Nudging on electricity use optimization gone wrong

Sometime back, I had blogged, here and here, about a unique experiment by the Sacramento Electricity Utility that sought to "nudge" its consumers to reduce their electricity consumption by sending them a Home Energy Report (HER) that carried information about the consumption pattern of their neighbours. It was found that households which consumed more than their average neighbours reduced their electricity use (albeit by a small percentage) in response to the HER send alongside the monthly bill.

But more troublingly, Ray Fisman points to a recent study by Mathew Kahn and Dora Costa, who found that the effectiveness of such nudges are also dependent on the political leanings of its target. They found that while the program succeeded in encouraging high consuming (higher than the average of their neighbours) Democrats and environmentalists to lower their consumption, it actually led to increased consumption among the relatively low consuming Republicans.

Kahn and Costa write, "Our regression estimates predict that a Democratic household that pays for electricity from renewable sources, that donates to environmental groups, and that lives in a liberal neighborhood reduces its consumption by 3 percent in response to this nudge. A Republican household that does not pay for electricity from renewable sources and that does not donate to environmental groups increases its consumption by 1 percent."

Conservatives have always opposed such energy conservation measures and its dissemination through paternalistic methods. The information that they are using less electricity than their neighbours would have actually encouraged the Republicans to become less vigilant about their consumption. Costa and Kahn suggest that ardently right-wing electricity customers might respond to paternalistic nudges by burning more energy, just to thumb their noses at Big Brother. They therefore suggest that nudges be tailored to meet the specific ideolgical and behavioral characteristics of the traget audience.

See this website of opower, a firm that assisted in the Sacramento experimment.