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How to Save Money With A Smart Thermostat: Everything You Need to Know

Homeowner using a smart thermostat to save energy and save money.
PublishedJune 18, 2021
UpdatedMay 7, 2024
AuthorCory O'Brien HeadshotCory O'BrienSenior Director - Growth MarketingEditorRyan Barnett HeadshotRyan BarnettSVP, Policy & New Market Development
In this article
What is a Smart Thermostat?
How Do Smart Thermostats Save Energy?
How Much Can You Save With a Smart Thermostat?
Popular Smart Thermostat Brands
Virtual Assistants That Work With Smart Thermostats
Other Things Your Smart Thermostat Can Do
How Do You DIY Install a Smart Home Thermostat?
What Types of Heating Systems Work With Smart Thermostats
Can a Smart Thermostat Damage Your HVAC?
How Much Does A Smart Thermostat Cost?
Rebates and Incentives Available For Smart Thermostats
Wrapping Up

Smart thermostats are slowly but surely making their way into American homes. They come with unique features that make living in your house more enjoyable while saving on energy costs.

If you’re a homeowner looking to save money by installing a smart thermostat that will help reduce your energy usage, you're probably wondering about the pros and cons of the technology. You've heard that smart thermostat savings can help you save money, but you're not sure how.

You may also be concerned it will make your home less comfortable to live in, or you won't be able to set your desired temperature. You may have heard terms like 'smart thermostat' or 'Nest thermostat' and wondered what precisely those devices do and how a smart thermostat saves money.

With this article, we will answer those questions and more by discussing how smart thermostats work, sharing how they can cut down your energy costs, and giving you tips on how to use them effectively.

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What is a Smart Thermostat?

A smart thermostat is a Wi-Fi-enabled device that allows you to control your house's temperature from anywhere via a smartphone app or voice-assisted virtual assistant. With this device, you no longer have to worry about your heating, ventilation, and air conditioning (HVAC) system heating or cooling an empty home without your knowledge. So apart from bringing comfort to your home, smart cooling and heating can help you save money.

How Do Smart Thermostats Save Energy?

There's no secret to saving energy. You just have to use less electricity at home, and that typically starts with using your HVAC system less. The beauty of smart thermostats lies in how the technology can automatically take advantage of times when you should use less electricity, such as when everyone has left home.

Why does that matter? Because the Department of Energy says that you can save up to 10% of your electricity bill if you adjust your thermostat by at least eight degrees from its normal setting for at least eight hours daily. Smart thermostats come with a setback system that automatically adjusts your HVAC depending on factors like time and who's in the house.

With a smart Wi-Fi thermostat, you can reduce your energy costs without feeling a big difference in comfort or remembering to make those manual changes to your thermostat. You can program a schedule into the device that ensures your temperature moves to an energy-saving setting when going to bed or leaving the house.

Create a Schedule with An App

Older versions of programmable thermostats could also create schedules, but it was usually a confusing and challenging process that was hard to verify.

One of the main advantages of a smart thermostat is that you can pre-set your preferences. Since you can program everything from your smartphone, you don't need to set the thermostat directly. Top-of-the-line models like ecobee and Nest thermostat save money because they can program themselves based upon your settings and adjustments you make to those settings. Just allow them some time to learn your behaviors and habits, and you’ll see smart thermostat savings in no time.

Adjust the Temperature When You Leave

Many smart thermostats also come with built-in sensors that can detect when you’ve left the house and adjust the temperature setting accordingly. With some models like ecobee, you can connect with more detailed remote sensors around your house like a motion sensor that can sense the atmosphere and movement.

Most smart thermostat companies include a geofencing feature in their models. These models can use your smartphone's location to know precisely when you're home or away. Also, they can remember to adjust your thermostat when you go to sleep.

Pro tip: Don't forget to pair everyone's smartphone with the geofencing technology. You don't want the temperature to change when one person leaves the house even though everyone else is still inside.

Remote Access to Your Thermostat

With a smart thermostat, you can easily access your thermostat remotely to change settings by connecting your smartphone. For example, if you forget to adjust your thermostat when going on vacation, you can just open the app and make the changes without a worry.

Adjust Automatically During Peak Usage

Does your city have cost-saving programs that provide energy bill credits? You can take advantage of them with the help of a smart thermostat, especially if your prior efforts didn’t bear significant results.

For instance, San Diego Gas & Electric's AC Summer Saver program can adjust your device remotely when the city experiences high demand. You can assist the city and save some money in return if you allow your house temperatures to go a bit higher during peak usage.

