Navigant Research Blog

Nudging Users Toward Smart Energy Choices

Carol Stimmel — July 18, 2012

In writing the update to Pike Research’s smart grid data analytics report for 2012, I became simultaneously enthralled and spooked.  After all, big data and predictive analytics are not a new phenomenon.  The marketing department at Target can already figure out if I’m pregnant (I’m not) and send me money-saving coupons for diapers.  Surely, with the precision of the data being collected from smart meters, the utility should be able to help consumers understand their energy use to make better decisions.  The power of the human intellect combined with machine-driven pattern recognition has possibilities limited only by the imagination, and can provide significant value to the modernized utility and to society at large.

As technology advances and big data piles up, though, ethical questions frequently arise regarding the importance of data privacy.  What about the acceptable use of smart meter data to influence our actions?

All of a sudden, changing habits and behaviors seems like a complicated business.  Behavioral economists believe that emotions play a significant role in how we make decisions, that often those decisions aren’t in our best interests, and that perhaps it doesn’t help that we’re a little bit lazy.  These same economists explore “nudge theories” that employ suggestions and positive reinforcement that encourage us to alter our decision-making in beneficial ways, often below the level of our awareness.  It’s no surprise that politicians (the United Kingdom even has a “nudge unit”) and corporate culture managers love these theories.  With effective nudging, it should be possible to move individuals away from what many would see as inept decision-making (like overeating, not saving for retirement, wasting energy) toward those that support desirable policy goals (choosing healthy foods, saving money, and turning off the space heater).

 

Through advanced analytical techniques and predictive analysis, utilities and their service providers now have the potential to not only know who you are and when and how much energy you consume, but also to create a virtual fingerprint of consumption behaviors to discover how likely it is that you’ll be effectively nudged, how best to nudge you, and how hard.  Utilities can provide a consumer with information, tools, techniques, and customized money-saving pricing programs that will help save money and energy, without paying a big cost in comfort.  This is extremely encouraging from the perspective of realizing meaningful energy efficiency gains, but these techniques undeniably raise the specter of ethical acceptability and the overall smart meter creepy factor.  If the utility can tell I’m a restless sleeper because I toast a bagel at 2:00 a.m., is it going to nudge me to go to a doctor and get a sleep aid, armed with a coupon for Ambien?

You’re Free to Make Bad Choices

Malevolence is not necessarily inherent in a nudge.  In fact, critics point out that there is really nothing new with nudges.  Advertisers and public figures have long understood the power of emotional manipulation to alter our choices, without sacrificing our freedom of choice.  For example, social programs attempt to manipulate us by providing more information to improve decision making, such as with the extremely effective Meth Project designed to discourage drug use.  The choice to use drugs is still available, but the societal and individual value of such campaigns is undisputed.  Are you going to complain if your favorite grocery story puts oranges instead of chocolate bars in the checkout line of the grocery story to encourage more healthful food choices? And more to the point, what about information that helps consumers use less energy?  If consumers can freely choose to become more energy efficient and learn to conserve that can lead to lower energy prices and reduced carbon loading, that has clear value, to society, to the utility, and to the consumers themselves.  By contrast, New York City Mayor Michael Bloomberg’s proposal to ban the sales of large-size sugar-laden drinks was a shove, not a nudge.

One effective nudging technique is to provide people with clear details about their choices, and insight into what other people are doing with the same information (peer comparisons).  Many energy analytics companies provide techniques to deliver this nudge in different ways.  They can correlate utility information with various forms of third party data attributes (energy consumption patterns with Facebook posts, income and home characteristics) to help refine messaging that can help consumers make energy-savings choices.  For example, with a personalized home energy report, Opower reports seasonal savings as high as 3.5% achieved through providing information, neighborhood comparisons, and action steps to residential energy consumers.   This approach is a clear departure from traditional means of encouraging energy efficiency, and consumers respond positively to it.

At the same time, complete transparency into how we are being influenced is the key to maintaining freedom of choice.  As Spiderman’s Uncle Ben said, “With great power comes great responsibility.” Amazing things will doubtless come from the ethical use of big data to help promote new social norms, including reducing our carbon footprint and using energy wisely, but we bear the difficult task of balancing the forces between the preservation of personal freedoms and technological capability to influence behavior.  And that dichotomy must be respected.

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