Are consumers willing to switch to smart time of use electricity tariffs? The importance of loss-aversion and electric vehicle ownership

By Moira Nicolson, Gesche M. Huebner, David Shipworth. 2017

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Smart time of use tariffs are a key part of most government’s strategies to ensure our future electricity supply is clean, affordable and secure – but will consumers be willing to switch to them? This paper presents the results of a survey experiment conducted on a nationally representative sample of 2020 British energy bill payers. The data suggests that over a third of bill payers are in favour of switching to a 3-tiered smart time of use tariff, indicating a sizeable potential market for these tariffs. There is substantial variation in willingness to switch, driven by differences in loss-aversion and ownership of demand flexible appliances rather than standard socio-economic/demographic factors. This is the first time loss-aversion has been measured amongst energy bill payers and the results suggest loss-aversion is likely to stifle consumer uptake; 93% of bill payers are loss-averse (care more about avoiding financial losses than making savings) and loss-averse people are substantially less willing to switch to the time of use tariff (p < 0.001). A randomised control trial finds that loss-framed messages are unlikely to overcome loss-aversion to boost uptake. Marketing campaigns tailored towards electric vehicle owners, who were significantly more willing to switch, could increase uptake during and after the smart meter roll-out.

Subfields: Electrical and Electronic Engineering, Renewable Energy, Sustainability and the Environment

View Paper: https://www.semanticscholar.org/paper/47ae0b7f02009e8cb5bdf78f207d25d9df1cd395