How the Nest Learning Thermostat Works

Prior to 2008, Tony Fadell was a legend at Apple. Fadell is the father of the iPod, having led the Apple team that developed the first 18 generations of the iPod and the first three generations of the iPhone.

After he retired in 2008, Fadell, who owns more than 100 patents, concentrated on building his new house in Lake Tahoe. It was during that time that he had an innovative idea to improve the thermostat. He took that vision to his former colleague Matt Rogers, who was responsible for iPod software development. Seeing value in the idea, Rogers joined Fadell in nurturing it to fruition [source: SmartPlanet].

There was only one problem: Fadell and Rogers knew nothing about the HVAC industry.

So, the duo sought advice from HVAC professionals from varying climates across the U.S. These professionals were skeptical about the idea, but curious enough to lend a hand. The information these experts provided helped Fadell and Rogers gain a deeper understanding of how and why people used their thermostats [sources: SmartPlanet, Fadell].

Armed with information and ideas, Fadell and Rogers redesigned the thermostat from scratch. The result was the Nest Learning Thermostat, the central product from their new company, Nest Labs. Their thermostat includes features that reflect their Apple roots, such as a sleek interface and multi-device connectivity.

Next, let's check out the features that have made a thermostat such a media and consumer darling.

The Nest Learning Thermostat has both energy-saving technology and an innovative design. Before we look at the energy-saving features, check out these design highlights that make Nest a cool gadget to show off to your friends:

The second generation of the Nest, which came out in October 2012, is around 20 percent slimmer than the original. The assembled unit, including device and base, measures 3.27 inches (83 millimeters) in diameter and 1.26 inches (32 millimeters) in height.

Although the overall shape and usability remain largely the same, the new model has some other design improvements. The grill that housed the sensors has been replaced with a smooth, opaque black plastic surface that blends more seamlessly with the device. The entire outer ring is now a single rotating piece, whereas before you turned a separate front portion of the ring. And the internal connectors have been arranged in a circular pattern to allow room for two more connection points.

The following Nest features are designed to appeal to consumers interested in saving energy:

As we've noted, Nest offers tech-savvy users options for manually programming the thermostat. However, Nest was developed for users who'd rather just turn the dial when necessary. For that probable majority, Nest's VP of Technology, Yoky Matsuoka, offers these tips for teaching your Nest to save energy.

Next, let's take a closer look at the Nest Sense technology.

We know the main features of the Nest Learning Thermostat. But what's behind that sleek black screen? The core technology behind Nest is a combination of its sensors, hardware and algorithms. The company calls this Nest Sense. Let's take a look at how Nest Sense works.

Part of Nest Sense's job is to gather data to use in its calculations. This data goes beyond just measuring the temperature in the room. In fact, Nest gathers data from the following sources:

Using data from these sources, Nest Sense creates a schedule for your HVAC. The schedule includes the following:

You can view this schedule from the Nest thermostat's interface or from your Nest account online. If you want to make manual schedule changes, you can do that, too. Manual adjustments can be useful when you'll be away from home for several days, or if you'll be at home instead of away during a typical work or school day.

Software updates and bug fixes are rolled out regularly, and many of the updates bring new capabilities to the device. As of the 3.0 version of its software, which was released in conjunction with the second generation Nest thermostat, the device uses different algorithms depending upon what sort of HVAC setup you have, providing features that work more efficiently with that particular system. It also became multilingual, allowing control from the Nest device, the website and the mobile apps in English, French or Spanish.

Version 3.5 added the ability to control just the fan, to kick on the AC when humidity hits a certain level, and to adjust temperature settings when the device is in direct sunlight.

But what is installation and setup like? We'll examine those next.

Nest's installation requirement list isn't terribly long. First, you'll need a WiFi network in the building, and that should include Internet access. With that in place, you can turn your attention to your existing thermostat.

Nest is designed to use the wires common to HVAC systems in homes and businesses today. Installation instructions start before you purchase a Nest:

If Nest's site says your system isn't compatible, ask an HVAC professional about your options. You might want to check here to find a Nest-certified Professional in your area. If you can't find one, be ready to tell your HVAC pro what you've learned and point him or her to the Nest Labs support site. Nest.com lists its supported wiring combinations here.

The second generation Nest thermostat has 10 wire connection points as opposed to original Nest's eight, so if your system wasn't compatible when the device first came out, you might want to check again. The company states that the new Nest Learning Thermostat is compatible with 95 percent of 24 volt (low-voltage) HVAC systems, up from the first generation device's 75 percent compatibility.

Once you know your home's wiring is compatible, you can purchase and install your Nest. If you're comfortable installing a light fixture or ceiling fan in your home, you can probably follow directions from Nest and install the thermostat yourself. If twisting copper wires together makes you nervous, use the Nest Certified Professionals lookup to find a professional installer in your area.

When you've installed the physical device, step through Nest's instructions to set up the software. This includes connecting to your WiFi network and your Nest account. After that, you can start using Nest to control your HVAC.

Within a week of making temperature adjustments as needed, Nest should have created a good approximate operating schedule for subsequent weeks. In addition, it never stops learning as it gathers data about you, your habits and your local weather over time.

Next, let's take a brief look at this product's advantages and challenges in the HVAC market.

Despite all its features, though, Nest has some hurdles to overcome. As of early 2014, Nest costs $249 per thermostat. That's more than twice, and in some cases five times, the cost of programmable thermostats from established brands Honeywell, Filtrete and Cadet. Non-programmable thermostats are even cheaper, with some models costing less than $20. Because of this, Nest's only customers are likely to be people with moderate to high incomes or who place a high value on either its design or its energy-saving features.

Beyond the cost gap, Nest also faces a sea of consumers who know very little about how their HVAC systems work. Though marketing materials for the Nest describe functions of these systems in easy-to-understand language, it may still prove difficult to sell the product directly to the consumer. It's possible that Nest's target audience will eventually shift to HVAC professionals and building contractors instead of home and business owners.

In early 2012, Honeywell, the biggest brand in thermostats in the U.S., threw down yet another gauntlet for Nest Labs. On Feb. 6, 2012, Honeywell filed a patent infringement lawsuit against Nest Labs citing seven Honeywell patents. Two days later, Nest Labs accepted the challenge. In its statement, Nest Labs said, "Nest will vigorously defend itself against Honeywell's patent-attack strategy to stifle thoughtful competition, and we have the resources, support and conviction to do so." That case is on hold as of early 2014, but another company, Allure Energy, brought a patent infringement suit on May 14, 2013. Time will tell how these legal battles will play out.

In January 2014, Google announced that it would be acquiring Nest for $3.2 billion. Provided the purchase is approved by regulators, the move will get Google into the connected home device market and possibly provide Nest Labs with more resources with which to fight patent suits. The impending acquisition has raised some privacy concerns from people worried that it will give Google access to the data gathered by Nest Learning Thermostat's sensors, as well as data from Nest's other product, the Nest Protect smoke and carbon monoxide detector. Nest contends that the company will follow its privacy policy and the information will continue to be used only to maintain and improve Nest products and services.