Nest and technology-service bundling

Lynne Kiesling

nest-rush-hour-alert

Nest’s recent business developments are refreshing and promising. Building on the popularity of its elegant and easy-to-use learning thermostat in its first couple of years, Nest is introducing new Nest-enabled services to automate changes in settings and energy use in the home. Called Rush Hour Rewards and Seasonal Savings, Nest claims:

Rush Hour Rewards could help you earn anywhere from $20-$60 this summer—it takes advantage of energy company incentives that pay you to use less energy when everyone else is using more. Seasonal Savings takes everything Nest has learned about you and automatically fine-tunes Nest’s schedule to save energy, without sacrificing comfort. Field trials have been impressive: Nest owners have used 5-10% less heating and cooling with Seasonal Savings and 80% said they’d keep their tuned-up schedules after Seasonal Savings ended.

The ever-incisive Katie Fehrenbacher calls their move a bundling of its “smart thermostat with data-driven services“, which sounds about right to me.

Behind these new services is the cloud-based big data algorithms that are the secret sauce of Nest, and which Nest has now named Auto-Tune. Now that Nest has gotten hundreds of thousands of thermostats out there in the market, and has done two years of field trials, it has been able to collect a large amount of data about how customers use and react to temperature and cooling changes. Nest uses this data about behavioral changes to inform its services and how its algorithms work.

She also remarks on something I noticed — in its marketing of its new services Nest assiduously avoids the phrase “demand response”, instead saying “New features save energy & make money. Automatically.” Once you get beyond the elegant interface, the thoughtful network and device connectivity, and the “secret sauce” algorithms, Rush Hour Rewards is little more than standard, administered, regulator-approved direct load control. But Nest’s elegance, marketing, and social-media-savvy outreach may make it more widespread and appealing than any number of regulator-approved bill inserts about AC cyling have over the decades.

In a very good Wired story on Nest Energy Services, Steven Levy analogizes between the technology-digital service bundle in energy and in music; quoting Nest CEO Tony Faddell, Levy notes that:

This pivot is in the best tradition of companies like Apple and even Amazon, whose hardware devices have evolved to become front ends for services like iTunes or Amazon Prime Instant Movies. Explaining how this model works in the thermostat world, Fadell compares power utilities to record labels. Just as Apple provided services to help customers link with the labels to get music, Nest is building digital services to help customers save money. Unlike the case with record labels, however, Nest isn’t eroding the utility business model, but fulfilling a long-term need–getting customers to change their behavior during periods of energy scarcity.

“Until now, if utilities wanted customers to change their behavior to use less electricity at those time, they instituted what was called unilateral demand response—they wouldn’t automate the process, they’d turn off the air-conditioning whenever they wanted. It was like DRM during the iPod days—where companies like Sony said, ‘I am the guardian, and I’m going to tell you what to do’.”

Faddell (and Levy and Fehrenbacher) articulates the value potential of technology-service bundles to automate energy consumption decisions in ways that save energy and money without reducing comfort. While the guts of their services are still direct load control and are not dynamic in any way that would make meaningful use of such a potentially transactive technology, I do think it’s a promising evolution beyond the monolithic, administrative, regulatory demand response approach.

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One thought on “Nest and technology-service bundling

  1. I have written here as to why we should regard these gizmos as slave collars and abjure them in the name of all that is holy. I won’t bother to repeat myself.

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