Inefficiencies in Residential Use of Energy -- A Critical Overview of Literature and Energy Efficiency Policies in EU and Sweden

Broberg, Thomas; Kažukauskas, Andrius

doi:10.2139/ssrn.2573047

Cited by 5 publications

(6 citation statements)

References 113 publications

(135 reference statements)

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“…As energy-efficient electrical appliances are usually more costly than less efficient appliances, boundedly rational consumers will tend to opt for the less efficient appliances with lower upfront cost. This situation can be classified as a behavioural failure (Broberg and Kazukauskas, 2015).…”

Section: Introductionmentioning

confidence: 99%

Narrowing the Energy Efficiency Gap: The Impact of Educational Programs, Online Support Tools and Energy-Related Investment Literacy

et al. 2017

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in Department of Economics, Centro de Investigación y Docencia Económicas (CIDE)Last revision: September 21, 2017 AbstractThere is evidence that many individuals make suboptimal investment decisions when the benefits and costs associated with that decision are distributed over time. One example is the decision to adopt new electrical appliances, with the benefits of choosing a more energyefficient device materializing only in the future. This paper analyses the impact of the level of an individual's energy-related investment literacy on the adoption of energy-efficient appliances. Moreover, the empirical analysis explores the impact of decision support tools such as educational slides on the probability that individuals identify the appliance with the lowest lifetime cost, which is ideally also the most energy-efficient appliance. To test the influence of these decision support tools, we developed an online randomized controlled trial and implemented it on two independently chosen samples of the Swiss population. One treatment offers a short education program on how to calculate the lifetime cost of an appliance -via a set of information slides. The second intervention provides access to an online calculator that supports the investment decision-making of the individual. Results across the two samples are encouraging. We find that i) pre-treatment energy and investment literacy positively impact on the probability of identifying the appliance with the lowest lifetime cost; ii) the reinforcement of energy-related investment literacy increases the rate at which individuals identify the appliance with the lowest lifetime cost; and iii) while both interventions are effective in increasing the chances that an appliance with the lower lifetime cost is chosen, the online calculator turned out to be more effective than the educational program. Public policy implications are discussed.

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Section: Introductionmentioning

confidence: 99%

Narrowing the Energy Efficiency Gap: The Impact of Educational Programs, Online Support Tools and Energy-Related Investment Literacy

et al. 2017

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“…the frequent observation that individual decision-makers do not choose the most energy-efficient appliance, even if this appliance is also the most cost-efficient choice from the individual's point of view (minimizing lifetime operating costs). 1 The list of potential underlying reasons for the 'energy-efficiency gap' is long and includes a myriad of market and behavioral failures Howarth 1994b, Broberg andKazukauskas 2015). A large body of literature studies, for example, (implicit) subjective discount rates and their role for the persistence of the energy efficiency gap (Hausman 1979, Train 1985, Coller and Williams 1999, Harrison et al 2002, Epper et al 2011, Bruderer Enzler et al 2014, Min et al 2014.…”

Section: Introductionmentioning

confidence: 99%

“…In these cases, it requires an extra effort on the part of the consumer to search for this information. One important attempt to overcome this market failure is the disclosure of energy-related information in the form of energy-efficiency labels on light bulbs and appliances Howarth 1994b, Broberg andKazukauskas 2015), as implemented in many countries, including Switzerland. However, even if information on the energy consumption of the appliance is provided, the optimization regarding the lifetime cost of an appliance depends on additional information, such as the current and future electricity price, the frequency or intensity of use of the respective appliance and its expected lifetime.…”

Section: Introductionmentioning

confidence: 99%

Boundedly Rational Consumers, Energy and Investment Literacy, and the Display of Information on Household Appliances

2016

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It is an ongoing debate how to increase the adoption of energy-efficient light bulbs and household appliances in the presence of the so-called 'energy efficiency gap'. One measure to support consumers' decision-making towards the purchase of more efficient appliances is the display of energy-related information in the form of energy-efficiency labels on electric consumer products. Another measure is to educate the consumers in order to increase their level of energy and investment literacy. Thus, two questions arise when it comes to the display of energy-related information on appliances: (1) What kind of information should be displayed to enable consumers to make rational and efficient choices? (2) What abilities and prior knowledge do consumers need to have to be able to process this information? In this paper, using a series of recursive bivariate probit models and three samples of 583, 877 and 1, 375 Swiss households from three major Swiss urban areas, we show how displaying information on the future energy consumption of electrical appliances in monetary terms, i.e. as an estimate of yearly energy cost (CHF) rather than in physical units (kWh), increases the probability that an individual performs an investment analysis and hence chooses the most (cost-)efficient appliance. In addition, our econometric results suggest that individuals with a higher level of energy and, in particular, investment literacy are more likely to perform an optimization rather than relying on a decision-making heuristic and are more likely to identify the most (cost-)efficient appliance. Keywords: energy-efficiency, bounded rationality, energy-using durables, information, energy label, energy literacy, choice experiment JEL Classification Codes: D12, D80, Q41, Q48 * We are grateful to the Bundesamt für Energie (BFE) for financial support. BFE was not responsible for the study design, the collection, analysis and interpretation of data or in the writing of this report. The content does not necessarily represent the official views of BFE. All omissions and remaining errors are our responsibility. Furthermore, we would like to thank the cooperating utilities who sent out invitations to their customers to participate in our household survey. †

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“…In all cases, it is urgent to examine how households are likely to act under various circumstances. To some degree, the high hopes of an untapped potential of demand-side flexibility is contradicted by the vast literature on the so called energy efficiency gap arguing that consumers are rather price-insensitive and may react inefficiently to price signals due to informational, organizational and behavioral failures (for an overview, see Broberg and Kazukauskas, 2014). With this in mind, empowering end-consumers by enabling dynamic pricing (or other compensation mechanisms) and the provision of detailed information about their energy use may turn out to be ineffective.…”

Section: Smart Grids and Demand Responsementioning

confidence: 99%

Is Our Everyday Comfort for Sale? Preferences for Demand Management on the Electricity Market

Broberg

Persson

2015

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Inefficiencies in Residential Use of Energy -- A Critical Overview of Literature and Energy Efficiency Policies in EU and Sweden

Cited by 5 publications

References 113 publications

Narrowing the Energy Efficiency Gap: The Impact of Educational Programs, Online Support Tools and Energy-Related Investment Literacy

Narrowing the Energy Efficiency Gap: The Impact of Educational Programs, Online Support Tools and Energy-Related Investment Literacy

Boundedly Rational Consumers, Energy and Investment Literacy, and the Display of Information on Household Appliances

Is Our Everyday Comfort for Sale? Preferences for Demand Management on the Electricity Market

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