Not So Fast: the Nuanced Benefits and Risks of Real-time Feedback, Incentives, and Demand Response in Rental Households

Smart grid proponents (and vendors) are quick to tout new products and services that provide real-time energy use feedback to customers. These advocates assume that better and more information leads to more efficient customer behaviors. Others see these technologies as a
pathway to reach the underserved. For example, renters caught in a split-incentive problem might be unable to participate in traditional efficiency programs, so real-time feedback with demand response (DR) messaging can support those customers’ participation. However, this is no simple solution and is fraught with risk for customers, efficiency program managers, and utility decision makers. We discuss results from a randomized controlled trial (RCT), in one utility service territory with smart meters, testing interactions between incentives and feedback on renters: (1) real-time feedback alone might work, albeit temporarily, making it difficult to justify technology costs to achieve long-term savings; (2) feedback combined with behavior-based incentives potentially double the savings benefit of feedback alone, and last longer; (3) incentives alone—whether as a rate structure or competitive game—might not work or it might backfire, adding to renters’ energy burdens; and (4) the source of these additional savings might be related to better aligning users’ perception of appliance energy consumption with reality. Taken together, there are benefits and risks. Utilities might see potential for strategic load growth and DR benefits and efficiency programs might benefit from coupling feedback with compelling messages, but there is a risk of increasing costs to customers if smart grid programs are not designed and carried out carefully to engage customers.