A Nest thermostat.
Photograph by George Frey — Reuters
By Katie Fehrenbacher
June 21, 2016

Nest, the company owned by Google parent company Alphabet and makes smart home gear, announced on Tuesday that its thermostats can now automatically and quickly adjust to changing energy prices in certain regions.

Why is that interesting? In some areas, the price of electricity changes throughout the day.

Similar to how airplane tickets, cell phone minutes, or hotel rooms are sold, when there’s high demand for electricity (like on a hot summer day), the price can go up. When demand slumps (like in the middle of the night), the price can go down. When there’s very high demand on the grid, utilities want to encourage customers to lower their energy use by saving money and tapping into lower prices.

Pushed by regulation, California’s utilities are moving all residential customers over to this type of pricing, referred to as time of use rates, by 2019.

Nest’s software, which it’s calling “Time of Savings,” can determine the price of electricity for individual customers during any time of day and adjust their thermostat to lower their heating and cooling use during times when grid electricity rates are expensive.

The software will only adjust the temperature a degree or two, and will maintain a comfortable setting, says Nest. Customers can also override any adjustment.

For more on how Nest’s thermostat works watch our video.

Fluctuating electricity rates are an important way for customers to lower their energy use, and for utilities to better manage power grids. The introduction of “time of use rates” in many areas of the world, will enable global power grids to have much more data and intelligence, and operate more efficiently like information networks.

Nest’s new energy service is only available through Nest’s (GOOGL) partners, like participating utilities and solar installer SolarCity (SCTY).

The software is just one way that Nest has been building its energy business, working with utilities, customers and regulators to create software that can help homes and the power grid run more efficiently. Much of Nest’s business is actually focused on consumers, selling gear for the digital home with connected video cameras and smoke alarms.

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The software launch comes just a couple weeks after Nest co-founder and CEO Tony Fadell announced his departure from the company. Fadell said in a statement that the transition has been in progress since late last year. The former executive vice president of Motorola Mobility and former CEO of Motorola Home, Marwan Fawaz, is taking over the CEO role.

There have been numerous reports over the years about dissatisfaction and departures from Nest employees, challenges with integrating the Dropcam acquisition, and early issues with the smoke alarm product.

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