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

Summary, in English

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.

• Author: Simon Bager; Luis Mundaca
• Department/s: The International Institute for Industrial Environmental Economics
• Publishing year: 2017-06-01
• Language: English
• Pages: 68-76
• Publication/Series: Energy Research and Social Science
• Volume: 28
• Links: http://dx.doi.org/10.1016/j.erss.2017.04.008
• Document type: Journal article
• Publisher: Elsevier
• Topic: Business Administration; Social Sciences Interdisciplinary
• Keywords: Behavioural economics; Demand-side response; Loss aversion; Residential sector; Smart meters
• Status: Published
• Project: Behavioural economics for energy and climate change policies and the transition to a sustainable energy system.
• ISBN/ISSN/Other: ISSN: 2214-6296