Do Small Pecuniary Incentives Motivate Residential Peak Energy Reductions? Experimental Evidence

Abstract

This article evaluates demand side interventions aimed at reducing residential consumption during the peak energy periods. The interventions were applied to a sample high-income households and included a set of text message reminders advising participants to reduce electricity use during peak hours. One group of participants received accompanying intra-day increases in peak-hour kWh rates, while another group of participants did not receive any price incentives. We find that intraday price increases, though small in absolute magnitude, produced significant reductions in peak energy use. Reductions in use, as compared to a control group, were significantly higher among the pricing group compared to the group only receiving text messages, suggesting that pricing played a central role in influencing behavior. Our results contribute to ongoing policy discussion about the effect of in dynamic pricing on consumer energy demand.