While sales of smart and Wi-Fi thermostats are increasing, the category remains a huge growth opportunity for contractors.

“Our research shows that 36 percent of U.S. homeowners are familiar with the smart thermostat category, and 28 percent of U.S. homeowners expressed purchase intent in the next 12 months,” Ed Blittschau, vice president of marketing, White-Rodgers for Emerson’s Commercial and Residential Solutions platform, said.

And despite the fact that there’s a lot of airtime given to smart thermostats in the media and throughout industry conferences, the reality is that only about 15 percent of households own a smart thermostat, according to Rob Munin, president at Lux Products.

“Most [people] still have a traditional, programmable thermostat in their home,” he said. “That means there is a lot of opportunity for HVAC professionals to upsell a smart thermostat.”

ADOPTION FACTORS

Industrywide, manufacturers estimate that nearly 40 percent of thermostat sales are Wi-Fi/smart.

Mike Soucie, senior product marketing manager for the Google Assistant program, cited a 2018 study from Coldwell Banker Real Estate LLC that reported 77 percent of potential homebuyers would prefer to have smart thermostats installed, leading a list of smart home components that included smart fire detectors (preferred by 75 percent), smart carbon monoxide detectors (70 percent), smart cameras (66 percent), smart locks (63 percent), and smart lighting (63 percent).

Seeing the same products and the same message across the board — from The Home Depot or Lowe’s, installers, utility companies, etc. — helps consumers become more aware of a trend like smart home products. That’s what Soucie believes is happening with the thermostat market today.

“I think this is a typical kind of early adapter market that is turning into the mainstream,” Soucie said. “Also, the price is coming down, like any technology becoming more mature.”

“We’re definitely seeing substantial growth in the Wi-Fi and smart area: We’re seeing probably five or six times as much growth as we see in some of the more traditional areas,” AJ Smith, vice president and general manager, Global Pro Comfort, Homes, said.

According to him, there’s been a recent shift in where that growth is coming from, with homebuilders now putting smart thermostats, if not full smart home technology options, into new residential construction.

“Up until maybe 18 months ago, adoption of smart/Wi-Fi thermostats was all in the replacement business,” Smith said. “Almost no homebuilders were doing much with that, and now you’re seeing almost every new home builder having options for smart Wi-Fi thermostats, if not making it the standard.”

He chalks it up largely to consumer expectations.

“It’s now hit that tipping point where it’s become mainstream enough that it’s … kind of like having a new car with crank-up windows,” said Smith. “It’s never good for [developers] for someone buying a new home to see an older, dated system. So much is being built upon that infrastructure of having that smart home implemented from day one; they want to be seen on the modern edge.”

SAVING MONEY

Part of the demand is being cutting-edge. Part of it, in an industry where almost half of home energy costs go to HVAC, is simply saving money. That’s one practical aspect that motivates homebuilders to install smart thermostats in new construction: allowing remote control of the HVAC system in the months before the house is sold saves energy while providing a comfortable experience for potential homebuyers doing walk-throughs and inspections.

On the retrofit side, thermostats are one of the first smart home products that consumers tend to purchase. Blittschau reported that nearly 85 percent of customers who bought Emerson’s Sensi thermostat did so to replace an existing, functioning thermostat.

“We are seeing smart thermostats used in new construction, but we believe a lot of upsell is through home upgrades,” Munin said. “A smart thermostat is a low-cost device that homeowners can purchase and immediately see an impact on their spending, especially in seasons where the weather is particularly hot or cold or when energy costs are at a premium.”

Utility rebates are also driving adoption, with almost 40 percent of Wi-Fi/smart thermostat customers taking advantage of one, Blittschau said.

Customers with Nest, for example, can sign up for Rush Hour Rewards, a demand-response program involving more than 40 energy utility companies. The program predicts when a big demand is coming. Then, Nest will make small adjustments in the temperature setting to reduce the load on the electrical grid. For example, when a heat wave is about to hit, the program may pre-cool the home, then shut off the system and run a fan during to circulate the air.

