Can a Small Nudge Make a Big Impact on Household Energy Efficiency?

As America’s policymakers grapple with ways to reduce the nation’s carbon footprint, one often-overlooked area is ripe for improvement: household energy consumption. According to the Department of Energy, about 22 percent of energy consumed in the United States in 2016 was used by residential households. Yet, while residential energy consumption is massive and expensive, governments rarely employ simple methods to encourage energy conservation.

One of these methods is a residential energy audit, which serves to inform residents about possible cost-saving energy conservation techniques, such as keeping the thermostat down while they are at work or refitting their home with new insulation. Typically, these assessments occur when utility companies send auditors to test the energy efficiency of every room in a home. Consumers can save as much as 30 percent on their home energy bills by making the energy upgrades typically identified in these assessments. However, just like many other approaches to improving energy efficiency, energy audits face the problem of low uptake and high attrition. That is, not many people start them, and among those who do initiate the process, few complete the audits. According to a recent study, just 4 percent of U.S. homeowners completed an energy audit.

In a new study published in the Journal of Environmental Economics and Management, researchers Kenneth Gillingham of Yale University and Tsvetan Tsvetanov of the University of Kansas examined this topic. The authors designed a randomized field experiment, which involved providing each of 323 Connecticut households with a low-cost, carefully crafted postcard meant to “nudge” them to complete a scheduled energy audit. On this postcard, the authors took care to include a descriptive social norm (the number of participants in the community who had already received audits), salient information (the date and time of the planned audit), and a personal touch (a signature of the staff member who recruited the participant).

The results of this experiment suggest that by providing relevant information, a notecard can encourage residents to follow through with an energy audit. Specifically, the authors measured a statistically significant increase of 1.1 percent in the probability that a household would complete their audit on a given day. Furthermore, the nudge increased the overall energy audit uptake for an average participant who received the note by 6.5 percent. This intervention, with a cost of $2.40 per treatment, can therefore meaningfully increase the completion rate of energy audits. In doing so, the authors estimated that it could bring average annual energy savings of 2,690 kilowatt hours per household, as well as a lifetime reduction of 3.47 tons of carbon dioxide emissions.

In addition, the authors analyzed the effect of the nudge on people of different demographics. They found no significant difference in responses to the treatment between individuals with different political views. At the same time, the study did show that the postcards produced a substantially greater effect on households in smaller rural communities than those in urban areas. One possible explanation posited by the authors is that in these smaller communities, social ties are stronger, leading social norm-related information to have a larger effect.

Ultimately, while a nudge toward energy efficiency is a small step, it has broader implications for policymakers who may leverage information-provision tactics like this one, in the future. The method in this new study is especially promising, as it is very low cost and technologically feasible. In the internet era, public service announcements are an oft-forgotten tool, but one that, when employed properly, has the power to make a difference.

Article source: Gillingham, Kenneth, and Tsvetan Tsvetanov. “Nudging Energy Efficiency Audits: Evidence from a Field Experiment.” Journal of Environmental Economics and Management 90, (2018).

Featured photo: cc/Pornpak Khunatorn, photo ID: 1061085528, from iStock by Getty Images