Visit your local utility company's website to check if your city has similar programs.

Track Your Energy Usage

If your energy-saving efforts aren’t paying off, and you need to change tactics, your smart thermostat can help. Many popular models provide a report detailing how much energy you've used. Nest shows a leaf icon to indicate that your thermostat settings actually helped you save energy. Others, like ecobee, provide a dashboard showing your electricity use in real-time.

Separate Temperature Sensors Provide More Control

If your home experiences inconsistent temperature from one room to another, you should use a model compatible with separate room sensors, such as ecobee or Honeywell T9.

This energy saving thermostat category comes with additional occupancy detectors to sense if a particular room has an occupant and adjust the temperature accordingly. There's no need to cool down the whole house just to bring comfort to a room with notoriously high temperatures.

With those sensors, you can also pre-schedule temperatures across various rooms. So you can have different settings in your office, bedroom, and living rooms respectively at different times of day, depending upon your schedule.

Automatic Reminders to Change Your Filters

You must change the filter in your HVAC system periodically to ensure it operates smoothly. A clean filter helps your HVAC run more efficiently and for less time, saving you money.

Thus, an energy efficient thermostat often allows you to pre-set regular alerts to change your filter. These setup-once-and-go reminders work automatically to ensure you don't miss the routine.

See how much you can save by going solar with Palmetto

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How Much Can You Save With a Smart Thermostat?

This is a good question, but it’s tricky since many factors come into play: Your usage habits, the size of your home, the size of individual rooms, the season of the year, the location of your home, the condition of your HVAC system, and more. But on average, home heating and cooling typically consumes around 41% to 63% of your electricity bill.

According to ecobee, smart thermostats can reduce your bills an average of 23% if your home is always set at 72 degrees Fahrenheit. Nest reports that the technology can cut down your bills by around 12 percent.

Regardless of what the actual figure of smart thermostat savings might be for you, what matters is that you can lower your energy usage and energy bill if you program your smart thermostat to adjust settings that match your schedule.

Popular Smart Thermostat Brands

The market is awash with many models of smart, energy-efficient thermostats. You should compare them before purchasing to find one that fits your needs. Here is a list of some of the most popular brands and their products:

  • ecobee: ecobee3 lite, Smart Thermostat
  • Emerson: Sensi
  • Honeywell: Wi-Fi Smart, The Round, T5+, T9, T10
  • Nest: Nest Learning Thermostat, Nest Thermostat
  • Lux: Kono, Geo, CS1, Brio
  • Mysa: Smart Thermostat

Virtual Assistants That Work With Smart Thermostats

Apart from smartphone apps that control your smart device, voice-controlled virtual assistants (VA) can also do the job perfectly with simple commands. These tools include:

  • Amazon Alexa
  • Apple Siri (Part of Apple HomeKit)
  • Google Assistant

Using a VA is easy. For example, if you're using Google's Assistant connected to your smart thermostat, start by commanding: “Hey Google”, then make your request:

”Make it cooler.”

”Reduce the temperature to 70 degrees.”

“What's the temperature?”

Be sure to research each VA with its pros and cons to determine the most suitable one for your needs.

Other Things Your Smart Thermostat Can Do

You can also lower your energy usage and bills with the extra features and settings offered by many smart thermostats. Some of these features require extra setup, while others require additional devices to enable. It all starts with pairing your smart thermostat with other smart home devices in your home. Services like IFTTT (If this, then that) are compatible with various devices like your security system, smart windows, and more, and can be used to program more advanced combinations of features and devices.

Turn Off When a Window Is Open

Opening windows while your HVAC system is running leads to wastage. Sensors can be used to automatically switch your system off when someone opens a window.

Turn On Fans To Help With Heating/Cooling

You can pair a smart switch to your ceiling fans and program them to switch on when your home reaches a given temperature. The idea is for your smart home to turn on the fans while the HVAC system is running to better disperse the air.

If you want to adjust temperatures by just a few degrees, the smart home thermostat can be programmed to turn on the fans first before turning on the heater or air conditioner, so you run that system less. The less you switch on the AC or heater, the more money you can save in the long run.

Adjust Your Vacation Home Before You Arrive

You don't want to bear the hot temperatures while waiting for the house to cool down. An energy-saving thermostat allows you to set a specific temperature for your designated arrival time.

Many models can store and activate several daily settings on a pre-set schedule. That way, you can program your AC thermostat to kick in 40 minutes before you arrive at the door so the home will be comfortable by the time you arrive.

