Could Behavior Change Insights Drive Demand for Energy Efficiency?

Proven strategies for encouraging customers to use new technologies and seek financing are critical to the diffusion of energy efficiency solutions. Even with financing, energy efficiency programs face significant hurdles in driving customer demand, particularly in the small- and medium-scale markets. The recent Behavior, Energy & Climate Conference (BECC) 2014 offered insights on customer motivation.

Some studies explored at the conference identify what factors drive or impede consumer demand for energy efficiency. The presenters described opportunities to incorporate these findings into marketing programs.

BECC 2014 was held on Dec. 6-9 in Washington, DC. It was organized by American Council for an Energy-Efficient Economy, Stanford University’s Precourt Energy Efficiency Center, and University of California-Berkeley’s California Institute for Energy and Environment.

Prepayment for Electricity

Nat Treadway, managing partner at Distributed Energy Financial Group (DEFG), said prepayment for energy services in the United States could change the way many customers interact with energy.

DEFG organizes the Prepay Energy Working Group for industry professionals. The group estimates 200,000 customers currently prepay for electricity in North America.

Prepayment is not a new concept. Everyone prepays for gasoline to fuel their cars. We pay for groceries in the supermarket before we can eat them. Nearly 30 percent of cell phone users are on prepaid mobile plans, according to AT&T. Prepayment for electricity is already commonplace in Europe.

“Prepayment for energy services appears to change the way consumers behave,” Treadway said. Analysis of monthly billing data shows energy savings of 10-15 percent for these programs. 

If prepayment results in greater customer engagement in the future, it could drive demand for energy efficiency and lead to interesting interactions with programs like on-bill repayment.

“With prepayment, consumers have increased control over household budgets,” Treadway said. “They receive daily usage and cost information, which informs them about their behaviors that affect usage.”

Treadway described the customer experience with prepaid electric service in Texas, where competitive retail electric providers offer service to the majority of residents. In Houston, 11 retail electric providers offer prepayment options.

Demand for

What if you could motivate people to save energy not for environmental or even financial reasons, but to support their local school districts?

Diane Schrader, a consultant, spoke about alternative ways to motivate participation in energy efficiency programs. She used the example of a startup called OhmConnect that is motivating households to participate in demand response programs that fundraise for schools.

Communities can crowdfund to support schools by saving energy and donating the financial savings, Schrader said.

In one pilot currently underway, 300 homes and 2500 participants are raising about $1 million for one school district.

Schrader quoted Stefan Heck, author of Resource Revolution: “You cannot lead with energy efficiency as a marketing tool.”

“In the United States, 15 percent of the population says they will pay a premium for ‘green.’ But only 1 to 3 percent actually do. Successful companies lead with what’s more convenient, sexier, faster and easier.”

Prosumers and a Market

How will shifts in consumer interaction with energy services shift the opportunity for energy efficiency finance?

Yael Parag, senior lecturer at the School of Sustainability at the Interdisciplinary Center, said consumers will become prosumers of energy and energy savings – and that innovators should be prepared for a shift to a “negawatt market.”

“This negawatt market treats a unit of saved energy as a commodity tradable between consumers, utilities and generators,” Parag said. “It’s beyond the suppliers providing all the services and demand reduction. It’s not demand responding to supply constraints.”

“A negawatt market goes beyond efficiency,” Parag said. “We have had feed-in tariffs for generations. The question is – should we have feed-in tariffs for savings if these are very valuable services? Should we think about how to make the consumer more active here?”

You may email the authors of any of the Clean Energy Finance Forum's articles via our contact form.

Find additional related content on these topics: 
CBEY logo bug