It's been proven -- and validated by at least 45 independent studies -- that giving consumers personalized energy information can unleash huge reductions in electricity and gas usage. As we've detailed in past posts, that's great news for consumers, great news for utilities, and great news for the environment.
In recent months, groundbreaking research has reinforced those findings, while also taking the analysis a step further. These new studies dive not just into the general savings impact of Home Energy Reports, but also examine when those savings take place and how they change over time.
These findings -- highlighted in the charts below -- are a testament to the power of personalized customer engagement in shaping household behavior. The new research also offers important context for how utilities can maximize accuracy when accounting for the savings from behavioral energy efficiency programs, as well as evaluating their cost-effectiveness.
To begin with, in the October 2014 edition of the American Economic Review (considered to be among the most prestigious academic journals in economics), Hunt Allcott and Todd Rogers examine the short-run and long-run effects of three longstanding Home Energy Report programs.
In their short-run analysis, the economists find that the behavioral impact of Home Energy Reports can be observed immediately, noting that "consumers reduce electricity use markedly within days of receiving each of their initial reports." (This observation mirrors that of another recent study by Lawrence Berkeley National Laboratory, Nexant, and the U.S. Department of Energy.) In the chart below, you can see this rapid reduction in electric usage (lefthand side) within days of Home Energy Reports arriving at participants' homes.
Consumers start savings energy within days of receiving each of their initial Home Energy Reports. The vertical axis measures daily electric usage, relative to a statistical control population. Dotted lines reflect 90 percent confidence intervals (Allcott and Rogers, October 2014, American Economic Review).
Interestingly, the chart shows that recipients' daily electric savings begin to "backslide" after a couple weeks of receiving a given report, suggesting that in the early stages of the program, Home Energy Reports provide a critical and necessary behavioral "cue" for consumers to take energy conservation actions. Of note, the authors point out that this "backsliding" effect becomes less prominent as recipients become more accustomed to the reports, and that after four reports, the backsliding effect becomes negligible. Allcott and Roger's long-run analysis (looking over a 2+ year time period) uncovers a parallel finding to what they found in the short run: when households no longer receive Home Energy Reports (e.g. if their utility were to end the program), their electric use starts to creep back up to conventional levels. This pattern is evident in the movement of the light blue curve ("dropped group") in the chart below, showing that after a group was dropped from the program (indicated by the orange line marking late 2010), their daily electric usage starts to revert back towards pre-treatment levels. The implication is that the discontinuation of personalized guidance and nudges causes a gradual erosion of energy efficient behavior.
When households that once received Home Energy Reports no longer receive them (light blue curve), their energy usage begins to increase, albeit gradually. In contrast, households that continue to receive reports (black curve) demonstrate incremental energy savings. Dotted lines reflect 90 percent confidence intervals (Allcott and Rogers, October 2014, American Economic Review).
The fact that energy savings begin to “decay” gradually after a household stops receiving Home Energy Reports (as shown above) has meaningful implications for the way utilities account for the long-term impact of such programs. This is the crux of an innovative new report by the consulting firm Cadmus, which emphasizes that sustained Home Energy Report programs do more than drive incremental energy savings over time; they also prevent a savings decline that would be happen if a program were halted. In this context, Cadmus proposes a framework that can help utilities account for the long-term impact of Home Energy Reports programs as precisely as possible. The proposed framework, illustrated with idealized numbers below, delineates how utilities can effectively account for the dual efficiency benefits of Home Energy Reports — the incremental energy savings they produce year over year, in addition to the existing energy savings behaviors they help sustain (i.e. behaviors that would otherwise subside if the program were discontinued). [caption id="" align="aligncenter" width="547"]
Cadmus' proposed framework suggests how utilities can help account for the dual conservation benefits of Home Energy Reports -- i.e. the incremental energy savings they produce year over year, in addition to the existing energy savings behaviors they help sustain (Cadmus Group, Winter 2014/2015)
The Cadmus framework is an important contribution to a field that has already begun to make big strides in measuring the long-term impact of energy efficiency programs. The central goal of their framework is to isolate each year’s new energy savings attributable to the continuation of a Home Energy Reports program. Cadmus' analysis of Home Energy Reports' long-term savings effects is further detailed in Table 2 on page 12 of the Cadmus report. It’s an ideal complement to Allcott and Rogers' new study in the American Economic Review.