Is Nest Thermostat Worth It?

I love my Nest thermostat(s) – but does it make financial sense? Here is my approach on estimating a ‘smart’ thermostat’s value:

  • Look at monthly bill to figure out how much electricity costs
  • Figure out how much energy is used by air conditioning
  • Figure out how many times thermostat saved on “auto-away”
  • Figure out how much thermostat saved by optimizing schedule
  • Consider the rebates from electric utility
  • Estimate how long until thermostat pays for itself

Monthly Electricity Costs

We live in a hot climate so much of our electricity usage during the summer is for air conditioning. First I pulled our historical usage by month (in killowat hours).

Table of kWh Used by Month

Next I divided our use into two groups: the highest use six months, and the least use six months.

Table of Average kWh Used

In the highest six months we average 1,087 kWh — or about 2.2x as much as the rest of year average. Given this ratio, I’ll estimate ~50% of my electric bill is air conditioning in the hottest six months of the year.

Next I need an estimate of the cost per kWh. If I just divide the bill by kWh, I get $0.12 per kWh. Buy looking closer at my bill, only about 60% of the cost is electricity use. The rest seems to be regulatory fees and fixed costs (meters, etc). Interesting.

My electric company also charges energy rates by tier. For example, the first 500 kWh cost $0.033, while the nest cost $0.08 / kWh, and so on.

Sample Cost per kWh by Tier for Residential

I’m going with $0.12 per kWh for my analysis for two reasons: 1) It includes regulatory fees which might vary on usage 2) The energy saved during the summer would likely have been charged at the higher tier.

The Value of Auto-Away

The biggest savings for me is enabling auto-away. Consumers have easily wasted billions of dollars running air conditioning to an empty home. I know one person who runs a short-term rental where a guest turned the heat to 90 degrees before checking out; heat ran constantly two weeks before the home owner returned and adjusted the temperature.

In my family’s case, we usually take a weekend or two each month to visit extended family. Before this new thermostat, we usually forgot to turn off the air conditioning. Now it’s done for us automatically.

Looking at the 1,087 kWh of monthly use above, we use about 36 kWh per day during summer. Let’s say it’s worth $0.12 per kWh. If we go on 9 trips and forget air conditioning each time, I’d guess it’s around $60 in wasted electricity during the six hottest months of the year.

Wasted electricity for air conditioning while away

Two other features worth noting:

  • Phone Control: You can turn air conditioning on with your phone. This is great for the ride back home, so you don’t walk into a scorching-hot house. While this doesn’t necessarily save money, it does make for a nicer climate than turning A/C completely off until your return.
  • Pets: If you left a pet home and don’t want to worry about exposing them to too much heat (or cold), auto-away detects movement and turns the air conditioning back on. This works for our cat who stays inside occasionally. It also has min/max degrees so that your house never goes above/below a set temperature, even when away. This can prevent wood shelves from warping, refrigerators from overheating, and lots of unwanted effects of turning air conditioning completely off when it’s over 100 degrees outside.

Other Savings

Using the auto-scheduler also provided some savings. We let the system automatically adjust the temperature while taking into account our manual adjustments. I had a different programmable thermostat but found that I usually just kept it at a fixed temperature. On Nest’s message boards I’ve seen people report 30% savings on heating bills, while others saved $10 per month on electricity. I think 15% is a safe guess for my actual usage the last couple of years. At an average bill of $100 for electricity, 15% savings come to $180 per year.

Another source of savings is an $85 rebate from the city utility for participating in “Rush Hour Rewards”. Up to 12 times per year our utility can remotely adjust our temperature in the house (usually from 3-6pm). If it gets too hot, we just get up and change it back without losing the rebate. I think we only changed it back once so far.

Adding It Up

I’d say the savings for me are:

  • ~15% off Electricity Bill: This comes to $180 per year for me in a hot climate (summer days frequently over 100 degrees). For me, this is 1/3 not forgetting to turn A/C off when leaving for a long time, and 2/3 letting the auto-scheduler optimize the temperature.
  • Rebates: The $85 rebate worked for the first year. It might be offered in future years but I’m not counting on it for my decision.
  • Usefulness: Changing the temperature on your phone is a great feature, especially when traveling. The monthly emails about usage are interesting. Not having to set the schedule is nice. Installation was easy. Oh, and it looks good too.

Given this, the Nest paid for itself in the first year despite it’s hefty price tag ($200-250). I’ve installed another three Nest thermostats in one rental property and it has been profitable, especially with Rush Hour Rewards.

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