive decarbonization in the next 15 years, smart technologies have the potential to help achieve these goals at a reasonable cost, said Casey J. Wichman, associate professor in the Georgia Institute of Technology School of Economics.

In a forthcoming issue of American Economic Journal: Applied Economics, Wichman and colleagues report that automation within smart thermostats can lead to potentially large reductions in household electricity use and costs.

Utilities look to time-of-use (TOU) pricing — where prices are higher during peak demand and lower during lags in demand — to save consumers money and relieve pressure on the grid.

“From an economics perspective, there's this idea that if you set the price right, everything will work out,” Wichman said. “But if consumers don't actually respond to those prices, that limits the effectiveness of the solution.”

For the study, more than 2,100 Toronto-area residents using Ecobee smart thermostats agreed to share their usage data during the 2019 rollout of a suite of new thermostat features that included an automated component.

Participants opted to allow the thermostats to precool or preheat their homes at times of the day when electricity was less expensive, choosing on a sliding scale how aggressive they wanted the algorithm to be. Degree changes within the homes varied from around 1 to 5 degrees, saving participants up to 30 Canadian cents per day in the summer.

“I have always liked applying economic concepts to simple decisions we make in our daily lives,” Wichman said. “This allows me to answer new questions about how decisions matter for the environment, and how policies or technologies can be designed to generate social change. In this project, we’re leveraging new data sources to try to capture the unaccounted-for costs of those policies.”

Studies on energy savings, he said, often miss the in-home comfort cost. These results showed that people seemed willing to trade relatively small monetary savings for a small increase in discomfort, although discomfort was most pronounced for residents who typically spend more time at home. For the most part, people were willing to sacrifice control over their heating and cooling decisions to an algorithm.

This finding surprised Wichman. “We thought we would see more people turn off the feature,” he said. That didn't happen.

As time-varying electricity pricing rolls out across North America, utilities could provide incentives for customers to opt into energy-saving settings programmed into internet-connected home appliances, like water heaters, pool pumps, and electric vehicles.

The researchers’ results suggest that such programs could be designed in a way that customers will accept. This gives Wichman a sense of optimism for the future.

“What is interesting here is that technology can complement economic incentives,” he said. “You can have technology correct for humans’ inability to remember to set their heating and cooling schedule in a way that's consistent with social goals.”