Awareness is growing among companies in the Italian energy sector that making energy efficiency does not mean installing a technology, but providing a "turnkey" service by also acting on people's behaviour. The reason, following the teachings of behavioral economics, lies in the "myopia" of energy consumers with respect to the benefits of efficiency measures. This "limited economic rationality" translates into scarce investments (even by companies), in a generally ineffective use of resources and production plants and in a little strategic management of energy. At a more general level, relying solely on technologies does not guarantee the achievement of national and European energy efficiency targets.
Acting on consumption habits makes sense because none of us are homo oeconomicus, until the end, that is, a perfectly rational person whose objective is to maximize his own utility through a completely efficient use of the resources at his disposal. This assumption was scientifically founded by the experimental work of the Nobel prize for economics Richard Thaler, who, through the field study of less rational behaviors has developed some of the tools necessary to induce and modify them. When these tools affect energy consumption, they are called behavioral measures for EE.
Behavioral measures are the strategies and tools which, through the theories of behavioral sciences (economic and psychological), have the declared objective of inducing structured changes in the energy consumption habits of users (individuals and businesses). Here are some examples:
- Provide accurate information on how the neighbor is more efficient than us. In the USA these measures are widely exploited by utilities and have generated savings on average of 2%, apparently small, but high if compared to the relatively low cost for companies;
- Have a reference figure who helps us improve our energy performance at home and in the workplace. Influencing the behavior of workers through the intermediation of "energy champions" can generate appreciable savings and at a reduced cost (a production bonus for the figures responsible for the measurement);
- A structured and certified energy management system for industrial processes, such as ISO 50001 certification, capable of generating savings of the order of 20% over the medium and long term compared to an execution codified by standards recognized at European level.
From a first and summary estimate we made, the potential impact of these and other behavioral measures in Italy could be between 2,32 Mtoe/year and 14,44 Mtoe/year of lower final energy consumption. In this wide range, the actual level depends on the type of MC adopted, the extent of the interventions and the success rate of the applications (0,8 – 2 Mtoe/year in the transport sector, 0,64 – 6,08 Mtoe/year year in the residential sector, 0,52 – 5,46 Mtoe/year in industry and 0,36 – 0,9 Mtoe/year in the service and agricultural sectors). Overall, therefore, it would be an important contribution to achieving the objectives of the Energy and Climate Plan.
The theme of behavioral measures was also explored by us in a seminar entitled “MCs and energy efficiency. From policies to business strategies”, on 4 July 2018. The closed-door meeting, which was attended by qualified representatives of companies, institutions and academia, clearly confirmed that MCs will be the future of energy efficiency.
There are many characteristics and advantages that emerged during the seminar that make behavioral measures fundamental for the future of energy efficiency and utilities, and in particular:
- Relatively low construction costs. These are "soft" measures that do not require large investments in plants or networks. In fact, the steps that go into activating a strategy to change behavior don't require large-cap investments. At the same time, however, in an initial "testing" phase, some investments may not give the expected results
- Time-to-market is short and energy savings are almost immediate. The initial stages of defining the intervention follow models that are already consolidated and it takes a few months to develop new ones. The savings start from the first day of activation and after a short time they reach a "plateau" on which they settle. However, the plateau needs to be consolidated over time and this requires "keeping alive" the effects with continuous measurements and targeted interventions.
- Some skills are already present in marketing and profitable collaborations can be activated with research centres. The added value of the research center is the expertise in the management of social experiments and complex measurement systems such as the management of counterfactuals. However, marketing is not enough and other skills, especially on segmentation, must be gathered in universities or innovative start-ups.
- Enabling technologies are partly already widely adopted in Italy. We are talking here about smart meters and other sensors, cloud computing, algorithm analysis systems, connected thermostats and communication systems such as e-mails and push notifications. As we have seen, however, technologies are only a means and excessive complexity risks generating a further barrier if we do not equip ourselves with the necessary skills at the same time.
- They are part of an incentive system and make it possible to enrich the information assets to expand the offer and improve customer retention. Direct returns are very appreciable, especially if the savings are converted into TEE, which however are not a reliable revenue stream.
Utilities therefore need to address consumer behavior if they are to overcome the barriers delaying EE adoption. To do this, they must integrate marketing skills with additional "transversal" skills, as defined by Stefano Venier, Hera's CEO, in his speech published by FIRSTonline. Utilities must learn behavioral economics and psychology and the skills of managing social experiments in the laboratory and in the field, especially the management of counterfactual tests. All supported by monitoring, communication, automation and analytics technologies.
The benefits for utilities are not limited to energy efficiency. For example, the adoption of water demand management (WDM) is promoted in the US water sector; as described in the report of the Observatory for a Sustainable Water Industry, WDM consists of a series of practices that exploit behavioral levers, through communication and education, in order to reduce water demand. In this way it is possible to reduce the consumption of resources and improve their management without having to intervene on pipelines or distribution systems.
It should be remembered that MCs have their origin, means and end in the human being; therefore, each intervention must be weighed with caution and awareness. The application methods of the MC are still evolving and to give solidity to the interventions it is necessary to move with caution. At the same time, however, it is a dynamic environment and therefore an eventual one first mover could secure a consistent competitive advantage over competitors.
We agree with Venier's perspective: for a rapid but consistent development of this paradigm, the contributions of all the players in the energy efficiency chain are required, in particular of the architects of the choices - the institutions responsible for the development of EE in Italy. They are asked to give greater stability to the TEE system, which is essential for reducing resistance to EE and concluding the excellent work that has brought Italy to first place in the ACEEE classification of energy efficiency.
*Stefano Clerici, author of this article, is Senior Consultant of Agici Finanza d'Impresa (Cesef), a research and consultancy company specialized in the utilities sector.
