Getting the signal – Do electricity users meet the preconditions for making informed decisions on demand response?

Abstract

Demand response refers to changes in power consumption by electricity users in response to certain conditions on the electricity market. Anticipated to play a major role in the energy transition, demand response is conventionally exercised through network tariffs, which serve as a medium for price signals intended to incentivize and guide electricity users on how to best behave. Considerable attention has been devoted to the unresolved question of whether users are willing to respond to these signals, a question premised on the implicit assumption of cognizant users making informed decisions. Less attention has been dedicated to evaluating the validity of this assumption, and the extent to which users actually internalize these signals prior to making any decision on how to respond. This study posits that prior to making an informed decision on how to act, an electricity user must first “qualify” through meeting a set of preconditions. These preconditions are captured by a proposed three-stage framework that involves i) receiving the price signal (being aware of the tariff), ii) processing the price signal (comprehending its features) and iii) assimilating the price signal (understanding how behavior influences costs). Evaluating this framework using a survey, the study finds that only 3.8–8.5 % of respondents clear all three stages. This minority is substantially more likely to contain older villa-residents, who are comparatively more concerned with their costs and read their bills more frequently. The findings of this study demonstrate that the “audience” of tariff-based price signals are a small fraction of what is commonly supposed, and that research and policy should shift from a dominant focus on the magnitude of these price signals, towards alternative or improved strategies for communication and engagement.