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Nest's New Goals: Save Energy, Money

When is a partnership an innovation? When it brings down prices and helps the environment. Nest, the "learning thermostat" company, is doing just those things. Here's how.
The Nest thermostat retails for $249.
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Pardon the pun, but the Nest is really heating up. 

After selling hundreds of thousands of thermostats in 2012, the company announced Monday it has partnered with four major energy companies around the country--Reliant, Green Mountain Energy, Austin Energy, and Southern California Edison. The partnerships will enable about 90 million domestic customers to use Nest's thermostat to save electricity--and cash. 

Nest, founded in 2010 by Tony Fadell (the man credited with designing the first generation of iPod for Apple), announced the news in a company blog post yesterday. Fadell also announced the creation of a new program for current customers, Rush Hour Rewards, which will allow customers to take advantage of energy-company incentives that pay customers to use less energy (i.e. turn off the air condioner) during peak times. In other words, it enables customers to take advantage of variable pricing schemes.

According to Nest, powering air conditioners during peak times accounts for just 1 percent of all energy usage--but can often take up the lion's share of an individual energy bill.

"These services are new--radically new--and dramatically different than any previous efforts by energy providers and thermostat makers to get their customers to save energy," Fadell, Nest's founder and CEO said in the post. 

Nest, which is based in Palo Alto, California, isn't your typical thermostat company. The company has so far raised $80 million from venture capitalists to create what it calls the "world's first learning thermostat."

It works, too. According to a white paper recently released by the company, the Rush Hour Rewards technology uses an algorithm that takes into account a variety of factors, including a home's HVAC system, personal preferences of the inhabitants, and the weather outside. Because it operates on Wi-Fi, the Nest integrates weather forecasts to predict temperature changes, and adjusts accordingly. 

In August 2012, the company studied the effectiveness of 2,000 test devices in Houston, Texas using the Rush Hour Rewards program. 

The results were impressive: In some cases, the load reduction--or the amount of energy reduced--fell by 38 percent. People seemed generally comfortable, too. According to the report, 87 percent of people felt "they remained in control," while 10 percent felt their comfort "wasn't preserved" during peak times.

Fadell's background, interestingly, isn't in the energy business. He's not even an an engineer. A designer by trade, Fadell is considered something of a luminary in Silicon Valley. 

"Whenever you build something, you need to go and look at why you're building it in the first place, and what you're trying to make different," Fadell said recently. "You need to look at the hard pieces of the puzzle--for example, how is the user really going to interact with this thing. Find the hardest thing--the thing you're differentiating--and go and look very deeply into that. You have to listen to the experts. You can't always trust yourself. But at the same time, if someone says what you're doing is crazy, sometimes that means you're on the right track."




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