Time to Tune Up Your Behavioral Energy Program

Maintenance—for your house, your car, or even your physical health—is an exercise in cost-benefit analysis. It would be irresponsible to routinely delay oil changes in your car, forgo upgrades to your home, and pick sweet treats over trips to the gym. At the same time, engaging in these acts of maintenance too frequently could lead to adverse outcomes, financially or otherwise.  

When it comes to energy use, demand-side management programs exist to create better outcomes in the form of savings for utilities and customers, while administrators for these programs have to balance costs and benefits in developing their offerings and planning outreach.  

Meeting the Moment

The passage of the 2022 Inflation Reduction Act (IRA), alongside the ongoing effects of climate change, has sparked a growing interest in demand response initiatives. As prices continue to rise and homeownership expenses escalate, the demand for such programs intensifies. Simultaneously, there’s a keen interest in embracing energy-efficient solutions such as smart thermostats, heat pumps, weatherization and water-saving products, and solar panels to tackle these challenges. 

While the motivations may vary between groups, a 2023 study reported over 75% of customers were willing to participate in some form of demand response program.Behavioral energy programs can deliver a “win-win” for customers, utilities, and the environment: Financial savings for utilities, passed on to those individuals who can benefit most, along with lessened environmental impact. For DSM program administrators, there are techniques and tools to help optimize this willingness and enthusiasm to create savings.  

Time-of-Use Rate Programs

Informed customers, driven by the desire to save money or reduce their environmental footprint, can shift their electricity usage to off-peak hours with utility time-of-use (TOU) programs. If avoiding on-peak usage is not feasible, customers may be further motivated to take actions like installing solar panels. Regardless of the approach chosen, customers stand to benefit from savings through some adjustment in their consumption patterns. 

Load-control Technology 

For motivated customers, access to load-control technology like smart thermostats or electric car charging infrastructure to manage electricity costs can produce additional savings.However, this technology access must be distributed equitably to those who most need rebates and financial assistance, in order not to compound existing energy inequality.

Home Energy Reports

Home Energy Reports (HERs), a form of behavioral energy conservation, were first implemented by utilities in the early to mid-2000s. HERs work by raising awareness of energy consumption by providing customers with personalized feedback on their energy consumption habits and comparing it to peers/neighbors. This messaging, coupled with energy-saving recommendations, gives recipients the tools and the incentive to reduce their energy consumption.  

Energy savings from HER programs have been studied extensively and generally produce robust savings of 1-2%. However, the effectiveness of HERs dissipates over time (by 20% per year according to one study).The first year of HERs are the most effective: According to Resource Innovations' research, in years two through five the program benefits no longer outweigh the costs. Persistence—the savings resulting from HERs over time—is important to consider in crafting an effective program. 

Other approaches to behavioral change, like gamification, community-based initiatives, and workplace programs, engage individuals by introducing competitions and challenges. These endeavors often include incentives for energy-saving actions, enhancing the appeal of energy efficiency for participants. Additionally, platforms facilitating the exchange of tips, experiences, and encouragement among individuals aiming to adopt energy-saving practices foster community spirit and promote mutual accountability. 

Fair Application 

Lower-income families often contend with heightened energy insecurity, while Native American and Black households experience twice the level of energy insecurity compared to their white counterparts. This disproportionate impact is only marginally alleviated for Latino and Hispanic families. We believe in implementing energy-saving initiatives with careful consideration to address existing inequalities rather than aggravate them. A comprehensive approach to community development and engagement helps you build equity into energy programs, maximize available funding, and make a lasting impact. 

A “Win-Win” 

For utilities, the promise of a well-delivered behavioral energy program is as simple as financial savings. For customers, personal motivations inform a number of benefits from savings to value-aligned action, to personal gratification or peer group conformity.For a cleaner, more equitable future, DSM administrators should carefully select the components and optimal delivery method for any program.