How Do You DIY Install a Smart Home Thermostat?

Most smart thermostats are relatively easy to install, so just follow these steps for a successful DIY installation process:

  1. Check the smart thermostat’s wiring configuration and ensure it's compatible with your HVAC system.
  2. Turn off power to the existing thermostat.
  3. Connect the new smart thermostat to your HVAC system using the necessary wires.
  4. Turn on the power to your new smart thermostat.
  5. Download the thermostat’s app on your phone and sync it with the device to link your thermostat to your home’s Wi-Fi and program your initial settings.

There you go. If you’re not comfortable with this type of DIY project, seek the help of a professional HVAC technician.

Importance Of The C-Wire

Like most smart devices, your smart thermostat relies on Wi-Fi to connect to the internet so it can do its job. That means it needs low voltage wiring for power.

A common wire (also known as the C-wire) powers your smart thermostat continuously so it’s connected to the internet even when not operating the HVAC system. Also, it keeps the display on for you to read essential features and figures.

However, not every home will have a C-wire because the furnace thermostat on older HVAC systems didn’t need electricity, since mercury thermometers were completely mechanical. However, some smart thermostats won't work without one. While you could add a C-Wire yourself, that makes the installation more complicated. Moreover, if you must add a C-Wire before you can install your smart t-stat, that work is best done by a professional electrician.

What Types of Heating Systems Work With Smart Thermostats

Some heating and cooling systems may not be compatible with a smart thermostat. Also, if you have an energy-efficient or smart HVAC system, a smart home thermostat might still offer the added benefits of programming and scheduling, but it won't help you save as much money.

Many homes with forced-air furnaces and heat pumps can enjoy smart thermostat energy savings. But the benefits may not be as significant if a home uses hydronic heating systems like radiant underfloor, water, and steam.

Also, electric baseboard heating produces the least results regarding energy-saving. However, some smart thermostat models designed specifically for baseboard heating claim they can deliver up to 26% savings on your energy bill.

Can a Smart Thermostat Damage Your HVAC?

If you’re concerned that a smart thermostat can pose risks to your HVAC system, the good news is that you don’t have to worry. As long as a professional has confirmed the system's compatibility and installed the device with the correct wiring, you will be fine.

How Much Does A Smart Thermostat Cost?

If you’re considering buying the best smart thermostat for your home, price plays a significant role. After all, your ultimate goal is to save money on your heating and cooling costs without compromising quality and comfort.

With our smart thermostat buying guide, prices typically range between $150 and $300. Some of the more popular models currently retail at these prices:

  • ecobee3 light Thermostat: $169
  • Honeywell The Round Smart Thermostat: $249
  • Nest Learning Thermostat: $249
  • Lux Kono: $153
  • Emerson Sensi Smart Thermostat: $129

While the price will catch your attention, the best product should increase the comfort of your home while taking your energy-saving game a notch higher.

Rebates and Incentives Available For Smart Thermostats

An energy saver thermostat going for $200 or more can make buyers second-guess their purchase, but they will enjoy sizable benefits over time. You can typically recoup the cost within two years, and you can sometimes get additional incentives to use them to save energy.

Many energy companies provide rebates on smart heating and cooling devices to entice customers to cut down their energy consumption.

For example, San Diego Gas & Electric currently offers a rebate of $75. That brings the price of ecobee's model ecobee3 Lite from $175 to $100. The price drops even further to $50 if you're a member of SDG&E's AC Saver Thermostat program.

Add these rebates to the savings you'll get from the automation features, and you'll understand why smart thermostats are becoming more popular.

Wrapping Up

It's always good to use less electricity, and a smart home can help you do exactly that. For many homeowners, a smart thermostat can drastically lower energy use and utility bills while enhancing comfort in your home. Also, cutting down on electricity usage helps the environment tremendously.

Are you looking to cut down on your energy bills even more? Make the smart decision to go solar. To get started, head over to Palmetto's free Savings Estimator and find out how much you could save with home solar.

See what solar can do for you:

My electric bill is $290/mo
About the AuthorCory O'Brien HeadshotCory O'BrienSenior Director - Growth Marketing

Cory brings over 8 years of solar expertise to Palmetto, and enjoys sharing that knowledge with others looking to improve their carbon footprint. A dog lover residing in Asheville, NC with his wife, Cory graduated from UCSB. If you run into him, ask him about the company he founded to rate and review beer!

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