Engaging Consumers: Utilities use behavioural science to encourage energy efficiency

Utilities use behavioural science to encourage energy efficiency

Utilities are increasingly looking at behavioural science to encourage and motivate consumers to reduce their energy consumption. Traditionally, economic models were used for studying the dynamics of electricity demand and supply, but of late, behavioural science is being considered for engaging customers in energy efficiency initiatives.

In the past, utilities had to think about involving customers on two main occasions: during bill arrival and pricing, and during blackouts. However, today’s competitive landscape means they need to engage with consumers more often and in a more effective manner. This is mainly because of increased deregulation and rising tariff rates, as well as the need of a utility to reduce service costs, create interest in other marketing programmes, create acceptance for smart meters, and become a trusted adviser and provider of services.

Smart meters provide insights into the electri-city usage of consumers, with data being collected at different frequencies (hourly, daily, monthly, etc). But investing in smart metering technology only takes care of part of the equation, as there needs to be a change in consumer energy behaviour as well. Lately, utilities have been taking steps to connect with consumers and encourage them to be a part of energy efficiency initiatives. For instance, utilities have launched web portals and customised websites where consumers can gauge their consumption; however, getting them to actually log in and take action is a different matter altogether.

Globally, scientists have been working on ways to bring in a behavioural change among consumers. This entails involving them in energy reduction endeavours through activities like insulation, replacing CFL bulbs with LED bulbs, and turning off idle equipment. These actions, which can be deployed swiftly and are more cost effective than setting up greenfield power projects, lead to significant energy savings. Behavioural scientists have identified many factors that affect the energy behaviour of consumers. For instance, they have often been found to delay monitoring their energy consumption statistics, and also shown a disinclination towards paying more for buying an energy efficient product. Knowing these factors can help utilities reduce energy use.

Value drivers

Some of the behavioural science-based value drivers for smart meters are discussed below:

  • Lower costs of customer acquisition through effective marketing: Smart meters can allow highly personalised outreaches through mail and digital channels with the use of data from monthly or bimonthly meter readings. For instance, utilities can send home energy reports (HERs) by mail or post, or eHERs by email. They can also create web portals that can be accessed through computers or cellphones. Utilities can also view individual household load curves for creating specific and tailored messages for each type of usage.
  • Reduced costs to serve via proactive engagement: Proactive customer engagement leads to fewer customer queries and complaints, as well as a greater shift to lower-cost interaction channels, the increased adoption of paperless billing, and on-time payments. With smart meter data, utilities can foresee high bills and alert consumers well in advance, enabling them to plan their usage and be prepared to pay the bills when they are generated.
  • More cost-effective, scalable programmes that promote energy efficiency: Utilities’ energy efficiency programmes generally experience a low level of awareness on the part of consumers. However, delivering insights in an engaging manner can lead to significant consumer interest. Smart meter data enhances customer experience in a behavioural energy efficiency programme. For instance, utilities can initiate a programme to rank consumers vis-à-vis their neighbours on the basis of energy consumption. They can also provide consumers with fresh insights for reducing energy consumption, or give a break-up of their usage for various activities (heating, cooling, appliances, electronics, etc). This would help consumers make informed choices regarding electricity consumption.
  • Increased adoption of demand response with smart meter data: Behavioural demand response drives customer awareness and peak energy savings without giving rise to the need for in-home devices. Studies indicate that behavioural demand response can lead to a reduction of 5-15 per cent in peak energy usage and lead to significant savings in the avoided capacity costs of a household.


The value of customer engagement in driving the success of smart grid technologies cannot be undermined. Apart from resulting in avoided costs, operational savings, load management and energy efficiency, it also helps utilities gain customer loyalty. Therefore, the communication of smart metering data to customers in a concise and easy-to-understand manner is crucial for smart metering technologies to have a positive impact on electricity consumption patterns.

With inputs from a presentation by Adam Welsh, Senior Director, Regulatory Affairs, Opower Asia-Pacific, at the India Smart Grid Week 2015