Keeping Up With The Joneses to Save Energy

This fall, 50,000 Massachusetts power customers are getting their first energy report cards in the mail. Just as in school, they're being judged against their peers, with the model citizens getting smiley faces and the laggards getting advice for cleaning up their acts.

Until now, these homeowners could only judge their own energy use by their month-to-month bills. The new Home Energy Reports (HERs) compare their energy use to that of neighbors with similar demographics and similar size homes.

Officials hope the peer pressure encourages users to take a few simple steps to stop wasting electricity — and money.

A few utilities that are testing HERs were able to reduce energy consumption up to 3.5 percent over the summer, says Arlington, Va.-based OPOWER (formerly Positive Energy), an energy efficiency software company that designed and delivers HERs for 21 utility companies, including six of the 10 largest in the U.S.

If the system spreads nationwide, OPOWER co-founder and President Alex Laskey says, it could help cut back on the 20 percent of greenhouse gas emissions that come from residential electricity use and produce savings equivalent to taking 6 million cars off the road.

Motivating Behavior Changes

Putting the basic desire to keep up with the Joneses to work for energy savings is delivering results.

"The exciting thing about HERs is that PSE (Puget Sound Energy) saw a statistically significant reduction of use within 48 hours of customers receiving the reports for the first time," said Todd Starnes, manager of residential energy efficiency for the utility.

The Sacramento Municipal Utility District (SMUD), which launched the first utility-run HER pilot program in April 2008 with 35,000 households, found that the first year's reduction of energy use was between 2.1 percent and 2.2 percent. The second year is delivering 2.8 percent in annual savings, with 3.5 percent in savings during the summer.

Connexus Energy's pilot program for 40,000 Minnesota households returned similar results. It also revealed that residents receiving monthly energy reports rather than quarterly reports saved more.

Most of the customers made small changes in behavior — installing compact fluorescent lights, turning off lights when they left the room, shutting down computers at night, and adjusting thermostat settings, according to SMUD and Connexus Energy.

"They knew about these before, but the home energy reports reminded them, and they became better at it," said Ali Crawford, project manager for SMUD.

Early indications show that energy savings from HERs get better over time, perhaps because "the reports tell residents what they can do to save, and if they see that their neighbors are saving, they know that it's feasible for them to do it too," said Dr. Robert Cialdini, OPOWER's chief scientist and the author of Influence: Science and Practice (2009).

Over time, customers may also make bigger investments, such as insulating windows or buying more efficient appliances. And while households that start out with higher consumption tend to show more improvement, PSE is finding as much or more savings in households ranked in the upper tiers, probably because they want to retain their status.

When Robert Moffitt and his wife were randomly selected to be part of the Connexus Energy pilot program, they were delighted. They've been a green household for years, but the HERs made them more aware of their habits and motivated them to do better.

"I liked getting the reports with two smiley faces on them — it was so affirming and made us feel we were making a difference," Moffitt said.

"We are in the top 5 percent of all our neighbors for energy savings, so we're 'super savers.' During the summer when we used air conditioning, we dropped into the 'good savers' category ... and we were definitely motivated to get back into the 'super savers' group again."

Why HERs Work

The HERs are based largely on Cialdini's behavioral science research on persuasion and influence.

In 2007, Cialdini and colleagues conducted an experiment that involved placing one of four door hangers on the doors of participants once a week for a month. The door hangers informed residents that (1) they could save money by conserving energy, or (2) they could save the earth's resources by conserving energy, or (3) they could be socially responsible citizens by conserving energy, or (4) the majority of their neighbors tried regularly to conserve energy. Although residents reported that they would be least influenced by their neighbors' energy usage, this was the only type of door hanger information that led to significant efforts to conserve energy.

In a BBC interview, Cialdini's colleague Vlades Griskevicius, a professor at the University of Minnesota's Carlson School of Management, explained,

"On the one hand, you want to be like everyone else; on the other hand you want to be better than everyone else.

"If energy conservation is the important topic of the day, that's the topic you want to compete with your neighbors about. ... If we're doing better than our neighbors, it has long lasting effects on our genes. ... It's about reproduction and status which enables you to ... attract better quality mates and have better quality children."

