How much money can you save with a smart thermostat?

The big smart thermostat manufacturers claim you can recoup the cost of a smart thermostat in as little as under 2 years. Coupled with rebates from your local utility company, that “break even” wait could be even shorter.

Show me some numbers!

Nest Labs actually did a study and released a white paper on their findings. It’s an interesting read, and the short of it is that they found a 10-12% savings on heating and 15% savings on cooling, or about $131-145 in savings a year.

Every smart thermostat manufacturer is making similar claims:

At these savings rates and a retail price of (let’s say) $250, a smart thermostat would pay for itself in about two years… maybe. Your savings might be considerably less (or more) depending on a bunch of different factors.

What will you do with the money you save?

What factors make a difference?

Studies like Nest’s are based on assumptions derived from government and other survey data. How much money you save with a smart thermostat depends on…

  • Your current energy usage – do you leave the heat on constant all winter or do you dial it down in the evenings and when you leave for work?
  • The cost of utilities in your region – they probably get more expensive every year
  • Seasonal variations – think “mildest winter in 20 years” and “coldest winter on record”
  • Climate – if you live in a temperate climate (ie: maybe you don’t even have air conditioning), your savings will be smaller than, say, those of someone living in New England and coping with both frigid winters and scorching summers
  • Your home and HVAC system itself – Your insulation and HVAC maintenance habits (keep those filters clean) make a difference, too

Basically, the worse you were before you get a smart thermostat, the better off you’ll be after getting one. If you are already religious about keeping your thermostat as low as can be through the winter, your savings are going to be smaller than someone who is using temperature setbacks for the first time.

Constant temp to automated setbacks

Do you set your home to 74 degrees in October and leave it that way until summer returns? You’re in good company if you do, a lot of people don’t bother to use “setbacks”, which is just a bizarre word meaning “turning down the thermostat’s heating temperature while you’re away during the day and cozy in your bed at night”.

Whether setbacks save money has been a topic of debate ever since the US government started pushing people to take advantage of setbacks, but in general, the consensus is that for most systems and most people, using setbacks makes sense.

Automating those setbacks is what smart thermostats are all about. Whether they “learn” your habits like the Nest or watch for your motion in a room like the ecobee3, the idea is to not run the heat or AC when you don’t need it, and by not running it, you’re saving money.

Bottom line: If you’re currently using a lot of energy because you run a consistent temp all the time, you’ll probably see an improvement in your energy usage by letting a smart thermostat manage your heating and cooling.

Your local utility company

There’s not much you can do about the cost of utilities in your region, but you might be one of the lucky customers who has a utility company willing to foot some of the bill for a thermostat upgrade.

Bottom line: Check if your utility company offers any sort of rebates. (Mine happens to offer rebates on LED lightbulbs, but not on smart thermostats.)

Seasonal variation

Another factor affecting how much you save with a smart thermostat is the year-to-year variation between seasons. If you just got out of “the coldest winter on record”, data from last winter may not be useful when looking at data from the next winter.

Remember this? This was a good winter to have a smart thermostat:

Fun fact: I happened to be in Florida when this happened in December 2013. My family sent me this meme, but I was busy worrying about my pipes breaking back in Seattle – haha.

Bottom line: Make an offering to your favorite weather deity?


Your potential for savings also depends a lot on the type of climate you live in.

I grew up in the Midwest, where the heating season starts in October and doesn’t end until April or May. There, heating is like a marathon. I later moved to the Pacific Northwest, where I run my furnace considerably less. Heating the house is more like going for a little jog around the block. Back home, the AC tends to run from May to September; over here, I have yet to live in a place with AC.

Bottom line: The less you run your heating or cooling, the longer it’ll take to break even on the cost of a smart thermostat.

Your home itself

How much you save also depends a lot on the characteristics of your home itself.

A large home costs more to heat than a smaller one, and therefore offer a larger potential for savings if you reduce how much heat you’re pouring into it. Your insulation matters, too. If home is poorly insulated and you keep it at a constant temp all day, switching to a smart thermostat (which has a schedule that does not run the heat all day long) will, in this case, probably save you quite a bit of money.

Bottom line: Insulation is a good idea, regardless of what kind of thermostat you’re using.

Is a smart thermostat worth it?

I think so, but not for the potential savings alone. There are too many factors at play to guess how much you might save, so expecting to break even in a couple years may not pan out. Of course, you might be “lucky” and find that thanks to your harsh climate and previously wasteful usage, you break even in just one season like some owners report!

For a lot of buyers, I think the allure of a smart thermostat is enhanced by all the other benefits the devices offer, such as better control over scheduling, ease of use, and features like alerts and on-unit outdoor temp displays. These little things add up to make life just a little bit more enjoyable.

13 replies on “How much money can you save with a smart thermostat?”

I have had a Nest for about 2 years and I believe it has caused a slight increase in my energy usage. I think the increase is because the Nest uses a wider dead band than my previous thermostat.

As you have stated, since I had used setbacks with my previous thermostat, I did not see savings. The slight increase in energy consumption I attribute to the Nest over shooting my set point because of the dead band problem.

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