IEEE Power & Energy Magazine - January/February 2018 - 43

Monetary Incentives
to Reduce Household
Fossil-Energy Use

©istockphoto.com/imaginearts

Practitioners and policy makers often use
monetary incentives to promote reductions in household fossil-energy use. For
example, subsidies have been offered
for the installment of heat pumps, solar
panels, or energy-efficient appliances,
and differentiated tariffs and monetary
rewards have been implemented in an
effort to encourage households to reduce
energy use.
although there are limitations to the
effectiveness of monetary incentives,
some studies have suggested that they
may sometimes be an effective tool to
reduce fossil-energy consumption in the
home. one study reported that, in 2011,
of the nearly 5,000 Southern california
households with solar panels, approximately 1,500 participated in third-party
ownership programs, where solar panels and related equipment are offered
to households th rough com mercia l
companies. Such third-party ownership
provides a monetary incentive because
it reduces up-front adoption costs, in
addition to removing the technical challenges of initial installment. This monetary incentive especially promoted solar
panels among younger, less affluent,
and less educated consumers.
additionally, monetary incentives may
sometimes promote curtailment behaviors
to reduce household energy usage, such as
those results shown in Figure 1 from a Japanese study. Participants were randomly
assigned to three groups. The first group
was offered approximately €1.70 for each
1% reduction in energy use. members of
the second group received the same offer
combined with social comparison feedback that compared their energy use with
that of their neighbors. The third group served as a control and
received no information. These groups reduced their energy
use by 5.9, 8.2, and 1.7%, respectively. in this case, monetary
incentives did seem to motivate consumers to curtail their
home energy use, especially when combined with social comparison feedback.
These studies suggest that monetary incentives can sometimes effectively reduce fossil-energy use. however, when
interventions provide monetary incentives, they usually do so
as part of a package of supplementary strategies. in the first
example, monetary incentives were provided in combination

renewable energy is available, thereby reducing household
fossil-energy use. For example, a consumer could choose
to use solar panel energy when the sun is shining. efficiency behaviors usually produce a long-term effect after
one focused effort, while curtailment behaviors require
consistent commitment and vigilance. efficiency behaviors often lead to larger energy savings than curtailment
behaviors. monetary incentives to change household fossil-energy use have mostly targeted curtailment behaviors.
however, both types of behaviors may be required to meet
iPcc emission targets.
january/february 2018

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Table of Contents for the Digital Edition of IEEE Power & Energy Magazine - January/February 2018