Customer and Utility Satisfaction

Over 1 million U.S. households are now receiving energy report cards by mail or online.

The reports also offer ways to improve — Quick Fixes, Good Investments and Big Gains — along with the amount of savings each would produce. With some, a web component offers energy saving suggestions tailored to the customer, with potential savings in dollars, payback period and rebates; a goal setting and commitment section; comparisons with other customers; and energy facts.

"The HER program has engaged customers more than any other energy savings program I'm involved in. They are excited about it," said SMUD's Crawford.

At Connexus, customers in the HER program scored 2 percent higher on the Customer Satisfaction Index than a control group, said Bruce Sayler, the company's manager of regulatory and governmental affairs.

Customers can opt out of the program if they're not happy, he said, but less than 1 percent do, and those customers tend to cite a "Big Brother" feeling.

The 3.5 percent energy reduction is comparable to the effects from much more expensive energy savings programs, yet HERs only cost $10 per customer, so they are cost-effective for the utilities. Sayler said that with savings of 5 to 5.5 cents per kilowatt hour, HERs are the second most cost-effective program, after CFLs, that Connexus Energy runs in its efforts to meet its renewable electricity standard. Minnesota mandates utilities reduce energy sales by 1.5 percent by January 2010 and get 25 percent of their electricity from renewable sources by 2025.

But how does selling less of their product affect the utilities? Energy savings help utilities avoid expenditures, Starnes explained:

"By decreasing the amount of energy customers are using, PSE needs less capacity, so we can delay buying that next wind farm or power plant. The longer we can hold off making those long-term investments, the better."

But Sayler admitted that because Connexus is a cooperative, "With costs going up and the savings on electricity, we will eventually have to charge customers more for the cost of electricity to meet the state mandates."

HERS are playing a key role in meeting state mandates and energy savings goals. "We looked at the potential of what we'd be able to save with equipment programs, and realized that we wouldn't be able to make our goals," said Crawford. "We needed a whole new kind of energy savings program like the HERs."

New Developments for HERs

OPOWER plans to expand to more utilities and households in conjunction with technical programs and metering, Cialdini said.

A social networking component is also in the works because selecting and interacting with one's own chosen community will likely prove even more motivating to customers than physical neighborhoods. PSE is already experimenting with a small social media component and has plans to incorporate daily or hourly meter readings into its HERs to provide more precise feedback about energy use.

To explore the parameters of HERs, some customers will be taken off the program to see if their behavior changes continue and some will receive HER data via email and online to test if these cost-saving methods are equally effective.

In January, SMUD plans to roll out a permanent three-year HER program with some new features. A ranking module from 1 to100 will encourage customers by showing them how much they have improved even if they haven't saved enough to get into the next more energy efficient category. SMUD is also developing a website which will customize energy saving tips by reflecting new information from customers (such as if they've just bought an Energy Star appliance), and give people the opportunity to create their own communities by choosing the criteria by which they're defined.

Keeping Up with the HERs

In California, a new law is encouraging utilities to create pilot programs comparing residents' energy usage with that of others. Meanwhile, a variety of energy efficiency programs are being developed to tie into the smart grid wave.

Microsoft's Hohm will inform residents where energy is being used in their homes, compare usage with others in the area, and suggest ways to save energy.

Google's Power-Meter will take real-time energy consumption data from a smart meter and display it on iGoogle for free.

Greenbox's web-based solution analyzes home energy use and displays it on a web dashboard.

Efficiency 2.0 puts customers on a "diet" for energy use with a step-by-step plan, social networking and comparisons, through the web, email or text message.

As Efficiency 2.0's CEO Tom Scaramelino said,

"The race is on for a scalable energy efficiency program."


See also:

McKinsey's Energy Fix for Developing Countries: Efficiency

Climate Legislation Could Be a Catalyst for Energy Efficiency

Energy Efficiency Funds Saving Our Bacon

New Business Model Cuts Up-Front Costs to Spur Energy Efficiency


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