Thou Shalt Covet Thy Neighbor’s Electric Bill

by Kristen Wright, senior editor

One of the easiest ways consumers can reduce their electric bills is to replace their old plug-in gadgets and appliances with new energy-efficient ones.

People happily–and voluntarily–stood in lines outside appliance stores on the last day states issued Energy Star-qualified appliance rebates.

But remove consumer choice by mandating energy efficiency, and a notable amount of Americans will tell you, “Don’t screw with my lightbulbs.”

The complaints go all the way up to Energy Secretary Steven Chu, who has heard it at home.

“My wife doesn’t like compact fluorescent lightbulbs,” Chu said during the GridWise Global Forum in November, “but I overruled her.”

Chu clarified during his opening keynote that the U.S. didn’t outlaw incandescent lightbulbs, just inefficient incandescent lightbulbs. The newest energy-efficient lightbulbs are better than their predecessors, Chu said; they turn on instantly and use 72 percent less energy.

According to the Department of Energy, artificial lighting consumes 10 percent of U.S. households’ electricity use. Upgrading 15 of the inefficient incandescent lightbulbs in a home could save about $50 a year.

But how can utilities, vendors and the government express those cost-saving and environmental benefits to electricity consumers who value choice without coming across as bullies?

A communication gap exists. That’s one reason the GridWise Global Forum asked Robert “Bob” A. McDonald, chairman of the board, president and CEO of The Procter & Gamble Co. (P&G), to deliver its ending keynote address on strategies for successful consumer engagement.

P&G invests $350 million in consumer research annually, then markets its products accordingly. The company did $84 billion in sales last year across 180 countries and served 4.4 billion customers, McDonald said.

“We have a saying at Procter & Gamble: that the consumer is boss,” he said.

The utility industry is learning it can empower customers through a force stronger than saving the environment or money: The big motivator is pure, old-fashioned, American competition, this time through social networking.

Coveting thy neighbor’s electric bill could become the new social norm.

Hunt Alcott, an assistant economics professor at New York University, published a study in the Journal of Economics supporting the subject, specifically Opower.

The Washington, D.C.-based company started by Harvard buddies Dan Yates, Opower CEO, and Alex Laskey, the president (who together ranked No. 36 on Fortune‘s 40 Under 40), is known best for its Home Energy Report, which compares consumers’ electricity bills with those of their neighbors.

Alcott analyzed Opower’s Home Energy Report projects that had begun by late 2009 with 12 utilities: six in California and Washington, six in the Midwest, one in the urban Northeast, and one in a suburban area in a mountain state.

According to Alcott’s analysis of 600,000 participating and control homes in the United States, the Home Energy Report demonstrates that consumer behavior can be changed substantially and cost-effectively with nonprice interventions, and the effects are equal to a short-term electricity price increase of 11 to 20 percent.

“Taken as a whole, these effects are remarkable: simply sending letters can significantly and cost-effectively affect energy use behaviors,” Alcott said in the report.

The cost-effectiveness, he said, compares favorably to traditional energy conservation programs. Consumption decreased 6.3 percent for households in the highest decile of pre-treatment consumption, and consumption by the lowest decile decreased 0.3 percent.

“I estimate that the average program reduces energy consumption by 2 percent,” Alcott said in the report.

Laskey said that by the end of next year, Opower will be in 50 million homes.

“Sixty-five percent of people receiving our communications are sharing them with their friends and family,” Laskey said.

The company announced in October that it will develop a new social energy app on Facebook with the National Resources Defense Council. So in addition to working with more than 60 utilities in the United States and Europe, now Opower can engage with Facebook’s 800 million users if they choose to participate.

The app will enable users to benchmark their homes’ energy usage against a national average of similar homes, compare their energy use with friends, enter energy-saving competitions, and share energy efficiency tips.

In other words, the new Joneses on the block can be in-your-face electricity-thrifty. The Smiths will get jealous and invest in more energy-efficient devices. And then they’ll all duke it out Facebook style.

If winning depends on it, consumers might even choose to screw with their lightbulbs.

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