March 14, 2018
For Utilities Trying To Drive Conservation, Mixed Messages May Be Best
Koichiro Ito goes deeper into his research on the optimal electricity pricing structures for utilities that want to get their customers to conserve energy.
By Robert Waltonvia Utility DIve
There are many situations where utilities call on customers to conserve energy, including efforts at peak load reduction, responses to fuel shortages and extreme weather. Some of the issues are persistent, while some are more situational — and for utilities, how they ask customers to turn down their energy use matters a lot.
New research from the University of Chicago concludes price-based incentives are the most effective and consistent way to tweak customers' energy use. But because of the difficulty in developing new electricity rates, the study also highlights the usefulness of non-price incentives. Utilities are also experimenting with incentives that use a mix of the two ideas, with strong results.
Ultimately, the ideal solution is a mix of cost-effective price- and non-price incentives that are optimized to the given situation, according to Koichiro Ito, an assistant professor at the University of Chicago's Harris School of Public Policy. But he said utilities looking for a sustained response should be looking towards price-based incentives.
"The bottom-line message is that non-price incentives are effective but potentially only for the short run," Ito told Utility Dive. "By comparison, price incentives are stronger and persist over time, even if you use it multiple times. ... Utility companies should use both types of approaches depending on their target."