The International Institute for Industrial Environmental Economics Lund University, Sweden Dynamic Electricity Pricing & End-user Behaviour Workshop 08 April 2014 Yuliya Voytenko,

The International Institute for Industrial Environmental Economics Lund University, Sweden Our electricity consumption is determined by: #1 - number of people in a household #2 - income of a household #3 - size of a household Age and education - only to a small degree Living with more people is more energy efficient Detached houses of the same size and income - huge variations in the electricity consumption (Gram-Hanssen 2011) 2 Yuliya Voytenko Household size + income = only 1/3 of differences in electricity consumption (Gram-Hanssen 2011) 40% are explained by lifestyle factors (Sanquist et al 2012)

The International Institute for Industrial Environmental Economics Lund University, Sweden One way to influence – Dynamic Pricing Pricing mechanisms: – Time of Use (ToU) pricing – time of a day – Critical Peak Pricing (CPP) – year-round (a stick), high tariffs at critical peak hours – Crtitical Peak Rebate (CPR) – year-round (a carrot), refunding for the end-user – Real Time Pricing – the price is tied to the wholesale market price; smart appliances – Inclining Block Rate (IBR) – the rate grows with increased consumption Most schemes focus on shifting the demand to off-peak periods while some aim for overall reduction in electricity use (e.g. IBR) 3 Different electricity tariffs - time of a day, day of a week, season less energy use in peak hours, no need to extend the grid cost reduction Yuliya Voytenko

The International Institute for Industrial Environmental Economics Lund University, Sweden Dynamic pricing package A pricing mechanism A supportive technology A feedback 4 Yuliya Voytenko The more elements are used in each category, the higher is the user response But this is not the most cost-efficient A CORRECT MIX is crucial

The International Institute for Industrial Environmental Economics Lund University, Sweden A sticker example 5 Yuliya Voytenko

The International Institute for Industrial Environmental Economics Lund University, Sweden Consumer specificity It is short-sighted to suggest dynamic pricing in one fits all package Consumers and their behaviour are different 6 Yuliya Voytenko

The International Institute for Industrial Environmental Economics Lund University, Sweden Consumer behaviour spectrum 7 Yuliya Voytenko ToU target here More difficult CPP, CPR, RTP target here Easier Important are changes in routines! Unconscious routines can be changed by making them conscious first, after which an intentional behavioral change is possible (Breukers, Mourik 2013)

The International Institute for Industrial Environmental Economics Lund University, Sweden Our electricity consumption is determined by: Attitude, motivation, awareness, capabilities, behaviours Socio-demographic variables House-related characteristics Appliances Presence patterns Household dynamics: timing and flexible use

The International Institute for Industrial Environmental Economics Lund University, Sweden Lifestyle end-user segments (1) 9 Yuliya Voytenko Sütterlin et al 2011

The International Institute for Industrial Environmental Economics Lund University, Sweden Lifestyle end-user segments (2) 10 Yuliya Voytenko Sütterlin et al 2011

The International Institute for Industrial Environmental Economics Lund University, Sweden Important to remember… Financial incentives do not always determine consumer behaviour 11 Yuliya Voytenko

The International Institute for Industrial Environmental Economics Lund University, Sweden References Breukers, S., Mourik, R End-user engagement for flexible energy consumption patterns, In-Context Workshop, Rotterdam Lindskoug, S Consumer reactions to peak prices. Elforsk raport 06:40. June 2006 Gram-Hanssen, K Households' energy use – which is the more important: efficient technologies or user practices? World Renewable Energy Congress 2011 Sweden; 8-13 May Linköping, Sweden Sanquist, T. F.; Orr, H.; Shui, B.; Bittner, A.C Lifestyle factors in U.S. residential electricity consumption. Energy Policy 42, Sütterlin, B., Brunner, T., Siegrist, M Who puts the most energy into energy conservation? A segmentation of energy consumers based on energy-related behavioral characteristics. Energy Policy 39: 8137–8152

The International Institute for Industrial Environmental Economics Lund University, Sweden THANK YOU !!! Yuliya Voytenko: