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  5. Smart Thermostats, Automation, and Time-Varying Prices

American Economic Journal:
Applied Economics

ISSN 1945-7782 (Print) | ISSN 1945-7790 (Online)

Smart Thermostats, Automation, and Time-Varying Prices

  • Joshua Blonz
  • Karen Palmer
  • Casey J. Wichman
  • Derek C. Wietelman
American Economic Journal: Applied Economics (Forthcoming)

Abstract

Can automation complement economic incentives? We explore this question by randomly encouraging households to activate a feature on their existing smart thermostat that automates responsiveness to time-of-use electricity pricing. The feature reduces air-conditioning use during the highest-priced afternoon period, raising indoor temperatures above a household’s preferred temperature, primarily for customers who are typically home during the day. Customers infrequently override the feature when they experience discomfort, suggesting that they are willing to trade off monetary savings for small increases in discomfort. Automation thus enables low-cost changes in household energy use, with potentially large electricity supply-cost reductions at scale.

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