Technology adoption, consumer inattention and heuristic decision-making: Evidence from a UK district heating scheme

Abstract

This paper contributes to the debate on the energy efficiency paradox according to which consumers fail to adopt cost-effective, energy efficient technologies over less efficient technologies and therefore fail to reduce energy consumption. Both traditional and behavioural theories are used to investigate the decision-making process of residential consumers with empirical evidence based upon a specially designed quasi-experimental survey of 784 households on the decision to connect to a district-heating system, a more energy efficient alternative to individual heating systems. The results suggest an internal discount rate of around 36 per cent for homeowners, a signal that consumers undervalue future energy costs. We also find the household’s decision to be negatively affected by years of payback up to around 7–8 years. Our findings suggest that neglecting consumer inattention and heuristics can lead to biases which cast doubt on the existence of the energy efficiency paradox. We believe that these results help to explain why some consumers are unlikely to invest in energy efficient technology, particularly those on low incomes.