Peer-based Comparisons Can Induce Consumers to Reduce Energy Use

Michael Giberson

Research by Ian Ayres, Sophie Raseman, and Alice Shih indicates that providing energy consumers with information on energy consumption relative to a peer group tends to reduce energy use. Here is their abstract:

By providing feedback to customers on home electricity and natural gas usage with a focus on peer comparisons, utilities can reduce energy consumption at a low cost. We analyze data from two large-scale, random-assignment field experiments conducted by utility companies providing electricity (the Sacramento Municipal Utility District (SMUD)) and electricity and natural gas (Puget Sound Energy (PSE)), in partnership with a private company, Positive Energy/oPower, which provides monthly or quarterly mailed peer feedback reports to customers. We find reductions in energy consumption of 1.2% (PSE) to 2.1% percent (SMUD), with the decrease sustained over time (seven months (PSE) and twelve months (SMUD)).

The paper is, “Evidence from Two Large Field Experiments that Peer Comparison Feedback Can Reduce Residential Energy Usage.”  (Links: the report at NBER; and a non-gated version of the report.)

4 thoughts on “Peer-based Comparisons Can Induce Consumers to Reduce Energy Use

  1. Mike,

    Absent an equally large sample size, I would guess that the most frequent and most effective comparison is the informal comparison based on the final number on the utility bill – the billing amount.

    In my 40+ years in the energy industry, I cannot remember any consumer asking a question about their energy consumption based on kWh or ccf consumed. The questions have always been based on the monthly bill, which is denominated in units all consumers understand. For many consumers, everything else is “gobbledygook”. The question is usually: “Your house is about the same size as mine. How big was your bill last month?”. That generally leads to the question: “How come your bill is so much lower than mine?”; or, “What can I do to reduce my bill?”.

    On that basis alone, I have concluded that the primary driver of consumer energy conservation is money conservation; or, perhaps more accurately, financial expenditure prioritization.

  2. But wait a minute, Ed… You’re forgetting the obvious benefits of top-down central control over consumer preferences and decisions. 😉

  3. Ed, I think that at least some of the information formats included summary information in the form of savings or potential savings of money (i.e., “Had you been as efficient as the average consumer, you would have saved $85 last year.” or something like that.)

    A nice aspect of the research cited is that they were able to do randomized assignment of consumers to treatments in order to explore issues like how to present the information, monthly vs. quarterly information distribution, and so on, and so can compare responses of folks receiving the information to folks not receiving the information. The inferences drawn from the study should be much stronger than inferences from programs in which a company tries strategy X and compares results under X to what they think would have happened in the absence of X.

    The other nice thing is the non-central control involved, at least relatively speaking. The utility sends consumers a bit more information, and consumers respond or not. Of course this sort of program and program analysis is easier to do in monopolized retail markets, as otherwise it becomes much harder to do reasonable comparisons between retail power customers.

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