Domestic energy bills have risen significantly in the past 10 years, piling pressure on household budgets. The current and previous government have tried to soften those rises with energy efficiency policies mainly focused on improving the fabric of people's homes, with varying levels of success.
There has been less policy focus on 'energy behaviour'; how people use energy in their home. Research suggests people continue to waste energy in their homes. Simple changes in how people use energy are often identified as a cheap way of reducing energy bills, as well as offering a cost effective way of cutting carbon emissions.
Behavioural economics have identified a series of nudges, social norms and other techniques that could help transform the way households use energy. However, questions remain about how these innovations can be delivered at scale and what policy measures should support them. This debate will discuss how policy can harness the potential of such understandings. In particular, it will consider:
Are householders ignoring opportunities to make simple cuts in energy use? What behavioural barriers might be getting in the way? What are the potential energy savings from behavioural measures? What role can behaviour change play in meeting energy efficiency goals?
Are policy changes needed to show people where they are wasting energy in the home? Do current policy measures like the Green Deal, the Energy Company Obligation and Electricity Demand Reduction do enough to address behavioural barriers?
Is regulation needed? Will the market not just deliver behavioural innovations if they are cost-effective?
Will measures like a price freeze undermine signals for households to become more energy efficient?
Will the smart meter programme, as currently envisaged, deliver the kind of savings it needs to?
Rt Hon Greg Barker MP - Minister of State for the Department of Energy and Climate Change
Jonathan Reynolds MP - Shadow Minister for the Department of Energy and Climate Change
Alex Laskey - President and Founder, Opower
Guy Newey - Head of Environment and Energy, Policy Exchange
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Households could reduce their gas and electricity bills by as much as £70 a year if they were allowed to compare each other’s energy bills. Smarter, Greener, Cheaper, shows there is evidence both internationally and in the UK that households cut the amount of energy they use when their energy use is compared to that of a more energy efficient neighbour.
Questions remain about whether government polices will provide enough of an incentive to get over the ‘hassle’ of improving energy efficiency. Are extra nudges, changes in social norms and default adjustments needed to unlock genuine energy efficiency opportunities and make it easier for customers to reduce their bills?
Nudge theory has had a big impact on David Cameron and his close team of advisers, so much so that Number 10 has a unit – the “behavioural insight team” specifically dedicated to turning behavioural insights into policy. This discussion will draw upon Richard Thaler’s work to explore a number of policy areas which might be driven by the “nudge” agenda.