Nest Labs: Automating the demand side of the smart grid

Nest Labs: Automating the demand side of the smart grid

There are many conceptions of what the smart grid is and what it should do for us, the ratepayers who will finance the necessary upgrades to California’s electrical system. I find the concept of a “smart-grid ecosystem” -- with smart customers, smart utilities and smart markets -- to be a helpful guidepost as we seek to evaluate what should be accomplished by the utilities trusted to deploy our smart grid.

Ecosystems achieve resiliency through diversity. We want a variety of clean energy resources on the supply side -- hydropower, wind, solar photovoltaic, solar thermal -- spread across a variety of locations (but never too far from customers). Similarly, on the demand -- or customer -- side, the idea is that Californians, buildings, appliances and electric vehicles create an intricate, synergetic web that can be made more efficient and flexible with customer education and empowerment, customer-focused energy pricing policies and demand-response programs (which allows customers to voluntarily reduce peak electricity use in response to a signal from their electric utilities and receive a payment for doing so).

There are other ways to contemplate diversity in the energy context: Unlike some other states, most Californians can’t choose their power providers, although they can choose among rate “plans” (which are payment schemes, not plans to help manage energy use and costs). EDF recognizes that a smart energy marketplace will thrive with a greater variety of competitors, products and services, and would like third-party energy service providers (that catch-all term includes organizations that deliver energy services and products to customers at a variety of levels throughout the smart grid ecosystem) to be able to participate.

Last month’s announcement by Nest Labs is proof that the smart-grid ecosystem is alive and well. With utility partnerships in California and Texas, among other places, Nest uses its intelligent, WiFi-connected thermostat to help customers smartly and painlessly trim energy use by learning -- and mimicking -- their temperature preferences automatically. For example, the Nest’s Seasonal Savings services will alert your thermostat when new seasonal rates apply and the device will begin making slight adjustments to its presets in order to adapt to predictable weather trends.

Even more exciting is Nest’s Rush Hour Rewards service that provides centralized, automated small reductions to heating or air conditioning at times of peak demand, when energy use is highest. The offering in particular is designed to enable customers to be good environmental stewards by enrolling in peak energy trimming programs, such as Southern California Edison’s Peak Time Rebate rate. Another benefit of participation is lower energy bills.

While customers retain the ultimate authority to override thermostat settings, the basic premise is to accept a payment to adjust settings by a couple of degrees when the electric grid is most stressed. The trouble is that involving people in energy conservation actions is less reliable and slower than communicating directly to appliances with computers. Enter the Nest, strategically located at the interface between utility and customer, with specific dominion over the biggest energy hog in your home -- the heating and cooling system.

This commentary was originally posted on EDF's California Dream 2.0 blog and is reprinted with permission. Photo courtesy of Nest Labs.

The reality is that the electric grid, as we know it, is changing, driven by California’s quest to secure an environmentally safe and affordable energy system. Increasing the amount of clean, renewable energy on the grid will mean that more generation is variable (meaning electricity output from solar and wind depends on sunshine or windiness, respectively). Up to this point, California has met this challenge by backing up clean resources with dirty fossil fuels.

Smart-grid ecosystems can provide hot beds for innovation, such as Nest’s learning thermostat, but first must get energy pricing right. Nest’s business model will thrive when residential customers see time-variant prices (meaning that the price customers pay reflects the cost of electricity produced at any given time of day) that align with the actual costs of delivering power. We’ve already seen this work in large, statistically valid studies.

This is how Nest’s learning thermostat will make a difference to your electricity bill and the environment:

  1. Customers would upgrade their old programmable thermostat,
  2. Customers would sign up for a time-variant electricity rate (perhaps at the same they are online for the utility rebate on the new learning thermostat),
  3. On peak demand days, when electricity use is highest and the utility will pay consumers handsomely to trim their energy use for a few hours, Nest Labs will signal customers’ thermostats via WiFi. Customers likely will barely notice any difference when their thermostats click up a couple of degrees during these times.

Meanwhile, California will avoid more harmful pollution from fossil-fuel power plants in the coming years and, eventually, could be tuned to work harmoniously with variable clean energy resources such as wind and solar. Nest thermostats are among a growing number of products capable of precooling buildings in advance of peak electricity demand, a strategy that will become commonplace once time-variant pricing pervades.

California already has spent billions of customer dollars installing a robust digital-metering infrastructure. Now it’s time to put these meters to work by enabling customers to participate in demand response and other demand-side programs, such as building weatherization. Coupled with technologies that now allow for fast, reliable, automated “set-it-and-forget-it” adjustments to electricity use -- including Nest’s learning thermostat and other exciting energy innovations -- we seamlessly can integrate variable clean energy resources, such as wind and solar. In California’s energy ecosystem, customers now can choose to actively, or passively, be part of the clean-energy revolution without leaving the comfort of their own nests.