Feedback, Education and Dynamic Pricing

Published: Mon 12 Aug 2013
A blog entry by Sasha Bermann

Contributed by:

Sasha Bermann
Chief Dissemination Officer
VaasaETT

Sasha Bermann's Blog

by Christophe Dromacque, Head of Research, VaasaETT Global Energy Think Tank

 

Many countries facing increasingly difficult-to-manage spikes in electricity consumption rightly see dynamic prices for residential users as one possible mitigator. Some are contemplating making them mandatory (the Republic of Ireland, the Gauteng province in South Africa, etc...) while some already made them the by-default tariff scheme (Italy for instance). Nevertheless, mandatory dynamic tariffs can have a disproportionate negative impact on people who have no choice but to remain at home all day or have little or no energy to shift (Johnston 2009). End consumers need to be informed about the workings and advantages of dynamic tariffs and how to best benefit from them (I term this process "customer education" in the rest of the article). We, energy practitioners, too often assume that this comes naturally for everyone else. However, results from pilots and real-life implementations show that feedback and education requirements ought to be an integral part of any residential dynamic pricing policy package to ensure that all consumers are able to benefit financially and otherwise. In addition, we can assume that this would go a long way towards avoiding a popular backlash against mandatory dynamic prices.

Customer education material and packages need not be (in fact should not be) complicated at least in the beginning to avoid the risk of antagonizing consumers. Nor do they need complex and expensive technology. As an illustration, the widely acclaimed and successful Irish “Smart Metering Customer Behaviour Trials” provided participants with education material as well as tips and advice in the form of a paper based consumption report, a fridge magnet and stickers to put on main appliances. Post pilot surveys showed that participants rated these items as very useful to lower both overall and peak usage. Similar results were found as part of Perth Solar City in Australia and in many other instances.

 

Figure 1: Influence of education on energy conservation in TOU trials. (Source: VaasaETT 2011)


This is supported empirically. Looking at the results of a large number of time-of-use pilots around the world (N in the graphs indicates the number of samples), customer education coupled with dynamic tariffs allows not only to meet the primary goal of dynamic tariff schemes (lower usage at peak times) but also to meet broader objectives of policy makers and often of consumers which is for instance to conserve electricity - and lower bills (see Figure 1). Customer education impacts the success of dynamic tariffs in terms of demand response as well. Indeed, as shown by Figure 2participants who received education material decreased their on-peak consumption by an extra 50% over participants who did not receive any education.

Figure 2: Influence of education on peak clipping in TOU trials. (Source: VaasaETT 2011)


It is interesting to note that only 57% of participants in TOU trials were sent material explaining how to benefit the most from the new pricing structure. This points to two issues:

- First, energy practitioners are convinced that actions to take in order to benefit from dynamic tariffs are obvious to people who never thought about their electricity usage before.

- Second dynamic tariffs are too often seen in isolation solely as a measure to reduce peak consumption overlooking the fact that their mass introduction is both a time of heightened risk for the industry (Victoria, Australia is a good case in point of what can go wrong) as well as a great opportunity to engage consumers, help them reduce overall usage and bills through feedback and education, increase their satisfaction with their utility, build trust, etc... The results of this virtuous cycle I described in my previous post "Of the soft benefits of residential feedback and education programs".

References

Commission for Energy Regulation (2011). Smart Metering Information Paper. Electricity Customer Behaviour Trial Findings Report.

Dromacque, C. (2013). Blog post: Of the soft benefits of residential feedback and education programs. Available on line at: <http://engerati.com/blogs/soft-benefits-residential-feedback-and-education-programs>.

Johnston, M. M. (2009). Customer Protections and Smart Meters - Issues for Victoria, St Vincent de Paul Society Victoria, University of Melbourne.

Stromback, J., Dromacque, C. and Yassin, M. H. (2011). The potential of smart meter enabled programs to increase energy and systems efficiency: a mass pilot comparison. Prepared for ESMIG. VaasaETT Global Energy Think Tank. Available online at: <http://www.esmig.eu/press/filestor/empower-demand-report.pdf>.

Western Power (2012). Perth Solar City: Annual Report 2012. 

More information on: www.vaasaett.com