Why are energy users so hopeless at economics? (Or why we should read, sleep and socialise more)

At this week’s seminar, Dr Philipp Grunewald of the University of Oxford discussed a different way of looking at energy. Normally the focus is on the economic and environmental cost of energy use but he has been researching the value of energy to people and the joys of energy.

The joys of energy

UK energy policy is deeply grounded in economics and the idea of competitive markets. So why do the people fail so miserably at getting it? They do not switch supplier, despite being on unnecessarily expensive tariffs; they do not install efficiency measures that would pay for themselves; they complain about the cost of renewables, even when these have become cheaper than some fossil fuels. Smart fridges could save the UK energy system significant sums of money, by providing response services. Yet, the vast majority of people is very hostile to this technically sound, safe and economically ‘rational’ solution.

Why do people make such ‘irrational’ choices, when it comes to energy?

Three connected reasons emerge from our recent research:

  1. We successfully created an energy system to disengage energy users
  2. Energy service and their cost are separated by multiple layers of disconnect
  3. People enjoy using energy

Strange as it may sound, part of the problem may result from how successful the UK energy provision has been over the past decades. We have designed a system that works flawlessly. It hides all that messiness (many miles) behind the meter. We minimised the need for people to engage – as Steve Jobs put it: ‘it just works’. Nothing for you to do, but to enjoy it. Don’t worry about how it is done. Back in the days when cars frequently broke down, at least one gained a sense of the bits involved from opening the bonnet. Not only is there no need to open the bonnet any more, what happens behind it is so slick, we probably wouldn’t understand. This applies to the energy system as a whole, but also to the individual appliances we use. They turn energy into service with magical ease. No rattling noise or steam that might give away that work is being done. Just slick user interfaces.

A well oiled machine

This creates an effective disconnect between the service and the cost. In fact, several layers of disconnect. Say you crave a cup of tea. You fill the kettle, boil it, pour it, enjoy your drink. While you think about tea, the economic you should have thought about the appliance, its power, the time it was on for, multiply the two, then remember the tariff you’re on, multiply that with the result of your energy calculation and evaluate the result in relation to the utility value of your cup of tea. Actually, we should go further. Check the supply mix is at the time, compute the marginal cost of generation and the marginal emissions factor and roll those into your assessment. Why, oh why, don’t people do this?

Perhaps they just want to enjoy a cup of tea. At least that is what we find in our research on household electricity use.

When we ask hundreds of people to report their activities and how much they enjoy them, it turns out that the times of high electricity use are among the most enjoyable. Do they think about the environmental or monetary cost at the time? No. Nor do they seem equipped to do so. During intervention experiments participants try to reduce electricity use at certain times. Many make a significant effort by turning off their mobile phone chargers. The disconnect between service and energy is so effective that an interesting heuristic appears to take hold: if it is very valuable to me, it must use a lot of energy. The majority of people think that phone chargers are responsible for over 5% of UK electricity consumption. In fact is is less than 0.1%. This makes informed and economically rational choices rather difficult.

smiley faces

Of course, the relationship between electricity use and enjoyment is more nuanced than that. Many high uses of electricity coincide with very low enjoyment: laundry, washing up and other house work are among the least enjoyable high energy activities. They also coincide with times of high system demand. It would be in the household’s and the system’s interest to shift these. This is where new service offerings may be able to add significant value. Why not have a laundry service? Well, many reasons, but it is worth raising the potential benefits.

There is another category of interesting household activities: low energy use with high enjoyment. Among the front runners are reading, sleeping and socialising. All three can be argued to be in short supply in modern western society. Promote those and we may have more effective take up than abstract concepts of kWh and the cost of electricity. Engage people with what they think and care about. That isn’t always just their electricity tariff.

The Meter study collects high resolution data on household activities and their electricity use. Find out more at http://www.energy-use.org

Dr Philipp Grunewald

Dr Philipp Grunewald

Dr Philipp Grunewald leads the Energy Flexibility Theme at the Environmental Change Institute, and is Deputy Director of Energy Research at the University of Oxford.

He was part of the second cohort of Energy Futures Lab’s MSc in Sustainable Energy Futures students in 2008. His PhD at Imperial explored the future role of electricity storage in low carbon energy systems.

Since 2013 he has worked at Oxford on the integration of renewables through storage and demand response. He is an engineer by background. Phil obtained his first degree in Business Engineering from Wedel, Germany. For 10 years Phil worked on advanced laser processes for the semiconductor and photovoltaic industry.

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