Of the soft benefits of residential feedback and education programs

Published: Fri 19 Jul 2013
A blog entry by Sasha Bermann

Contributed by:

Sasha Bermann
Chief Dissemination Officer
VaasaETT

Sasha Bermann's Blog

Households are often perceived as a very difficult target group for energy efficiency programs due to their diversity and because they often see energy as a low interest and low involvement product. However, addressing residential electricity consumption is essential and inevitable if environmental and energy efficiency targets are to be met and also for affordability and social justice reasons. For instance, households account for about 30% of the European Union’s final electricity consumption, 39% in Abu Dhabi, 35% in California, etc. Moreover, residential consumption is globally expected to increase steadily in the foreseeable future as living standards of millions of households improve in the emerging world and households in developed countries keep acquiring new electricity consuming appliances. What is more, a recent study showed that residential energy prices have increased substantially between 2009 and 2012 in the countries that are most affected by the economic crisis in Europe[1]. (Dromacque and Bogacka 2013.) Soaring prices are not confined to Europe however; the South African power utility Eskom for instance has applied to more than double the price of its electricity over the next five years after an increase of 180% over the past six years; prices in Victoria (Australia) have increased by 36% since 2008 and by 75% in Chile since 2006.

 

The first step towards creating more sustainable behaviors is often to raise awareness of consumption and educate consumers about how to use energy more efficiently. Regulators and policy makers seeking to do so often consider drafting rules supporting the provision of households with feedback on energy consumption as well as information about how to reduce it (what I will call “feedback programs” here on out). Utilities in competitive markets see feedback programs as a way to differentiate their offering, move competition away from prices only and establish a trust-based relationship for the sale of additional future revenue generating services to customers. Information on energy consumption is typically conveyed to household consumers through in-house and ambient displays, web portals, mobile phone applications and smart bills.

 

There is consensus in the industry that providing feedback on energy consumption can influence the behavior of residential consumers and lead to a conserving behavioral effect and lower bills. Looking at 74 pilot projects, Stromback, Dromacque and Yassin (2011) found that participants reduced electricity consumption by between 4% and 11% depending on the feedback channel. In her literature review, Darby (2006) found results ranging from 0 to 12%. Evidence indicates that when feedback programs are well designed, electricity and gas consumption reductions are sustainable and vulnerable households are able to benefit as well. Feedback programs ran by the Sacramento Municipal Utilty District (35,000 participants), Intelliekon by a German and Austrian consortium (over 1,100 households) and the Irish Customer Behavior Trials (4,200 participants) are good cases in point. What is perhaps well less known or at least not often measured is that feedback programs also lead to several other indirect but crucial benefits for utilities and policy makers alike:

 

1. While they suffer from a rather poor image in Europe (cf. European Commission: 2012) and indeed in other parts of the world, energy providers are in contradiction also widely seen by households as one of the most trusted parties to inform them about their consumption and actions to take in order to reduce it. (Accenture 2011: 13-14.) Utilities who offer solutions to manage consumption, lower customers' carbon footprint and reduce energy expenditure should see their image improve. Opower (2013) indicates that utilities who send its home energy reports enjoy a customer satisfaction rate of 86% versus 81% for other utilities.

 

2. In competitive markets, they should be better placed to stop consumers from switching to another retailer and attract new ones. The figure of one third as likely to switch as a typical customer is sometimes cited by market practitioners.

 

3. There is also some evidence of a “halo effect”; in that utilities may be able to capitalize on customers’ newly built sense of empowerment and trust towards the utility. Opower (2013) reports on its website that customers exposed to its programs are more likely to get involved in other utility offerings and programs.

 

4. Numerous countries are upgrading or contemplate upgrading their metering systems at massive costs which one way or another will fall on end-users. Many countries facing increasingly difficult-to-manage spikes in electricity consumption rightly see dynamic prices as one possible solution and are trying to promote them to residential consumer. Nevertheless, smart meters alone do not bring about consumption reductions and 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. End consumers need to be informed about the workings and advantages of dynamic tariffs and how to best benefit from them. This does not come naturally. Feedback and education have shown to increase customer acceptance of other energy efficiency programs such as ToU tariffs or smart meter roll out since they enable them to benefit financially and otherwise. The “Meter Hunt” by Danish utility SEAS-NVE and the high overall satisfaction rates among participants to the trials in Ireland are good cases in point whereas the popular backlash against the smart meter roll out in Victoria (Australia) is a good counter example.

 

References

Accenture (2011). Revealing the Values of the New Energy Consumer. Available online at: <http://www.accenture.com/SiteCollectionDocuments/PDF/Resources/Accenture_Revealing_Values_New_Energy_Consumer.pdf>.

Darby, S. (2006). The Effectiveness of Feedback on Energy Consumption. A review for DEFRA of the Literature on Metering, Billing and Direct Displays. University of Oxford: Environmental Change Institute.

Dromacque, C. and Bogacka, A. (2013). European residential energy pricing report 2013. VaasaETT Global Energy Think Tank. Available online at: <http://www.energypriceindex.com/?page_id=9>.

European commission - DG Health and Customers (2012). The Consumer Markets Scoreboard - Making markets work for consumers. Eight edition. Available online at: <http://ec.europa.eu/consumers/consumer_research/editions/docs/8th_edition_scoreboard_en.pdf>.

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>.

[1] Between 2009 and 2012, end user residential electricity prices have increased by 34% in Spain, 31% in Portugal, 14% in Greece and 13% in Italy while end user residential gas prices increased by 89% in Greece, 43% in Portugal, 27% in Spain and 38% in Italy over the same period.

 

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