2012 ONE Doctoral Consortium Academy of Management, Boston August 4, 8 am 2 pm Abstract

Energy Conservation Nudges How Non-Monetary Messaging Schemes Motivate Household Conservation in U.S. Residential Electricity Markets: Evidence from a Large Scale Field Experiment Omar I. Asensio UCLA

1 Overview
In residential field experiments at UCLA, we employ wireless energy metering technology along with insights from economics and psychology to design non-monetary incentives for conservation. Promoting conservation through information-based strategies is uniquely enabled with innovations in smart metering technology, in which we give consumers real-time access to detailed, appliance-level information about their home electricity consumptiontypically through website, e-mail and via portable electronic devices. Household conservation is particularly difficult in residential electricity markets because saving energy by adjusting thermostats or unplugging charging devices at home, for example, requires both individual and collective action. Traditional economic incentives, either through price increases or differential rates by time-of-use, may not produce the desired long run savings or environmental benefits, and often lead to wellknown rebound effects (Khazoom 1980, Dubin 1986, Henly 1988, Brookes 1990, Greening 2000) and heterogeneous outcomes (Alcott 2011, Costa and Kahn 2010) in which some consumers respond favorably to calls for conservation, while others dont. How can we motivate people to conserve energy at the individual level ? In recent years, neighbor comparisons and social norms have been promoted as non-monetary information nudges for household consumers (Alcott 2010, Ayres et.al. 2009, Dolan and Metcalfe 2011, Ferraro and Price 2011). Promoting conservation through these information-based policies, however, requires a deeper understanding of the psychology and economics of electricity use behaviors and is often necessary for analysis of field experiments and utility-scale programs that have become increasingly popular.* * Arlington, VA-based OPOWER, a privately held analytics company, for example, is currently working
with over 60 U.S. electric utilities to transform home energy reports with neighbor comparisons as information nudges in residential billing data.

In a series of experiments at UCLAs University Village apartments, we outfit 120 family apartments with real-time electricity metering technology down to the appliance level. One group of apartments is given detailed energy use feedback along with information about potential financial savings. Another group is given feedback with nonmonetary messages about the environmental health impacts of excess emissions, relative to more efficient neighbors. Which group(s) conserved energy in response to the information treatments ? Our preliminary evidence suggests that our non-monetary, health-based messaging strategy was more effective at sustaining favorable conservation outcomes versus the financial savings strategy, in which consumption decreased initially but rebounded sharply.

2 Broader Impacts
Information-based policies for conservation can be used, particularly where pricebased strategies may not be politically feasible or effective. More generally, energy conservation is desirable in the economy as an alternative to costly capital investments in new power generation, and can help delay managerial investment decisions for new generation capacity. While behavioral-based conservation strategies can be viable alternatives to new capital projects by promoting peak load-shifting and conservation, they can also be implemented immediately. Consumer messaging strategies do not require long lead times typical of new capital investments in energy generation, distribution and storage.

Keywords: energy conservation, social norms, consumer choice, randomized field experiments

References
Allcott, Hunt and Sendhil Mullainathan. (2010). Behavior and Energy Policy. Science. 327(5970) 12041205 Alcott, Hunt. (2011). Social Norms and Energy Conservation. Journal of Public Economics. 10821095 Ayres, Ian, Raseman, Sophie, Shih, Alice. (2009). Evidence from Two Large Field Experiments that Peer Comparison Feedback Can Reduce Residential Energy Usage. NBER Working Paper 15386. (September) Brookes, Leonard (1990). Energy Efficiency and Economic Fallacies. Energy Policy 783785 Costa, Dora, and Kahn, Matthew E. (2010) Energy Conservation Nudges and Environmentalist Ideology: Evidence From A Randomized Residential Electricity Field Experiment NBER Working Paper 15939 (April) Dolan, Paul, Metcalfe, Robert. (2011) Better Neighbors and Basic Knowledge: A Field Experiment on the Role of Non-Pecuniary Incentives on Energy Consumption LSE and Oxford Working Paper, (October) Dubin, Jeffrey, Miedema, Allen K., and Chandran, R.V. (1986) Price Effects of Energy-Efficient Technologies: A Study of Residential Demand for Heating and Cooling. Rand Journal of Economics, 17(3) 310325 Ferraro, Paul J., Price, Michael K. (2011) Using Non-Pecuniary Strategies to Influence Behavior: Evidence from a Large Scale Field Experiment NBER Working Paper 17189 (July) Greening, Lorna, Greene, David L., Difiglio, Carmen. (2000) Energy Efficiency and ConsumptionThe Rebound EffectA Survey Energy Policy (28) 389401 Henly, J., H. Ruderman, and M. D. Levine. (1988). Energy Savings Resulting From The Adoption of More Efficient Appliances: A Follow-up. The Energy Journal (2) 163170 Khazzoom, J. D. (1980). Economic Implications of Mandated Efficiency In Standards For Household Appliances. The Energy Journal 1(4) 2140