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Making ‘Smart Meters’ smarter? Insights from a behavioural economics pilot field experiment in Copenhagen, Denmark

Bager, Simon and Mundaca, Luis LU (2017) In Energy Research and Social Science 28. p.68-76
Abstract

This paper examines the relationship between loss aversion and consumer behaviour in a non-price policy intervention that followed the installation of smart meter (SM) technology. Drawing upon insights from behavioural economics, we propose that consumers underestimate potential gains and overestimate potential financial losses resulting from electricity use. To test the hypothesis, we carried out a pilot study involving the installation of SM technology in Copenhagen, Denmark. The analysis used two baselines, and the differential effects revealed that the provision of loss-framed, salient information reduced daily demand by 7–11%, compared to unframed information. Reductions in standby consumption were more pronounced, with a... (More)

This paper examines the relationship between loss aversion and consumer behaviour in a non-price policy intervention that followed the installation of smart meter (SM) technology. Drawing upon insights from behavioural economics, we propose that consumers underestimate potential gains and overestimate potential financial losses resulting from electricity use. To test the hypothesis, we carried out a pilot study involving the installation of SM technology in Copenhagen, Denmark. The analysis used two baselines, and the differential effects revealed that the provision of loss-framed, salient information reduced daily demand by 7–11%, compared to unframed information. Reductions in standby consumption were more pronounced, with a differential effect of 16–25%. Despite the limitations inherent in a pilot study, notably the small sample size, the findings suggest that policies that address SM technology need to consider not only the pure provision of information, but also how it is designed and presented to users. Several aspects for further research are identified.

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author
organization
publishing date
type
Contribution to journal
publication status
published
subject
keywords
Behavioural economics, Demand-side response, Loss aversion, Residential sector, Smart meters
in
Energy Research and Social Science
volume
28
pages
9 pages
publisher
Elsevier
external identifiers
  • scopus:85017908551
  • wos:000405725500009
ISSN
2214-6296
DOI
10.1016/j.erss.2017.04.008
language
English
LU publication?
yes
id
572ba399-8334-4716-b631-b323603edc11
date added to LUP
2017-05-12 08:04:19
date last changed
2017-09-18 11:35:44
@article{572ba399-8334-4716-b631-b323603edc11,
  abstract     = {<p>This paper examines the relationship between loss aversion and consumer behaviour in a non-price policy intervention that followed the installation of smart meter (SM) technology. Drawing upon insights from behavioural economics, we propose that consumers underestimate potential gains and overestimate potential financial losses resulting from electricity use. To test the hypothesis, we carried out a pilot study involving the installation of SM technology in Copenhagen, Denmark. The analysis used two baselines, and the differential effects revealed that the provision of loss-framed, salient information reduced daily demand by 7–11%, compared to unframed information. Reductions in standby consumption were more pronounced, with a differential effect of 16–25%. Despite the limitations inherent in a pilot study, notably the small sample size, the findings suggest that policies that address SM technology need to consider not only the pure provision of information, but also how it is designed and presented to users. Several aspects for further research are identified.</p>},
  author       = {Bager, Simon and Mundaca, Luis},
  issn         = {2214-6296},
  keyword      = {Behavioural economics,Demand-side response,Loss aversion,Residential sector,Smart meters},
  language     = {eng},
  month        = {06},
  pages        = {68--76},
  publisher    = {Elsevier},
  series       = {Energy Research and Social Science},
  title        = {Making ‘Smart Meters’ smarter? Insights from a behavioural economics pilot field experiment in Copenhagen, Denmark},
  url          = {http://dx.doi.org/10.1016/j.erss.2017.04.008},
  volume       = {28},
  year         = {2017},
}