Energy

Crafting a Thermostat for the Digital Age


Technology has transformed just about every gadget in our lives, from telephones to coffee machines. One device, though, has remained stubbornly stuck in the past: the home thermostat. These wall-mounted units, typically boxy and beige, are ugly, hard to use, and easily forgotten. There are about 160 million in U.S. homes today, and only about 40 percent are programmable, with manually adjustable temperature settings. A recent study by Lawrence Berkeley National Laboratory found that even among the programmable ones, only 11 percent are used to properly conserve energy.

Tony Fadell wants to bring the thermostat into the age of the iPod and iPhone, and he may be the perfect person to do it. Fadell, a former senior executive at Apple (AAPL) and one of the creators of those two iconic devices, has worked for the last year and a half, in total secrecy, on a new company called Nest Labs. On Oct. 25, he began taking preorders for Nest’s first product: a sleek, circular thermostat that is simple enough for most people to use regularly and smart enough that they may not have to. The Nest Learning Thermostat, as it is called, automatically studies its owner’s daily schedule and adjusts accordingly to save energy. “Thermostats today look like personal computers from the ’90s,” Fadell says. “We think if people see that someone put in the time, energy, and passion to make a thermostat that looks great and is easy to use, they will take an interest in it.”

Fadell, 42, could easily be enjoying early retirement. Back in 2001, he led the project inside Apple that became the iPod, the hit music player that revitalized the company and kicked off its epic run of success. When he left Apple in 2010, he traveled with his family, invested in startups, and built an environmentally friendly vacation home in the Lake Tahoe region. As he looked over options for the house’s heating-and-ventilation system, he couldn’t believe how limited they were. The Internet-connected “smart thermostats” cost over $500 and didn’t have anything like the simple, sophisticated interfaces that members of the iPhone-generation have come to expect.

Fadell persuaded a former colleague, iPod software manager Matt Rogers, to join him in creating a company to address the problem. At a time in Silicon Valley when it is difficult to keep anything secret for long, the pair exploited their knowledge of Apple’s surreptitious ways and stayed under the radar. They’ve recruited close to 100 employees, who work from offices in Palo Alto, and raised an undisclosed amount of money from pedigreed investors that include Google Ventures and venture capital firms Kleiner Perkins Caufield & Byers and Lightspeed Venture Partners. Among Nest’s advisers are Al Gore and legendary Stanford artificial-­intelligence­ professor Sebastian Thrun.

The $249 Nest Learning Thermostat will go on sale in mid-November at retailers including Best Buy (BBY), but it would easily fit in at an Apple store. The circular unit is all reflective silver and curved glass, with a scroll wheel controller that evokes the iPod. Once installed, it connects to your home’s Wi-Fi network and can be remotely monitored or adjusted. It has two motion sensors, and over the first week, it learns when its users are outside the house and raises or lowers the temperature accordingly, depending on the season. Users can review their history to see how much energy they’ve saved and what factors (such as the weather) are affecting their usage. When they adjust their temperature parameters to more energy-efficient settings, they see the rewarding image of a leaf, which tells them they are saving money and helping the environment.

First though, Fadell has to persuade potential customers to upgrade a part of their home that they have willfully overlooked for a long time. “A lot of consumers are willing to paint the walls and put window treatments up, but when you get to their electrical systems and plumbing, they get pretty scared,” says Mike McGuire, an analyst at Gartner. Fadell says he’s designed Nest to get over this hurdle. The unit is compatible with almost 90 percent of all home-heating and air-conditioning systems—you have to have a pretty old house, or a mobile home, for it not to work. It’s supposed to take just 20 minutes to install and comes with a hand-holding video for the faint of heart. For those really fearful, Nest also offers professional installation that costs $119 for the first unit and $25 for each additional one.

There is also plenty of competition for this market, starting with Honeywell International (HON), the Morristown (N.J.)-based conglomerate that is the 10,000 pound gorilla of the home-heating and air-conditioning world. In September, Honeywell announced its plans to develop smart thermostats in partnership with Opower, a creator of energy-monitoring software, which works with most of the large utilities in the U.S. Fadell doesn’t seem worried. He notes that it’s a huge market—10 million thermostats are installed each year—and if Nest can carve out even a tiny slice, it will be fine. He also seems to enjoy putting off retirement. “We wanted to create our own sandbox to have fun again,” he says. “And we didn’t want to compete with Apple. That would be hell on earth.”

The bottom line: With funding from Kleiner Perkins and Google, Nest hopes for a slice of the thermostat market, which ships 10 million units each year.

Stone_190
Stone is a senior writer for Bloomberg Businessweek in San Francisco. He is the author of The Everything Store: Jeff Bezos and the Age of Amazon (Little, Brown; October 2013). Follow him on Twitter @BradStone.

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