Nudging down household electricity usage during peak hours with small monetary rewards

Abstract

Two recent studies highlight the potential of a demand response (DR) program as a tool to manage peak-hour electricity consumption by households. Households in these studies respond to the offer of financial rewards or an appeal to the sense of civic duty and significantly reduce electricity consumption during declared peak hours. Due to the small number of peak events included in these studies, however, a question remains whether households will continue to respond to repeated calls to action over a long span of time. We analyze a demand response program of Gangwon Province, South Korea, called “Electricity Piggy Bank” where the incentive offered was in the form of small monetary reward together with an appeal to social consciousness. The program tracked the electricity usage of about 2,000 households over one-year period during which peak events were declared once a week. We find significant reduction in electricity usage during declared peak hours and, more importantly, no decay of effects over time. The magnitude of electricity savings during peak hours is no less than the one reported for the previous financial-incentive-based DR, suggesting that offering small monetary rewards together with pro-social stimuli can be a viable alternative to a financial-reward-oriented scheme.