Behavioral approaches to energy conservation pay off

Cost-effective, quantifiable results with residential customers

Jamie Wimberly | Feb 26, 2012

Share/Save  

The utility sector is being required to meet mandated targets for energy efficiency and demand response, while these targets often double over time. Traditionally, utilities have used various engineering-driven measures to meet these targets; e.g., offering customers compact fluorescent light bulbs or pricing programs with incentives. These measures are straightforward to deploy and measure.

Today it is widely recognized that the traditional approach will not be enough to meet escalating targets, creating a need for a more diversified resource portfolio. New approaches are required.

Utilities have begun to experiment with pilot programs that embody a behavioral approach. These programs are designed to change consumer behavior towards energy consumption, resulting in load reduction. Such behavioral approaches include any program that initiates a change in behavior that doesn't require a widget or a rebate on a "widget-based" program. A behavioral approach is not technology based.

New behavioral approaches to energy conservation represent an opportunity and a challenge to traditional management of the demand side management (DSM) portfolio. These behavioral approaches should be considered in a strategic context, tying together pieces of the DSM portfolio, leveraging real-time information from smart grid systems and then further tying into customer service and marketing/communications efforts.

Opportunities

To date, utilities have largely focused on providing a consumer's energy use information through reports or other means and linking that information to comparative statistics from the consumer's community, creating a competitive lever to change behavior. This is one approach—a marker, if you will, on a behavioral landscape that would leverage motivations such as fear, persuasion, commitment, etc. 

Overall, the utility sector's use of behavioral approaches has been largely limited to pilots, but the savings so far are real and significant—2 percent, on average. The new behavioral approaches have quickly become one of the more important initiatives to drive savings in the residential sector, especially for utilities serving urban service territories where the savings potential is limited by the number of apartment dwellers or addressable loads (namely, air conditioning).

Our interviews with utility managers also point to specific benefits to behavioral approaches. They are:

  • Cost effective in the first year
  • Easy to quantify
  • Able to scale quickly
  • Useful in meeting regulatory requirements
  • Conducive to customer satisfaction

 

The experience of utility portfolio managers implementing behavior-based pilots have largely been positive.

Challenges

The way that utilities think about energy consumers is often dramatically different than the way energy consumers think about themselves. This thinking gap makes it difficult for utilities to fully understand their customers and to create strategies that will effectively motivate behavior change. To drive the future consumer behavior change that leads to demand reduction will require a more "customer-centric" perspective from utility providers across all programs and for all customer types (residential/business, rural/urban, etc.).

From a utility manager's perspective, the biggest challenge is that the sector's experience with behavioral approaches has been limited to a year or two (i.e., their initial pilot programs), yet their planning horizons are three to five years. There are many open questions: Will the savings impact persist or degrade over time? Will cost effectiveness be maintained over time? How will behavioral approaches integrate with back office systems and other parts of the enterprise? When these questions are addressed at scale, they become challenges to overcome.

If behavioral programs are going to be effective tools for demand reduction, they need to be big, sustainable, relatively cheap and well-received by customers. 

+ Strategy

Looking beyond a stand-alone approach to behavioral program design, we suggest consideration of what I call a "+" strategy. In other words, use a behavioral approach connected to another part of the energy efficiency (EE) portfolio or utility offering to either optimize the underlying program or to serve as a glue to hold pieces of the offering together in new, stronger ways. 
 
A "+" strategy would encompass:

  • Optimization: Combine a behavioral approach with a device or offering to optimize the potential for demand side impacts. For example, residential lighting + behavioral approach = broader, faster adoption, optimization of program objectives and persistent behavior.
  • Glue: Employ a behavioral approach to connect pieces or programs of the proposal into a comprehensive approach, with the whole producing more impacts and savings than the individual parts combined. The glue can also be thought of as "stickiness" (persistence) over a sustained period of time. For example, audits/retro commissioning + behavioral approach = continuous/ monitoring-based commissioning to optimize original controls and measures, along with operational guidance and incentives focused on behavior for greater savings.

 

Behavioral approaches represent a significant opportunity for both energy savings and re-examining the utility's customer strategy. Taking a strategic view, many utilities now aspire to become the "trusted energy advisor" to their customers, with trust becoming the currency of a more engaged customer relationship that creates value for both the utility and the customer.  Trust is difficult to gain, yet behavioral approaches tied to the DSM offering and to customer service represent a good base to start.

Jamie Wimberly is CEO of DEFG EcoAlign, a management consulting firm focused on the energy sector.

 

Related Topics

Comments

Why are we focused on 2%

I think the article is spot on.

