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How Behavioral Science Can Boost Household Energy Efficiency

Photo by Jiri Rezac/Climate Change Group/Flickr

Persuading people to use energy more efficiently has long been heralded as a simple, effective way to help tackle climate change. The problem lies in the persuasion.

Historically, policies and programs to encourage people to save energy have relied largely on technological interventions and decision-making driven by economics: consumers will save energy to save money. However, a growing volume of research shows that energy-consumption behavior is not always rational and can benefit from nudges designed to encourage households to be more energy-efficient.

The UN Intergovernmental Panel on Climate Change and the European Union recognize that lifestyle changes – such as setting thermostats higher in summer and lower in winter – can reduce energy use and therefore mitigate climate-warming greenhouse gas emissions. Adding weight to this idea, Richard Thaler’s 2017 Nobel Prize for economics explored the role of nudges in shaping public policy, noting that nudging can prompt people to make better choices if their motivations and biases are understood.

Households display three types of behavior to reduce energy use:

  1. Curtailment: Repetitive efforts like switching off lights, fans and other appliances.
  2. Maintenance: Practices to ensure appliances and equipment are in good running condition.
  3. Buying more efficiently: One-shot purchases of energy efficient products and services.

Curtailment behaviors are most common, but savings derived from them are often grossly overestimated, while savings from buying more expensive but more energy-efficient appliances are frequently underestimated the role of behavior and technology are both crucial to delivering the savings consumers want.

Focusing on Behavior

Recognizing this role in the use of energy-related technologies and services, utilities in the United States and European Union implemented behavior-focused programs in the residential sector. These have been found to be as cost-effective and in most cases cheaper than technology-oriented demand side management measures. Broader understanding of consumer behavior can help utilities and planning agencies align public policies that are suited to consumer needs and also complement energy-saving technologies and practices. To realize maximum energy savings, technological interventions must be combined with behavior-changing approaches in a utility’s demand side management program.

Behavior-based energy efficiency programs can be classified into two broad categories: 1) education and outreach that give consumers information on energy efficiency and tips to save energy; and 2) feedback programs that give direct or indirect feedback to consumers through use of smart meters, home energy reports or comparisons with community, peers or similar households.

Direct feedback offered through devices like smart or prepaid meters that give consumers real-time information have reportedly brought savings of 5 to 20 percent. In India, smart metering initiatives by Tata Power Delhi Distribution Limited, Energy Efficiency Services Limited and other utilities have been mainly driven by managing inefficiencies and tracking usage of appliances in individual homes. Smart meters with real-time displays would keep consumers informed and could influence long-term changes in their behavior. Communication with consumers about the benefits of these new smart meters is essential during the switch from traditional electricity meters.

To a lesser extent than direct feedback, indirect feedback offered through enhanced electricity bills or home energy reports have contributed to changes in consumer habits. Informative electricity bills containing charts that show households’ electricity use trends, comparisons from previous years or with neighbors or community averages have resulted in savings of 5 to 10 percent.

The extent to which feedback can lead to long-term behavior changes is complex. A review of 38 natural field experiments on nudges leading to lasting energy-saving habits found that 35-55 percent of the decrease in energy use persisted even after nudges were discontinued.

Rebound Effect?

In the developed world, critics of energy efficiency programs say the rebound effect – in which consumers use more of the energy efficient technology, offsetting any cost savings envisaged from investment in energy efficiency – makes these technologies a bad investment.

But this effect has little applicability at present in India, for example, where millions lack access to electricity and many others, even in large cities, lack reliable access. The impact of energy efficiency interventions must be examined in the larger context of multiple societal, environmental and economic benefits it offers.

In an experiment with a small sample of households in Delhi, nudges, in the form of comparison of electricity use with neighbors, resulted in 7 percent energy savings. The same study reported an increase in electricity use in households given the same nudge but additional financial rewards.

In Vidyut Rakshaka, a joint initiative of WRI India and TIDE in Bangalore and Chennai launched in 2015, consumers are given customized energy saving reports based on the electricity use information they share voluntarily. Vidyut Rakshaka is an indirect feedback program and reports also show a comparison of the household’s electricity use against neighborhoods’ use. Each household is given an energy savings goal corresponding to their current and historical consumption patterns and comparison with similar households. Reports contain recommendations to encourage curtailment (for example, switching off appliances when not needed), maintenance (such as regular checks of refrigeration and air conditioners) and efficiency (replacing incandescent bulbs with LEDs, for instance) behaviors for achieving the savings goal. Participants are sent regular feedback on their performance against the goals.

Preliminary findings from Vidyut Rakshaka’s impact evaluation have indicated a total of 17 percent electricity savings from 45 percent of the participants. Going forward, data from participants will be analyzed to study the impact of indirect feedback and goal setting on changing behavior.

The original version of this article appeared on WRI’s Insights.

Sumedha Malaviya is a Senior Project Associate for Energy Efficiency with WRI India.

Smita Chandiwala is Principal at Energe-se.