Research & Insights

Flipping The Switch For Alternative-energy Power Plans

Encouraging people to choose an environmentally-friendly energy plan is a tough sell, especially when eco-friendly power typically carries a higher price tag. But research from the University of Mannheim in Mannheim, Germany and the Universitat Pompeu Fabra in Barcelona, Spain, suggests that people are likely to select an eco-friendly plan if that’s offered as the default choice and conventional power is a second as second option.

For their study, which is published in the August 2014 issue of Energy Policy, researchers Katharina Momsen and Thomas Stoerk examined whether “nudges” — “a slight change in the information set that an individual faces when taking an action” – can encourage consumers to enroll in an alternative-energy power plan. Their study involved 475 European college students..

In the experiment, students were asked to imagine that they had just moved to a new apartment and had to choose between two alternative energy plans. The first plan was “100% conventional energy, priced at 30€ per month.” The second plan was “50% renewable energy / 50% conventional energy, priced at 45€ per month.” The students were subject to a variety of experimental “nudges” designed to encourage them to choose the renewable plan.

For instance, some of the students were informed that the renewable plan produced fewer carbon dioxide emissions than the conventional plan. Other students were told that “the majority of [their] neighbors uses an energy mix that features 50% renewable energy.” Still other students were told that “the default energy contract in their region consists of 50% renewable energy and 50% conventional energy,” such that, while they could choose between the two plans, “if they [did] not make an active choice…they [would] keep the default contract and use renewable energy.”

The researchers found that “only the default nudge had a significant effect,” raising the number of participants selecting the renewable energy package from 48.2% to 69.7%. Although the researchers caution that “the magnitude of the effect in our survey experiment does not directly translate into real world applications, we believe that the direction of the effect can be trusted.”

“Public actors,” the researchers note, “could use our findings to consider the implementation of default renewable energy contracts as an alternative way of promoting renewable energies.”

Energy Policy

Katharina Momsen, University of Mannheim, Mannheim, Germany
Thomas Stoerk, Universitat Pompeu Fabra, Barcelona, Spain

Posted: August 12, 2015
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