As utilities modernize their customer interactions — adding apps and marketplaces and new payment options — the traditional home energy report can seem a bit antiquated. But rather than letting it fade away, one demand side management expert says the tool still has much to teach utilities about how to tweak customer decisions.
Home Energy Report programs are "the biggest, baddest behavioral programs out there right now," Beth Fitzjarrald, senior research manager of customer energy solutions at E Source, told the audience of a webinar hosted last month by the American Council for an Energy Efficiency Economy.
"Utilities are getting more and more invested, and getting more out of, behavioral programs."
Beth Fitzjarrald
Senior Research Manager of Customer Energy Solutions, E Source
The utility consulting firm's customers deliver 75% of the electricity and gas in North America, giving it a "pretty good big-picture overview of trends," Fitzjarrald said. And a 2015 survey put hard numbers on the efficacy of residential behavioral programs.
The research showed utility spending on residential behavioral programs made up about 2% of their demand side management (DSM) portfolio — but returned 10% of average DSM portfolio energy savings.
"They are a cost-effective program," Fitzjarrald said, adding that the trends since 2015 "have remained the same."
And the programs appear to be improving.
"Utilities are getting more and more invested, and getting more out of, behavioral programs," Fitzjarrald said. "It looks like programs are getting more cost effective over time."
Is 1% to 2% "really all we can do? Surely there is more out there."
Beth Fitzjarrald
Senior Research Manager of Customer Energy Solutions, E Source
E Source research shows home energy report programs return an average of about 1% to 2.5% annual energy savings per customer. And those savings are borne out over a decade of reports.
They are "reliable, and stand out over the test of time," and Fitzjarrald said the same principles at play with home energy reports can be used to grow behavioral-based savings related to other programs.
Is 1% to 2% "really all we can do? Surely there is more out there," Fitzjarrald said.
Bringing multiple strategies to bear
There are a wide range of strategies used to tweak customer behavior, and Fitzjarrald notes that Opower's (now Oracle) research has helped the industry understand the importance of peer comparisons and "closing the loop," along with injunctive norms, or perceived expected behaviors.
Utilities now recognizes that they need both to tell the customer how they performed relative to their neighbors and what they can do to improve.
"Not only do you need to compare, but you need to tell them which direction is the right direction," Fitzjarrald told Utility Dive. Early iterations of home energy reports included peer comparisons but lacked injunctive norms to cue customers on how to achieve additional savings.
"Before they added that 'should' component, customers who were more efficient than average would use more energy. You tended to move toward that average," she said. "Adding the injunctive norm helps everyone move toward a more efficient space at the end."
Along with developing social norm comparisons, utilities have an array of behavioral strategies they can utilize, including setting up steps for customers to achieve follow-through, offering rewards and solutions, and in-person interactions.
"You suck at using energy. Come buy a smart thermostat."
Beth Fitzjarrald
Senior Research Manager of Customer Energy Solutions, E Source
Fitzjarrald said utilities should be looking for ways to layer these strategies onto existing programs.
"There is a huge opportunity in incorporating some of these strategies into existing programs," she said. "How can we embed commitments into our rebate programs? How can we include more prompts and follow-through in our home energy audit program?"
Utility programs can also be designed to work together. An example: pairing a utility marketplace, where a customer can purchase efficient appliances, with home energy reports.
Utility messaging, Fitzjarrald joked, then runs along the lines of: "You suck at using energy. Come buy a smart thermostat."
But more seriously: "It's a solution that allows the utility to help the customer," she said.
Similarly, E Source sees a growing interest in pre-pay options for electric service, in part because of the energy savings associated with those customers. About two-thirds of utility customers have expressed an interest in pre-paid options.
Once typically thought of as primarily a low-income option, due to the lack of connection fees, the flexibility of pre-pay has made it popular for college students, infrequently-used homes and those on a daily or weekly budget.
"Obviously there are some things we still need to figure out in terms of consumer protections .... but customers want pre-pay."
Beth Fitzjarrald
Senior Research Manager of Customer Energy Solutions, E Source
Consumer advocates have some concerns about disconnections for pre-pay customers, and Fitzjarrald said it is an area where more study is necessary. But modern pre-pay programs, with apps that notify a customer as their account balance declines, provide inherent behavioral nudges that encourage conservation.
Ultimately, pre-paid billing programs are producing energy savings of 5% to 14%, and a few utilities have even claimed those savings as a demand-side management program. Salt River Project has offered pre-pay since the 1990s and shows 12% annual energy savings per customer, according to E Source data.
"There is a huge potential here," said Fitzjarrald. "Obviously, there are some things we still need to figure out in terms of consumer protections .... but customers want pre-pay."
And utilizing social and behavioral cues to help customers save energy "is how we go beyond education, to create more effective behavioral change," she said.
Behavioral vs. pricing?
There have been a few studies that cast doubt on the efficacy of utility behavioral programs.
Most recently, Dartmouth researcher Praveen Kopalle looked at data from the Texas non-profit Pecan Street neighborhood test bed, as part of a study on critical peak pricing interventions. The study found the interventions reduced electricity consumption by 14% — but did not turn up similar reductions through behavioral channels.
"In contrast, we find minimal response to active information provision and conservation appeals," Kopalle and the other study authors wrote.
Research published last year by the University of Chicago concluded price-based incentives are the most effective and consistent way to tweak customers' energy use. Though that work also found some efficacy in non-price incentives, the Dartmouth conclusions are more stark.
"We still see home energy reports as a valuable component of this solution set. ... But also, we can do so much more with behavioral savings."
Beth Fitzjarrald
Senior Research Manager of Customer Energy Solutions, E Source
Years of utility behavioral-based savings speak for themselves, according to Fitzjarrald, adding that home energy reports target overall energy use rather than the peak reduction analyzed in the Dartmouth and University of Chicago studies. And going forward, the rollout of advanced metering (AMI) will allow for even more and targeted savings.
"The rollout of AMI is inspiring some of the deeper behavioral programs we've seen," Fitzjarrald told Utility Dive. In part, that's because AMI rollout "needs a little more justification" and behavioral programs show a "direct consumer benefit."
Ultimately, E Source sees home energy reports and behavioral strategies becoming more important to utilities.
"We still see home energy reports as a valuable component of this solution set. They are a reliable source of savings, and a tool we think will stay in the DSM toolbox for a long time," said Fitzjarrald. "But also, we can do so much more with behavioral savings."
