Lost in transaction?: An institutional analysis of households’ transaction costs from demand-side grid management

Abstract

Better utilization of the electricity grid is urgently called for, and demand-side management (DSM) measures are implemented to influence consumers' electricity consumption to off-peak periods. Little is known about how DSM measures generate private transaction costs for households, being crucial for the effectiveness and fairness of such measures. This article contributes to the energy transition literature by exploring sources of private transaction costs for households from a time-of-use tariff scheme for the grid in Norway. Data from nine group interviews reveal that uncertainty about the transaction (grid capacity), distrust of the transactor (grid provider) and the complexity of the institutional context (uncertainty about the electricity sector) increase transaction costs for households and reduce effectiveness of the tariff. Providing households with information on the reasons and methods for adjusting electricity consumption is essential, including the economic impacts on households of the new tariff. Additionally, households should receive enhanced guidance of technology use and behavior changes. For these two steps to work, trust in energy actors must be strengthened. Lastly, one should pay attention to the potentially undermining effect of such DSM measures on legitimacy of energy policies in general, given the unequal levels of transaction costs depending on households’ capital.