Show us the money: incentivising home energy habits

Woman holds cup of tea while looking at smart energy meter (habits)
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New research from Monash University Business School has tested whether monetary or non-monetary incentives can encourage households to shift their home energy habits to better align with solar energy output.

Rooftop solar has created opportunities for households to consider shifting their electricity consumption to times of the day that are more cost effective. During the daytime when the sun is at its strongest, it can provide low-cost electricity for households as opposed to in the evenings when the sun has set. The research findings provide compelling evidence for retailers to take advantage of usage trends and pass these savings on to Australian households.

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The incentive scheme specifically tested:

  • Incentives to move consumption into daylight hours (solar sponge incentives) and incentives to move away from non-daylight hours (peak shave incentives)
  • Financial subsidies and rebates per kWh shifted and non-monetary incentive schemes where households instead earned status points per kWh shifted
  • Incentives that target routine (every day) actions and those that target ad hoc (less frequent) actions.

Led by Dr Gordon Leslie from Monash Business School’s Department of Economics, in collaboration with Race for 2030 and Powerpal, the research provided insight into the most effective way to encourage households to alter the timing of their energy use within a day, and identified the economic value that this can create.

“We enrolled over 6,000 Victorian households, with and without solar panels, to determine if providing incentives to increase consumption during the day was more effective than providing incentives to reduce consumption at night,” Dr Leslie said.

“The results showed that certain price conditions could generate financial benefit for both households and retailers if customers move from generic fixed rates to rates that encourage greater daytime use.”

Forty-two per cent of solar households reported environmental reasons being more important than financial reasons for motivating their load shifting habits, while 37% of non-solar households reported the same motivation.

“We found non-solar households were less engaged than solar households, when it came to changing their pattern of electricity use in response to some, but not all of the incentive programs. In contrast, solar households responded to all incentive programs, including non-monetary rewards, highlighting that careful incentive design and targeting can improve energy consumption,” Dr Leslie said.

Monetary incentives encouraging households to use more energy in the middle of the day was the most effective incentive for non-solar households. This incentive saw a 6% increase of energy usage during the day, while decreasing the need to use energy at peak times when the sun has set.

While providing such incentives everyday may not promote flexibility with respect to real-time conditions, ad hoc incentives can be a useful tool to implement on specific days to support and contribute to grid stability.

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“Encouraging households to think about their energy use habits and shift their usage based on environmental factors such as the time of day and the weather, is a crucial step in maximising the economic value from renewable energy in Australia.”

“Knowing that customers are willing to engage with time-varying prices and change their consumption habits accordingly, energy retailers are well positioned to incorporate this data into their offerings for their customers,” Dr Leslie said.

The research findings identify opportunities for both industry and policymakers. The results showcase how electricity plans can be developed to encourage and reward customers who shift their energy use to times of day when electricity is generated by cheap and clean energy sources.

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