Beyond Economics – A behavioural approach to energy efficiency in domestic buildings Dublin Institute of Technology Faculty of Business Marius Claudy Supervisor: Dr Aidan O’Driscoll

Introduction Currently… Before that… PhD Researcher at Dublin Institute of Technology in Ireland Before that… BA in Economics & Social Science (Erfurt, Germany) MSc International Strategy & Economics (St Andrews, Scotland) Economist at the Department for Work & Pensions (London, Uk) Strategy Unit Forecasting Division The classification of barriers varies across the literature but generally includes factors like

Research Project Title: Technological Sector Research (2006) Strand III - Energy Policy Research in Domestic Building Faculties involved: Faculty of Business, Faculty of Engineering, Faculty of the Built Environment, School of Physics, Futures Academy, Focas Institute, and Dublin Energy Laboratory Overall Objectives: Generate reliable data on current domestic energy consumption. Identify relevant social, political, regulatory, technical, economic and environmental barriers to sustainable energy uptake in the sector. Identify policy tools that increase energy-efficient technology uptake in domestic buildings and groups of buildings. By that economist describe an underutilisation of energy-efficiency investments that appear cost-effective on an estimated life-cycle cost basis. This phenomenon is explained by the existence of market barriers like: - Risk - High initial costs - Hidden Costs - Split incentives (the so-called “landlord-tenant” problem) - Imperfect information - Bounded Rationality (Rohdin et al., 2007, Scott, 1997, Sorrell et al., 2004, Stern, 1986, Jaffe and Stavins, 1994) The classification of barriers varies across the literature but generally includes factors like

Content Background Understanding Low Rates of Adoption of SES Climate Change – Towards a Micro Perspective Potential Energy Savings Technologies Understanding Low Rates of Adoption of SES Economics versus Social Psychology An Integrated Approach Operationalising the Model Expected Outcomes The classification of barriers varies across the literature but generally includes factors like

Background Climate Change – A Micro Perspective It needs the actions of individuals to meet climate change targets. People often have conflicting ‘goals’ Need to better understand consumers and provide them with appropriate ‘goal vehicles’ through ambitious energy standards for new houses and, more importantly, refurbishing the existing building stock 5

Background Domestic sector provides the largest potential for energy efficiency (EU commission) Households can save and generate electricity and heat using Sustainable Energy Systems (SES): Photovoltaic Small Scale Wind Turbines Active Solar Water Heating Heat pumps Small Scale Hydroelectric Plants Fuel Cells Combined Heat and Power Generation (CHP) Biomass Micro-generation Various studies on SES show that investments into these technologies are cost effective[1] and that societal benefits are even greater. [1] Note: the economic potential of sustainable energy systems is largely theoretical, based on discount rates, life-cycle evaluations and current or expected energy prices. Alternative Energy Systems

Background SES play a minor role in the production of electricity and heat Identification of influences on SES adoption is vital for the design of effective policies through ambitious energy standards for new houses and, more importantly, refurbishing the existing building stock

Understanding low Adoption The Energy-Efficiency Gap Underutilisation of investments that appear cost- and energy effective on an estimated life-cycle cost basis. Problem are Market Barriers: - Risk - High initial costs - Hidden Costs - Split incentives (the so-called “landlord-tenant” problem) - Imperfect information - Bounded Rationality (Rohdin et al., 2007, Scott, 1997, Sorrell et al., 2004, Stern, 1986, Jaffe and Stavins, 1994) The classification of barriers varies across the literature but generally includes factors like

Understanding low Adoption Underlying Assumption: Consumers act rationally. Barriers prevent them to do so, hence adoption of SES remains low Implication: Policies and programs to remove barriers, improve cost-benefit ratios and provide sufficient information

Understanding low Adoption Policies and programmes often show only moderate success Research shows that its often conviction rather then economics influencing peoples’ decision to adopt SES E.g.: Bang et al., 2000, Faiers et al., 2007, Hansla et al., 2008, Jakob, 2007, Paladino and Baggiere, 2007, Steg et al., 2005, Stern, 1986, Stern, 1992

Understanding low Adoption Also psychological determinants Social and environmental psychology evaluate the impact of personal factors like values, norms, attitudes etc. Theory of planned behaviour to understand conservation behaviour like SES adoption. Like economics it follows a rational choice approach For theory see: Icek Ajzen (1985) For applications (e.g.) see: Huebner et al (2000), Paladino et al (2007), Bang et al. (2000) Hansla et al. (2008), Poortinga et al. (2003)

An Integrated Framework Adoption decision is determined by: Barriers Regulations, Information, Risk etc. Psychological Factors Attitudes Social Norms Personal capabilities Routines or habits » Extended version of the theory of planned behaviour For classification see: Stern (2001, 2005)

Theory of Planned Behaviour Contextual Domain Personal Domain Individual/Subjective Shared/Objective Outcome Belief (Expected Outcome X Desirability) Normative Belief (Referent Beliefs x Motivation to Comply) Control Belief (Factor x Access to Factor) Shared Context ….…) Relative Advantage Compatibility Complexity Trialability Observability Impact on the Environment Friends Family Neighbours Government Information Financial Recourses Bounded Rationality (Technical) Skills Access to Providers Type of House Technologies Regulations/Policies Economy Weather Theory of Planned Behaviour Attitudes Subjective Norms Perceived Behavioural Control External Conditions Intentions to Invest into Sustainable Energy Systems

Operationalising the Model Underlying Beliefs Determinants Intention Rel. Adv. Attitudes ? Compatibility ? Social Norms ? ? Intentions Money ? ? Perceived Behavioural Control Information ? Access Prov. The classification of barriers varies across the literature but generally includes factors like External Factors E.g. Type of House Pre-Questionnaire Scales Final Questionnaire Analysis

Expected Outcome Insights about householders’ personal beliefs about SES: Attitudes (Advantages/Disadvantages) Importance of the opinion of significant others Perceived Barriers Insights about the impact of external factors: Socio economic factors The type of house Regulations etc Estimates of the relative and aggregate strength of each factor Estimates of how strongly factors influence each other

Contribution Can be translated into more effective programmes and policies Offer the ‘right’ support Overcome scepticism Capture the attention of householders Gain their involvement Increase the uptake of sustainable energy systems and helping society to become more sustainable

Contribution (2) Can be used to forecast technology adoption under different policy scenarios. Segregate Householders according to age, gender, income etc Use data to evaluate the likelihood of adopting SES Design (subjective) utility-function Predict householders’ decisions via stochastic agent-based micro-simulation modelling. Incorporate different policy scenarios (using data to form assumptions about the effects of certain policies)

Thank you! Any Questions?

Pre-Questionnaire Identifying the salient beliefs (attitudes): What do you believe are the advantages of buying Photovoltaic for your dwelling? ---------------------------------------------------------------------- What do you believe are the disadvantages of buying Photovoltaic for your dwelling? Is there anything else you associate with buying Photovoltaic for your dwelling

Existing Scales Example of testing a global measures (attitudes): Buying Photovoltaic for my dwelling would be: --- --- --- --- --- --- very useful not useful at all

Questionnaire How well do you belief you are informed about the below mentioned technologies PV very well __ __ __ __Not well at all Micro Wind very well __ __ __ __Not well at all so on 2. Are you using any of the above named technologies? If yes, please specify which: _________________ 3. Filter Question – Which technology do you belief would be the most useful for your dwelling? ________________ 4. All Follow up Questions on this technology. 21