Smart Thermostats, Automation, and Time-Varying Prices

This study evaluates an experiment in which randomly encouraged households activate a smart-thermostat feature that automates responsiveness to time-of-use electricity pricing.

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Date

July 21, 2021 (Updated September 29, 2021)

Authors

Joshua Blonz, Karen Palmer, Casey Wichman, and Derek C. Wietelman

Publication

Working Paper

Reading time

1 minute

Abstract

We evaluate an experiment in which randomly encouraged households activate a smart-thermostat feature that automates responsiveness to time-of-use electricity pricing. The thermostat feature reduces electricity use by raising indoor temperatures, thus increasing thermal discomfort in some households during peak periods. Changes in discomfort are small, concentrated among households who spend the most time at home, and do not prompt them to adjust the feature’s intensity or deactivate it. Using energy cost savings and experienced indoor temperatures, we calculate households’ revealed preference trade-off between comfort and cooling expenditure and find that households are willing to trade off small monetary savings for small increases in discomfort. Automation thus provides a low-cost opportunity to make small changes in energy demand at the household level, with potentially large electricity supply-cost reductions at scale.

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Topics

Authors

Joshua Blonz

Federal Reserve Board of Governors

Karen Palmer

Karen Palmer is a Senior Fellow at Resources for the Future and an expert on the economics of environmental, climate and public utility regulation of the electric power sector. She also serves as the director of the Future of Power Initiative.

Casey J. Wichman

Casey Wichman is a university fellow at RFF. He performs research at the intersection of environmental and public economics, with an emphasis on examining the ways in which individuals make decisions in response to environmental policies.

Derek C. Wietelman

University of Maryland, College Park

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