The impact of behaviour change in energy usage has been studied and piloted at great lengths.  The findings are clear.  It works....and the savings can be much more than 2%.  Better monthly usage information and benchmarking (the 2% factor) are just the first layer of the onion....or the base of the pyramid.

If that's what it takes to get going - terrific.....but much deeper engagment solutions or better still engines that can turn usage data into valuable "effortless" insights and actions for the homeowner is the exciting future.  The quicker we get there the better!

Peter Porteous

2% is no doubt significant so some people

You have no argument from me that 2% is sufficient motivation to those who are "energy aware" such as most large commercial customers now are. When your bill is $50k/month, 2% is not chump change. That's one reason why when MACH Energy started providing simple on-line energy information a dozen years ago (denominated in dollars in addition to kWh), we found a "sweet spot" in the commercial real estate market, where saving a few pennies per square foot translated directly into more competitive lease rates. My argument is that the effect is nonlinear. There is a certain threshold at which people are unlikely to change their behavior, especially if energy management is not part of their job description. To get typical homeowners to act, the benefits either have to be big, or the actions very easy. Saving $4 per month on a $200 utility bill is not likely to be strong motivation. One partial solution is to provide customers with better tools for calculating the cumulative value of small steps, both in aggregate and over time. It's a tool that's worked well for me over the years for a number of different target audiences, ranging from EPRI member utilities trying to get the biggest bang for their R&D buck to solar energy customers trying to validate their investment decision.

Greg Tinfow
CEO, Energy Informatics LLC
www.energyinformatics.com

2% matters...

When my competition is working 2% more efficiently than I am, you bet it matters.

Here in Southern California we've seen that putting that 2% in context is highly effective in persuading once-skeptical or indifferent energy users that EE/DR improvements can spell the difference between staying in business or not. Telling they thay they can achieve a 2% improvement might not by itself galvanize them to act, but showing them that their competitors have taken that 2% and used it to improve their postion in the marketplace is something few businesses can ignore.

It's possible in an increasing range of industries to show that EE/DR is already big, sustainable, relatively cheap and well-received, and that in the aggregate, it's helping to create signiifcant savings in dollars and GHG.

Is 2% significant?

Let's see, for a customer with a $200/month energy bill, the annual savings would be $48, about the price of two large pizzas here in the San Francisco Bay Area. I don't thing most people are willing to change their behavior for such a meager payback.  At MACH Energy a dozen years ago, we were generally able to squeeze far more out of our commercial building customers in the first week of our monitoring service just by doing a walk-through and pointing out the obvious (turn off the lights next to the windows, move the coffee machine out from under the thermostat, reset the clock on the building EMS, etc.)

People don't change their behavior because they do not perceive sufficient payback for doing so, especially when the payback period is long. This is why people don't lose weight, or give up smoking, even though they know both will likely shorten their lives. We apply a very high discount rate to anything with a long tail. The more explicit you can make the action and resulting payback however, the more response you are likely to get. And, you have to make the action easy, not something that requires a change in habits that have taken a lifetime to develop (i.e., occupancy sensors probably work better than expecting people to remember to switch off the lights). People have a lot on their minds these days. They don't have a lot of spare bandwidth to analyze what small measures add up to big savings. However, if you provide an explicity "do X/save Y" choice, something like "click this button and we'll send you lightbulbs that will save you $100 by the end of the year," you may get their attention. You can also increasingly appeal to their interests in preserving the planet, which makes it even easier. Probably the simplest thing that utilities can do is to just send each customer a "personalized" list of what actions they can take (based on their own usage and bill), along with the expected payback time, or accrued environmental benefits. Most people can intuitively understand the relationship between time and money, even if they don't explicitely understand the math.

Greg Tinfow
CEO, Energy Informatics LLC
http://www.energyinformatics.com

So true...

This excellent article really got to the heart of the matter. It is time we all get serious about the huge potential energy savings locked up in the 'behavioural wedge'. Even though an average 2% saving is significant, there are at least 20% of savings locked in wasteful or inefficient behaviours or technologies (which are also driven by our purchasing/using behaviours). I hope we will be able to collaborate with energy utilities to access these bigger savings and create all the co-benefits associated with smarter energy use. The International Energy Agency has created a new task under the Demand Side Management Implementing Agreement that is looking at exactly that issue. It brings together international expertise in research, policy and DSM implementation to 'close the loop' from theory to practice and figure out how to measure ongoing energy savings and long-term behaviour change. Check it out at www.ieadsm.org

Keep the Discussion Going

Good article and definitely timely in light of what utilities need to do now that they have done about as much "piloting" as they can and need to look at ways to really get the customer benefits they promised for smart meter investments.