A new study indicates that economic incentives are a better lever for curbing power consumption than reminders to do the right thing.
But the study—at least in my mind—also leaves open the question that laziness may be the best motivator of them all.
The study—conducted by Japanese and U.S. researchers—sought to examine whether economic incentives or moral suasion is more effective in getting consumers to reduce power consumption and in particular peak power consumption. The researchers, moreover, didn’t focus on an “average” society. It surveyed 691 Japanese households, a group well-versed in the power of efficiency, in 2012 and 2013 when the nation’s power infrastructure as a whole was still recovering from Fukushima.
The subjects were divided into three groups: a control group; a moral suasion group which received messages on a smart thermostat reminding them of the critical need to curb peak power on extreme winter and summer days; and an economic incentive group, who were informed that their pricing would rise by 40 to 80 cents per kilowatt hour for power from a baseline of around 25 cents a kilowatt hour during select periods. Consumers got a day-ahead or day-of notification to turn down power consumption for 30 minutes. So what did they find?
- The group given moral incentives did well at first. They reduced power consumption by 8 percent, but over time their behavior became indistinguishable from the control group.
- Even so, the economic group did better. “The economic incentive group showed usage reductions of 14 percent for the lowest critical peak price and usage reductions of 17 percent for the highest critical peak price. Moreover, the effect was persistent over repeated interventions,” the report stated.
- The economic incentive group also exhibited “significant” spillover effects: consumption during non-peak hours for them also came down.
- Energy saving also became more of a habit with the economic incentive group. When the incentive was lifted, the moral suasion group slipped back into its normal behavior. “On the other hand, the economic incentive group continued to practice energy conservation even after we withdrew the incentives,” the report stated.
“Our data indicate that the economic incentives induced behavioral changes in lifestyles—households in this group formed a habit of efficient energy use for a variety of electric appliances including air conditioners, heaters, computers, washers, and cleaners,” the report stated.
Opower, which has based its business model around using peer pressure and behavioral clues, will likely raise some questions about the study. It has shown data that behavioral hints can cut power by around 2 percent without economic incentives. Peer pressure is no doubt effective, but maybe not as strong. (P.S. home energy will be one of the big subjects this week at Distributech taking place in San Diego. I'll be there and providing updates.)
But here is the argument for stupidity. Automation, or some degree of automation, might work best of all. What if the experiment were slightly changed, and the moral suasion group was given a thermostat that kept their power level reductions at the level where they started? They would have stayed at the 8 percent reduction level, or at least most would have. Similarly, more of the economic incentive group would have become habit-formers, so to speak.
Automation is powerful because it gives consumers the choice of abdicating choice. You can form a habit without thinking about it.