Similarly, DTE Energy customers who sign up for the utility’s SmartCurrents program are eligible for a free Wi-Fi enabled ecobee 3 lite smart thermostat, and they receive the Dynamic Peak Pricing rate. Like Rush Hour Rewards, it helps shift electricity to off-peak times, resulting in lower energy use overall and lower prices for the customer.

Exact statistics vary on how much energy a smart thermostat can save on average, based on region, equipment, and usage; however, manufacturers agree that everyone is able to realize some degree of benefit. Emerson reported 23 percent savings, on average, from customers who use the Sensi thermostat to adjust the temperature using features like scheduling, remote access, and geofencing. Nest reported about 10 to 12 percent savings on heating and 15 percent savings on cooling, on average.

“So we can say, the Nest pays for itself in two years,” Soucie said.

STRAIGHT TO SMART

In part because of those energy savings, Smith said he’s seen a lot of consumers make the jump straight from a simple on-off thermostat to a Wi-Fi connected model, skipping the in-between alternatives completely.

“If they’re going to make the decision to go to a programmable one, many times, they’re skipping over that middle category and going straight to connected,” he said. “Once they’ve made the decision, it’s ‘well, heck, for not that much more, I can get more control and the ability to control remotely,’ so they make the leap a little further.”

In the realm of control, Honeywell has introduced a new thermostat controller that brings geofencing to mini-split systems, meaning they can work with the rest of a connected home.

“It’s really nice from an added room perspective,” said Smith.

Geofencing is one smart feature that continues to evolve and attract customers looking for both ease of use and energy savings. Homeowners can use the geofencing proximity detection feature (the sensors work with occupants’ smartphones, operating under the premise that people usually have their phone with them) to determine if they are home or away. For busy people or families with no set schedule, geofencing allows them to be more efficient with their energy usage without needing to remember to adjust their thermostat, said Blittschau.

That kind of interconnectivity, with multiple connected devices and sensors in the home, is not just a trend, Soucie said; it’s leveraging intelligence.

“You can get an alert on your phone if something is wrong, like if the temperature is low … and the pipes could burst,” he said.

The Nest Learning thermostat can be connected to the Nest Cam and the Nest smoke and carbon monoxide detector. If Nest Protect goes off, it sends a memo to the thermostat, which will shut down the air conditioning to help fight the fire. And for those who want it all done hands-free, Wi-Fi thermostats are able to work with the most popular voice assistants, such as Google Home, Amazon Echo, and Apple HomeKit.

“Smart speakers have become the gateway product to a smart home,” said Blittschau. “More customers are looking for best-in-class products but want seamless control through one hub.”

Controlling everything through the smartphone begs the question: In the future, could smartphones ultimately replace the thermostat altogether? Soucie doesn’t think so.

“At the end of the day, the thermostat is a relay to the HVAC system; the smartphone is an interface to your connected device,” he said — one of many interfaces in the home.

But while other devices, like voice assistants, do and will continue to augment the thermostat, he doubts they would replace it.

“Like light switches,” he said, “they’re not going to go away.”

Smith took a different perspective.

“I don’t think it’s a crazy idea,” he said. “Obviously, phones are already part of that control: using it for geofencing, using it as a hub, if they choose it to be. But there are a number of things we still have to address.”

First, there’s still a large demographic who didn’t grow up with smartphones; they appreciate having the device on the wall. Then, there’s the issue of compatibility between the smartphone and the unit itself.

“The thermostat itself … it’s connected to the furnace,” Smith said. “Smartphones are upgraded and changed so often that it would be a challenge to keep that compatible. So when [a technician] came out, they would have to make sure the furnace was still compatible with the phone.”

Convenience aside, there’s still value in maintaining that consistency with the furnace, he concluded.

“We’ve built so many other systems that interface with the thermostat that the phone will also have to interface with ventilation systems, for example,” Smith added. “If the phone were to become the most effective way for customers to be the most comfortable, have the best experience, we would embrace it. But the thermostat today … does so much more than just turn the heat on and off.”

Publication date: 10/22/2018

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