“Homeowners’ familiarity with smart thermostats continues to grow through awareness and the popularity of smart home devices. … You have a couple of things working together: government incentives and people are realizing the savings on their utility bills,” said Tom Lorenz, director of product for Sensi. “Another familiarity is through word-of-mouth — people realize the savings and benefits of a smart thermostat and will recommend them to a friend or acquaintance.”

SMART CUSTOMER: Government incentives and utility savings have contributed to increased homeowner awareness of smart thermostats. (Courtesy of Sensi by Copeland)

According to Kristin Bickett, head of Nest enterprise partnerships, Google, additional drivers of the increased awareness and importance of smart thermostats include rising energy prices, the impact of the Inflation Reduction Act (IRA), the increasing adoption of home automation and integrated ecosystems, the convenience of controlling systems with remote control, and the broader trend towards electrification in various industries.

Yet the maximum growth of smart thermostats has yet to be achieved.

“Despite millions of smart thermostats sold over the past 13 years, the overall market penetration of these devices still presents significant growth potential,” Bickett said.

Kozak said that according to some surveys, consumers still find the “novel” smart devices (such as cameras, video doorbells, or smart lights and smart speakers) more valuable to them than the other “necessary” smart solutions. Basically, not everyone is realizing that smart thermostats are more than just a sleek design able to provide comfort control anywhere, anytime.

MORE THAN A PRETTY INTERFACE: Not every homeowner realizes the importance of smart thermostats beyond their sleek design and optimal control. (Courtesy of Trane)

“Smart thermostats are a necessary solution to help conserve energy resources, as heating and cooling account for roughly half of a home's energy costs,” Kozak.

Though the market has been growing and data shows that homeowners are familiar with smart thermostats, that doesn’t necessarily mean that they are being installed as frequently as they could be. The market still shows room for significant growth.

“Smart thermostat adoption rates are still in the early adoption phase (i.e., 17-20%),” said Blake Kozak, senior strategic planning analyst at Resideo. “So, while awareness of smart thermostats is high, adoption rates have not become mainstream. …The smart thermostat market continues to grow at a pace similar to what we have seen in the past: low double-digit growth.”

Kozak said that some macro trends have muted otherwise favorable conditions for customers to switch to a smart thermostat — like new home construction and existing home sales. Additional factors include the trend toward electrification, higher energy costs, and the desire to help curb demand during extreme weather events.

“Consumers are also spending more money on entertainment and travel compared to a few years ago, which has shifted some disposable income away from upgrading HVAC or adding solar to more experience-related expenses,” Kozak said.

Standard Smart Thermostats

Today, what is the ‘standard’ smart thermostat? In other words, which type of smart thermostat is a homeowner most likely to actually buy?

“When choosing a smart thermostat, homeowners are most likely to consider models that are easy to use and thermostats that make their lives easier,” Lorenz said. “Some homeowners also consider smart thermostats that keep their data secure and private without using their thermostat activity for targeting or advertising purposes.”

In general, consumers just want a practical, uncomplicated smart thermostat that offers them basic features like automated temperature control or usage reports.

“It's all about consistent comfort that helps users manage their energy consumption effectively,” Kozak said. “Straightforward installation is also important. While many consumers rely on pros for these types of installations, providing consumers the opportunity to do it themselves is important, even if many would prefer a do-it-with-me or do-it-for-me approach.”

Bickett said that when it comes to what a homeowner wants from their smart thermostat, start thinking of ‘smart’ as ‘connected,’ since the two are basically already interchangeable when discussing technology like smart thermostats.

There are, of course, different levels of smart thermostats that set themselves apart from the rest. Some offer advanced features like smart ventilation, geofencing, learning schedules, and remote sensors.

The types of smart thermostats that contractors are most likely to offer today often depends on how easy it is to install, and what the homeowner’s needs are.

“If a homeowner is more tech-savvy, they might offer a more feature-rich thermostat, but if they are less tech-savvy, they might offer a more basic smart thermostat,” Lorenz said. “The contractors are also most likely to offer a smart thermostat that is easy to use and minimizes any homeowner callbacks.”

Contractors may offer a mix of smart thermostats, both OEM and other brands. They might also offer thermostats that are just ‘connected’ but lack other intelligent features that customers may be looking for in a smart thermostat.

“Unfortunately, the vast majority of contractors are still offering a lot of ‘dumb’ thermostats, which doesn’t help homeowners get the most they possibly can out of their very important (and expensive) HVAC systems,” Bickett said. “The contractor market is actually pacing behind the retail/consumer demand for smart thermostats.”

The Future

In the future, the smart thermostat market will likely continue on its same trajectory — growth.

Lorenz said this will be driven by technological advancements, increased affordability, greater integration with smart home ecosystems, and enhanced features like improved energy efficiency, and sensor technology to improve comfort and quality of indoor air.

“The home, and the thermostat category, has seen tremendous change and innovation over the past 100+ years,” Kozak said. “With thermostats, the evolution [has progressed] from our original damper flapper to a manual thermostat control, to programmable and now smart thermostats that offer more complete IAQ control and smart home features. The professional HVAC contractor will continue to play a critical role in the evolving thermostat category.”

Bickett agreed that as these systems continue to evolve and become even more complex, the need for professional installation will only increase.

“We expect the growth of smart thermostats to continue, with a heavier trend towards professional installation as systems become more complex … There is a tremendous amount of opportunity for the contractor market to not only bring additional value to homeowners with smart thermostats, but also to their own businesses,” Bickett said.

Lorenz said that with the growing adoption of connected devices, data security and privacy will become even more critical.  Some homeowners are worried about smart thermostat manufacturers having access to their personal data and thus, they do their research and go with manufacturers of smart thermostats who keep their data secure and private.

Kozak said it is important to look outside of the world of smart thermostats and HVAC and understand the interdependency with the smart home and utility/energy categories, in order to understand the future of the market.

“How will changes in those industries shape awareness and adoption of smart thermostat features?” Kozak said. “For example, how will more extreme weather and temperatures impact energy demand? How will energy prices impact consumption and desire to have more control over thermostat scheduling?”