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Luis Mundaca

Luis Mundaca

Professor

Luis Mundaca

How smart are electricity users with ‘Smart Metering’? A Behavioural Economics experiment

Author

  • Simon Bager
  • Luis Mundaca

Summary, in English

The purpose of this paper is to examine how behavioural biases affect consumers’ response to energy-use information provided through smart meters (SM). We take insights from behavioural economics and carry out two real-life experiments with SMs and electricity users. The experiments were conducted in Copenhagen (Denmark) to identify and assess the potential of two economic behavioural biases, salience and loss aversion. The results of the first experiment (i.e. installation of SM without further intervention) generally aligned with electricity use reductions found in previous research, and indicate that it may be reasonable to expect a reduction in electricity use in the medium-term (weeks/months) of ~5-7% approximately. Results of the second experiment (i.e. introduction of SM with and without intervention) show that subjecting participants to loss aversion and salience seems to affect their behaviour toward electricity use, as the intervention group reduced their consumption roughly twice as much as the reference group. With due limitations, the results suggest that the delivery of information to energy users needs to take into account not only its pure provision, but how it is designed, framed and presented. At all events, the results and reviewed studies strongly suggest that increased energy efficiency and energy conservation need to be addressed with a mix of policies – not only information schemes or the provision of feedback alone.

Department/s

  • The International Institute for Industrial Environmental Economics

Publishing year

2015

Language

English

Pages

1-1

Publication/Series

38th International Association for Energy Economics (IAEE) Conference

Document type

Conference paper

Publisher

International Association for Energy Economics

Topic

  • Energy Systems
  • Psychology
  • Economics and Business

Keywords

  • Behavioural Economics
  • Energy Efficiency
  • Households
  • EU energy policy
  • Smart Meters

Conference name

38th International Association for Energy Economics (IAEE) International Conference

Conference date

2015-05-25 - 2015-05-27

Conference place

Antalya, Turkey

Status

Published

Project

  • Behavioural economics for energy and climate change policies and the transition to a sustainable energy system.