Next For Nest: Building Out The Smart Grid, One Home At A Time

The connected thermostat is creating some of the functions promised by a smart grid without a major infrastructure overhaul.

Since its introduction in 2011, the connected thermostat Nest has emerged as a shining example of a smart device that’s actually smart. By giving owners an easier and more efficient way to visualize and control the temperature of their homes, Nest has in many ways demystified the process of paying for energy. And it’s saved its users money, too, by learning their daily routines and adjusting the temperature accordingly. It’s a simple, high-tech solution to a problem faced by millions around the world.


But in the bigger picture, optimizing a single household’s energy consumption as it relates to heating and cooling is small potatoes compared to optimizing the energy use of a whole community–or even a whole country. And that, as it turns out, is what Nest wants to do next. By partnering with energy providers across the country, Nest is adding a new layer of functionality to its thermostats, using data not just from inside the home but from the grid that supplies it as well. The aim? Increasing energy efficiency on a much larger scale.

The Nest Energy Services, as they’re calling the new features, will be available to customers of a handful of NRG Energy subsidiaries, including National Grid, Green Mountain Energy, Reliant and more. The most ambitious component is a pair of opt-in energy-saving programs that kick in when demand for energy is at its highest. When these periods roll around, Nest owners can rack up extra savings by letting the thermostat intelligently decrease their household’s energy needs. And it’s not just the homeowner who benefits: Nest’s new features are also intended to serve another class of customers entirely: the utility companies.

It helps to understand a bit about what’s going on behind the scenes. Energy companies have a government mandate to find ways to be more efficient, and just using Nest as it exists today already helps with that. That’s why one of the new services is a simple rebate for energy customers who use Nest in their homes. But the bigger problem energy companies are looking to Nest for help with is managing periods of “peak load.” Basically, these are the times throughout the year when customer demand for energy is greater than what a given energy company can provide. The energy companies have a handful of options for meeting that demand when these periods inevitably occur, but they’re all exceedingly expensive, and their various efforts to curb demand during these periods have been ineffective.

As Tony Fadell, Nest’s founder explains, “We knew that there were billions and billions of dollars being spent on energy efficiency, and they weren’t really getting anywhere.” Those issues of efficiency and peak load are precisely what Nest is trying to solve.

One of the new features aimed at curbing demands on the system at its busiest moments is called Rush Hour Rewards. It alerts users to upcoming high-demand periods and lets them opt-in to strategically heat and/or cool outside of that window, kicking back savings to the tune of $20 to $60 a season. It’s all done right through the thermostat itself, and users retain full control of their temperature the whole time. Next there’s Seasonal Savings, which lets users lessen their energy demand across an entire season by gradually increasing or decreasing their house’s temperature over the course of several weeks. What the company offers with these new services is a sort of win-win proposition. It promises the utilities an ease in demand, especially during those crucial peak periods, while giving individual energy customers extra savings for their trouble.

On the surface, it might seem like small news. The initial roll-out only covers five providers in seven states. But the services mark a significant transition in what Nest is–not simply a product but also a sort of symbiotic middle-man. According to Fadell, they mark “a dramatic shift in the way people should be thinking about Nest.”


“We’re not just a beautiful looking connected device that helps you,” he says. “We’re a beautiful looking connected device that also works with your utility.”

And that was always the plan. First, Nest had to prove to homeowners that it could be trusted to save them cash. That’s what it’s been doing for the last year and a half. Now that it has that trust, it can step in to help with bigger problems of energy demand. “This was always the vision of the company,” says Fadell. “We understood that the energy problem is specific to your home but also to the community at large.”

The services mark another shift, too: one towards more broadly networked Nests. Units that don’t just talk to your smartphone, but to the homes of your neighbors, and back to the energy companies themselves. The hope is that this new connectedness gives homeowners an even broader understanding of their energy usage, at least in terms of heating and cooling. It’s a step towards empowering people to understand the greater context in which they consume and pay for energy.

When you think about it in those terms, you can start to see Nest as something else entirely: a sort of proto-smart grid. And while the high-tech energy infrastructure of our dreams may have far greater transformative potential than some extra savings for homeowners, Fadell insists that, practically speaking, Nest’s new services cover much of the same ground. “We can get all the consumer benefits of the smart grid today, without the smart grid,” he says.

These are the areas we can expect to see Nest developing in the next few years. At this point, the company’s hardware is pretty solid: one big, beautiful, intelligent knob that controls the temperature in your home. Now, the company is working on raising the stakes for those smarts. If the Nest Energy Services prove successful, surely more energy companies will get on board. And as Nest devices become more attuned not just to the climates of the homes they’re installed in, but also to the broader climate of energy demand surrounding them, there will inevitably be more sophisticated features for increased efficiency. One such possibility? Monthly budgeting. Fadell lays out a scenario in which you’d tell your Nest how much you wanted to spend on heating and cooling for a month, and, after projecting energy costs from your utility for that period, it would cook up a plan for keeping you under that amount, automatically.

For homeowners, that’s pretty exciting stuff. And, at least for the time being, it’s exciting for over-burdened energy companies, too.