What about demand-side response? Using behavioural economics to boost consumer switching rates to time-of-use electricity tariffs – evidence from field experiments
Moira Nicolson, UCL Energy Institute
Overview
My research involves using randomised control trials to test whether insights from behavioural economics, other than defaults, could be used to boost switching rates to domestic demand-side response (DSR) programmes. Demand-side response is a crucial part of the business case for smart metering programmes and energy security strategies for governments all around the world. For example, in the UK, the Government requires 20% of consumers to switch to a static time of use tariff by 2020 to realise the business case of smart meters.
Whilst ample evidence suggests that people will participate in load shifting behaviour when put on a time of use tariff as part of their participation in large academic/industry trials, it is not known what proportion would switch to a time of use tariff of their own accord when they become widely commercially available following the smart meter roll-out – or what would boost uptake, without making them mandatory or the default option. Default enrolment is effective at boosting enrolment numbers but will likely result in lots of people being recruited to DSR programmes that would gain and provide little or no benefit from being enrolled.
The only alternatives have been tested in the context of surveys which suffer from social desirability and other biases in self-reported behaviour. This research therefore seeks to answer three questions:
- What proportion of British consumers with high flexible electricity loads will switch to a time of use tariff (or other DSR programmes)?
- Can we increase switching behaviour for time of use tariffs amongst consumers with high flexible electricity loads using insights from behavioural economics that do not rely on opt-out enrolment?
- How does switching behaviour, and the factors which influence switching, vary across important consumer sub-groups (e.g. those with electric vehicles vs electric heating and amongst low income and vulnerable consumers)?
To answer these questions, this PhD will run field experiments to measure consumer switching behaviour to DSR tariffs and to test alternative ways of encouraging flexible electricity consumers to sign up to time of use tariffs that do not rely on default recruitment, such as active choice, prompted choice and tailored information. It will do this by partnering with external organisations, including a DSR provider, to measure actual switching behaviour rather than opinions or attitudes about the prospect of switching.
Expected outputs
- The first measure of market demand for time of use tariffs amongst consumers whom DSR companies will want to recruit into their programmes that is based on actual behaviour not opinions expressed in national surveys
- A more realistic estimate of the likely proportion of British consumers who will switch to a DSR tariff than has so far been obtained from national survey research
- Results which demonstrate the extent to which energy companies and other organisations could boost uptake to DSR tariffs using a number of low-cost interventions designed using insights from behavioural economics
- Data on the variation in switching behaviour across geographic regions in Britain as well as across people with different appliance types (EVs vs heat pumps) and incomes