Smart choices? An experimental study of smart meters and time-of-use tariffs in Ireland

Abstract

The introduction of smart technology and dynamic tariffs (such as time-of-use tariffs) provides multiple potential benefits for electricity markets. However, time-of-use tariffs generate additional complexity for consumer tariff choices in electricity markets. How well consumers can choose between tariffs, and whether certain tools improve these choices, are therefore important questions for energy regulators and policy makers. This paper presents an exploratory study that used experimental behavioural science to investigate consumer choice in electricity markets with time-of-use tariffs. A representative sample of consumers (n = 145) were given information about smart meters and time-of-use tariffs. A sequence of experimental tasks measured attitudes towards smart meters, comprehension of tariffs and quality of decisions between different types of electricity tariffs, where quality was judged against participants’ own perceptions of their electricity usage. The findings suggest that consumers struggle to match tariffs to usage accurately, with a general aversion to time-of-use tariffs that may lead to sub-optimal choices between tariff types. When participants chose between different priced time-of-use tariffs via an experimental price comparison site, decisions were significantly improved by a tool that personalised estimated costs. Policy implications include the importance of pre-testing interventions designed to improve consumer decisions.