Improving the Effectiveness of Time-of-Use Pricing to Make Household Electricity Consumption More Sustainable

Abstract

To increase efficiencies and reduce greenhouse gas emissions, policymakers and electric utility providers are increasingly adopting time-of-use (TOU) pricing policies, which charge the most for electricity consumption during on-peak hours, the times when the demand for electricity is greatest. TOU policies aim to disincentivize on-peak electricity use in favor of use during usually low-demand, off-peak periods to reduce the suppliers’ need to augment electricity generated by low- or nonemitting sources (such as hydro-electric and nuclear power) with electricity generated by high-emitting sources (such as coal- or gas-fired power plants). Researchers and policymakers are attempting to apply behavioral science tactics to enhance the effectiveness of TOU pricing by making behavioral science-based changes to electricity bills or delivering personalized information about electricity use and pricing, or doing both. In this article, we describe several studies we conducted in Ontario, Canada, in which we examined customer responses to various bill designs and communications. Simplifying bills and emphasizing the high cost of on-peak use (that is, making on-peak pricing more salient) were effective at shifting behavior, as was the delivery of nudge reports, which compared a household's electricity use with its past consumption, offered conservation tips, and asked customers to make a pledge to reduce consumption. These studies demonstrate that incorporating behavioral tactics into existing consumer-facing communications can be an effective, low-cost, and scalable way to induce customers to increase off-peak electricity use and thus limit greenhouse gas emissions.