Case Study Series - ‘Home Power Savings Program’: Saving Energy in Low Income Households (Office of Environment and Heritage)

8 August 2013Behavioural Insights Unit

Categorybehavioural insights

Tagsbehavioural insights, case study, nsw

The key policy issue underpinning the Home Power Savings Program is the social impact of the rising cost of electricity on low-income households in NSW.

home energy savings

Issue: Rising energy costs are placing increasing pressure on households across NSW. Lower income households that spend a large proportion of their income on utility bills are particularly vulnerable. 

Program:  The original program provides low income households with a free in-home energy audit, power savings kit, and personalised Power Savings Action Plan to encourage households to reduce their energy consumption. 

Behaviour: The Home Power Savings Program interim evaluation results indicated further potential to unlock energy savings through behaviour change. In partnership with BehaviourWorks Australia and the Behavioural Insights Team, the original program design has been adapted to include specific behavioural change techniques, which are currently being tested through a randomised control trial.

Outcome: The Home Power Savings Program Behaviour Change Trial commenced in June 2013 and is due to be completed and evaluated in 2014.

The Policy Issue

The key policy issue underpinning the Home Power Savings Program is the social impact of the rising cost of electricity on low-income households in NSW.

Low-income households face a number of barriers in addressing their energy use and affordability of electricity bills. Typically, low-income households are characterized by living in less energy efficient homes containing inefficient appliances and have limited capital to upgrade their housing and appliances. The majority of low-income households are renters rather than owners, which limits their control over their own living circumstances as decision-making rights related to replacement of fixtures such as efficient showerheads and insulation reside with owners and not renters.

The amount of energy consumed in the average Australian home continues to rise.  Initiatives exist to tackle energy consumption, but low-income households can face particular barriers to reducing energy usage, while standing to benefit the most from lower energy bills. While many low-income households may not be able to change their energy efficiency through costly measures such as installing solar hot water systems, small behavioural changes provide a viable option and an effective way to meet both environmental and social outcomes.

The Policy Objective - a Priority Action of NSW 2021 is to support low income households to reduce energy use through the Power Savings Kit and advice on behavioural change. The Home Power Savings Program is the Governments policy response to this Priority Action.  

Behavioural Analysis of the Policy Issue

There are several behavioural factors that influence the ways in which we consume energy:

  • Central to an understanding of environmental behaviour is how we perceive time. Without salient reminders, we experience a disconnect between consumption and costs. One example is the time lag between energy consumption and billing, where high energy bills are received months after consumption has taken place. The problem exists because we are biased towards the present, more attentive to what is happening in the here and now, and less concerned about future problems. Researchers call this Hyperbolic Discounting, and we see it in many aspects of life, including people’s reluctance to save adequately for retirement. 
  • Energy use in the household is linked to activities that have all become habits (such as watching TV or reading emails online). Habits are patterns of behaviour which are regularly followed until they become automatic and subconscious. These ingrained behaviours are extremely resistant to permanent change, because we are not making active decisions when we engage in them.
  • Control and agency are seen as key factors which influence behavioural outcomes. In terms of energy consumption, individuals cannot see the consequences of their individual action and feel there is little they can do about the issue. Empowering people to feel in control of their household energy consumption, or providing a feedback mechanism so that they see the impact of their behaviour in meaningful units, such as money lost through energy use, should increase perceptions of control and thus lead to more energy efficient behavioural outcomes. 

The Program

The Home Power Savings Program (HPSP) is an initiative of the New South Wales government which aims to help 220,000 eligible low-income households in the state to reduce their energy usage by up to 20%. The program provides eligible households with three main benefits. First, a one hour in-home energy use assessment by a trained professional. Second, a Power Savings Kit of energy efficient products, fully installed by the assessor, which includes a stand-by saver power board, energy efficient light bulbs, an efficient showerhead, a thermometer, and other relevant items. Third, the program provides a Personalised Power Savings Action Plan identifying free and low cost ways for the household to save power.

Interim evaluation of participants’ energy savings indicated that on average most savings have been achieved primarily through structural changes (installing kit items) and that there is potential to increase savings further by more effectively encouraging householders to change their energy use behaviours. To this end the NSW Government, Office of Environment and Heritage is running a behaviour change trial, focusing on the behaviour change tools of loss aversion, commitments, social norms, and reengagement with participants.

Using the MINDSPACE framework, four concepts are primarily used in this program: SALIENCE, INCENTIVES, NORMS and COMMITMENTS.

INCENTIVES: The program uses incentives, such as the free Home Power Savings Kit, in order to maximise the number of households involved in the program. Recent work in psychology shows consumers have a strong positive emotional reaction to ‘free’ products and services[fn id=1]. Therefore, framing a message to highlight the free gift can be effective, as is seen in the advert in Figure 1.

The consumer is also incentivised to sign up to the program because installing all the kits items has been made easy for them by installing them during the visit. Furthermore, the assessor tries to gain landlord consent for further installations on their behalf.

Research in the field of behavioural sciences has indicated that people are loss averse, making this a useful way to frame issues. Energy experts in the Home Power Savings Program now frame the issue in this way. For example, where they previously said “if you take shorter showers you will save $100 a year”, the issue is now framed in losses, i.e. “by not taking shorter showers you are losing $100 a year”.

COMMITMENT: By using follow-up visits and phone calls, the program utilises a concept known as the commitment bias, which refers to our tendency and desire to make behaviours consistent with our public promises and actions. During the first visit, the Energy Expert asks the householder to write down 2-3 actions that they can commit to, and the participant makes a commitment to the assessor to change their energy use behaviour. When the assessor returns or calls 6-12 weeks later they discuss their progress against the changes they committed to. The follow-up is a form of ‘accountability’, and participants are more likely to adopt changes following their assessment, compared to if there was no follow-up.

SALIENCE: Messages are much more effective when they are personal. The Home Power Savings Program provided tailored information through a home audit and personalised energy-use profile, making the information relevant to each individual participant. Research consistently demonstrates that people pay more attention and remember more information when it has been personalised to them in some way.

The program also used personalised text messages. These prompted individual specific actions which could reduce energy use based on areas the participant identified during their consultation. The messages were also made salient by using personal, and accessible language, and including principles of loss aversion and social norming. An example text message is:

“Time for a cuppa? Don’t forget you only need to fill your kettle just above the number of cups you are pouring. Any extra is a waste of power and money. Cheers, Peter.”

NORMS: When Energy experts discuss potential behavioural changes that householders could make they have been trained to use descriptive norms. E.g. “88,000 other program participants just like you have also committed to taking shorter showers.” 

Outcomes and Results

The Home Power Saving Program is on-going, and by June 2014 the $63 million project will have targeted 220,000 lower income households across New South Wales to reduce their energy usage. As at 30 June 2013, 193,000 lower income households across New South Wales have participated in the Home Power Savings Program and significant (verified) energy and bill savings have been reported. It is expected that Trial results will demonstrate that the inclusion of the behaviour change tools of loss aversion, social norming messaging, and commitments will result in further participant savings and enhance overall program outcomes. An evaluation of the HPSP and the Trial are due in 2014.