Smart Thermostats Bring New Life and Innovation to AC Cycling

By Mike Taylor

When I was in high school, I remember my dad signing our house up for an air conditioning (AC) cycling program. We would get a credit on our electric bill in exchange for allowing the utility to install a device to turn the AC on and off every fifteen minutes for a few hours on hot summer days. The house would get a bit warmer at those times, but it would save energy in the process and we would save money.

The idea was that the utility would create a virtual, inverse power plant by combining thousands of customers in a program to lower electricity consumption slightly when demand and prices were high or the electric grid was strained. Unfortunately, when my mom found out a week later, she cancelled our participation in the program. She didn’t want anyone controlling our AC, even if the house was empty.

Image courtesy of Nest.

Air conditioning cycling programs may seem like a narrow interest in the wider world of managing the electricity system effectively, but the demand savings are real. They were a big part of the discussion at a recent Peak Load Management Alliance (PLMA) conference I attended, which included several sessions and a workshop dedicated to AC cycling programs.

According to Mark Martinez, a program manager at Southern California Edison (SCE), SCE has over 250,000 customers enrolled in its program, which can save 250 megawatts (MW) on peak, the equivalent of one or two natural gas power plants.

More to the point, smart thermostats are breathing new life — and innovation — into utility AC cycling programs. For utilities, smart thermostats can be more reliable than the old control switches, allow for incentive payments based on actual energy savings, and can target specific locations within a company’s service territory to manage individual power line needs.

Find out about SEPA’s National Town Meeting on Demand Response and Smart Grid, July 11-13, here.

For customers, they can improve comfort and program satisfaction by precooling a house by a few degrees on the morning of a hot afternoon before the AC starts cycling. Smart thermostats also allow consumers to set a specific temperature ceiling to avoid a house getting too warm, or to use an easy override to opt out on any given afternoon.

I don’t mean to imply that traditional switch-based AC programs should be abandoned or can’t be retrofitted to improve some functions and benefits. Rather, that programs for new customers might achieve improved results by leveraging smart thermostats.

A recent report from the Smart Grid Consumer Collaborative (SGCC) found consumer interest high in these devices, suggesting that the technology offers “a range of opportunities to engage consumers.” A successful smart thermostat program could be a first step toward raising consumer confidence and interest in other smart grid technologies, the report said.

Smarter Thermostats

How are smart thermostats different from programmable thermostats? First, smart thermostats can self-program for long-term energy savings.

“Many programmable thermostats were nothing more than ‘hallway lights’ since they were never actually programmed.” said Tyson Brown, a program manager at KCP&L, an electric utility providing service in Missouri and Kansas, speaking at PLMA conference.

Second, smart thermostats have external communication and control capabilities that enable AC cycling and other types of demand response programs, as well as remote long-term troubleshooting and maintenance. Communication between a device and utility can be set up through the customer’s Wi-Fi router, through cellular networks, or a utility’s smart meter or power line network.

These reinvigorated air conditioning programs typify the changing nature of energy devices in our homes and the related utility business models. In the old programs, the utility managed everything — signing up customers, installing the devices, sending the control signals and evaluating results. In some cases, utilities even built their own radio towers, in part to transmit control signals.

More advanced technology on the grid: SEPA’s report on utilities’ roll-out of smart inverters here.

The programs worked, to a degree, but they were awkward in many ways. Mark Martinez of SCE also quipped that their initial program using radio towers to send control signals was “spray and pray.” Control switches would break or not receive communication signals, and devices provided no reverse feedback on actual energy saved. Customers were paid regardless of whether their AC was even operating at the time of a cycle.

Now, instead of managing and controlling all parts of the program, utilities are turning to customers and third-party aggregators. Aaron Johnson from Pacific Gas & Electric said that the utility is moving away from being the sole demand response program administrator and toward being the third-party and wholesale market enabler of non-wires and non-power plant solutions.

Bring-your-own thermostat programs benefit both utilities and smart thermostat vendors.

This evolution could open new opportunities with smart thermostats; for example, utilities might:

• Develop a “bring your own thermostat” program, in which customers can sign up with their existing smart thermostat or buy and install a new one themselves.
• Build third-party vendor partnerships to implement thermostat sales, installation and controls, with input and incentives from the utility.
• Modernize their consumer marketing by focusing on the customer experience, rather than energy lingo and utility program goals and rules.
• Reduce the burden of participating by requiring as little online application information as necessary

Behavioral Limitations

Still, smart thermostats do have limitations. Part of the thinking here goes that with a more relaxed approach to program management, more customers will participate. However, utilities are now marketing to and signing up a broader audience that is less aware or engaged with their energy consumption.

The SGCC report showed that 68 percent of surveyed consumers expressed an interest in a smart thermostat program, but only 41 percent of those were open to one controlled by a utility. The implication is that most consumers may be open to long-term energy savings, but not as-needed participation, at least initially.

Courtney Henderson from ILLUME Advising discussed one approach to this problem. Games and gamification could help utilities modernize marketing and increase customer participation, using online web portals and social media to attract customers, influence behavior, generate greater energy savings and improve long-term program participation.

Additionally, the SGCC report also showed that by segmenting customers by type — Greens, Savers, Cautious — utilities can more effectively target program messaging. Green and Saver groups represent more than 50 percent of the population.

Read SEPA blog on utilities’ evolving customer communications strategies here.

Smart thermostats can also offer another benefit – more utilities can implement them more easily. The advent of combining customers and third-parties to design, market, purchase, install and operate all or parts of the program, lowers the utility staffing and cost burden, particularly for smaller utilities such as cooperatives and municipalities. Their associated wholesale power providers could even aggregate multiple utilities to spread the cost and management burden.

The opportunity doesn’t come free. Thermostat manufacturers or energy management companies will be paid from part of the energy cost savings. However, the remaining savings can keep electricity rates lower with a fraction of the utility management burden of the past. For utilities who don’t have an existing AC cycling program, it’s an untapped opportunity that deserves a fresh assessment with smart thermostats in mind.

Mike Taylor is Principal of Knowledge at the Smart Electric Power Alliance. He can be reached at [email protected].