Three little questions about behavioral energy economics and transactive energy

Recently I spoke at the Surge Summit event of the Illinois Science & Engineering Innovation Foundation (ISEIF). ISEIF’s mission is customer education, awareness, and engagement as Illinois implements policies enabling a digital distribution grid and transactive energy. I am honored to serve as a peer reviewer on ISEIF’s Peer Review Committee.

As a lead-up to the event I spoke with ISEIF’s Program Director, Clare Butterfield, and she expertly distilled our conversation into three little questions:

  1. What is the big insight from behavioral economics on how people use energy?
  2. Given that most people don’t pay much attention to their energy usage, are there ways to communicate with them that are likely to fare better than others?
  3. Where do you think the real opportunities for impact on energy behavior are going to come from if we haven’t seen them yet?

Her post has my responses, but in a nutshell: prices aren’t as salient for all customers as we assume them to be in standard economic models, a century of regulation has habituated us to being informed after the fact by looking at our bill but we can do better with technology and competitive pricing, and the potential for automation to save us money and reduce energy consumption aligns economic and environmental interests at very little cost and inconvenience to the customer.

The real opportunities in electricity come from transactive energy, harnessing the transaction cost reductions of digital technology to build technology-market platforms to enable richer and more valuable decentralized coordination as more and more people have more and more diverse energy resources.

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