NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Peer Comparisons Reduce Residential Energy Use

When customers received information on the energy consumption of their neighbors, average energy use declined by 1.2 to 2.1 percent.

When utility customers are told how much energy their neighbors use, those who are consuming more than average tend to cut their consumption. Average energy use declines by 1.2 to 2.1 percent, and the savings are sustained for periods of many months, according to a new study by Ian Ayres, Sophie Raseman, and Alice Shih. In Evidence from Two Large Field Experiments that Peer Comparison Feedback Can Reduce Residential Energy Usage (NBER Working Paper No. 15386), the authors examine data from two field experiments carried out by West Coast public utilities. "Together, the [two] experiments provide compelling evidence that properly framed peer comparisons can predictably lower energy consumption, particularly of the highest energy using households," they write.

Previous studies of the provision of peer information have found mixed results. However, this study analyzes a far broader customer base than past studies: 35,000 customers of the Sacramento Municipal Utility District (SMUD) and 40,000 customers of Puget Sound Energy (PSE). It also examines the phenomenon over a relatively long period (12 and seven months, respectively), looks at daily impacts on energy use, measures changes for both electricity and natural gas, and investigates the effects of different timing and formats of energy-saving messages.

In both the SMUD and PSE experiments, certain households were randomly assigned to control and test groups. The test groups were sent reports, either on a monthly or quarterly basis, showing the energy use of similar homes in their area. These reports contained not only data but also messages (including emoticons, computerized happy faces) designed to convince customers of the virtues of energy conservation.

On average, the effects of such reports were larger for families living in lower-value houses than for families in higher-value houses. Also, the households with relatively higher energy use tended to save more than those with relatively lower energy use.

In Sacramento, the energy reports did not produce a "boomerang" effect – there was no evidence that households using the lowest amount of energy increased their energy consumption once they found out how much more energy their neighbors were using. But in the PSE experiment, the homes using the least amount of energy before the study did boost their consumption by an average of 3.4 percent. By contrast, the highest energy-using households decreased their energy use by an average of 6 percent, so overall energy demand declined.

In the SMUD experiment, households receiving monthly comparison reports saved $31 a year in reduced electricity usage; those getting quarterly reports saved $13. Extrapolating from these results suggests that if the mailings had been sent to all of SMUD's customers, they would have saved $15.2 million and used the equivalent of 9 million fewer gallons of gas.

In the case of PSE, the average household saved almost $14 a year in reduced electricity usage and $11 in reduced natural-gas use if they received monthly reports with comparisons. Those who received the mailings quarterly saved almost as much: $11.19 and $11.09, respectively. If the program were extended to send quarterly comparisons to all PSE customers, the authors estimate that the utility's customers would save $20.7 million a year and use 14.3 million fewer gallons of gas.

In both experiments, energy use dropped almost immediately after the mailings went out, suggesting that households were making behavioral rather than durable changes (remembering to turn off lights rather than, say, caulking their windows). Also, in the PSE experiment, where researchers could track daily energy use, the biggest changes came during two-day periods around the weekends, suggesting that reductions occurred because customers were being more mindful of their energy use. The authors warn that these results are not conclusive, however.

The authors conclude that "experiments suggest that privately-delivered peer comparison feedback, such as direct mailings, might prove an effective tool in a range of other situations." For example, "schools might mail parents reports of how many absences or times late their children had compared to peers. Dentists might send mailings to their infrequent visitors indicating how often typical patients come in for cleanings. A gym might inform its lazier patrons of how often typical members work out."

-- Laurent Belsie

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