This is the third and final post in a blog series on our survey of homeowners as part of RFF’s Energy Efficiency Information Initiative.
In two earlier blog posts, we summarized some findings from our recent survey on home energy audits. In the first post, we described what we learned about the features of audits and what they cost. In the second, we reported the extent of follow-up on audit recommendations. In this post, we explore some factors that seem to be associated with audit uptake.
As economists, we like to think that, by and large, people make decisions based on a rational accounting of costs and benefits. In the case of home energy audits, homeowners are paying for information that should allow them to make better energy investment decisions. And so if the benefits of that information outweigh the costs of acquiring it, we would expect them to spend the money for an audit. But recent research on behavior and energy efficiency suggests that many other factors come into play in people’s decisions about energy use and related investments in appliances, equipment, and buildings. The salience of energy costs and attentiveness to energy usage are two important factors identified by many researchers. In a recent paper, Katrina Jessoe and Dave Rapson show that simple information feedback to households can dramatically increase the price elasticity of demand for electricity. In an experiment the authors conducted, using information along with price increases was much more effective than prices alone. Studies have shown evidence of salience and attentiveness affecting other consumer choices as well. Examples include how sales taxes affect purchase behavior, the effects of repeated information on bank overdraft fees in reducing overdrafts, and the impacts of reminders on gym usage.
In our survey, we asked some questions related to energy attentiveness and salience. While we have yet to perform a full econometric analysis of the data, the raw data hint that some of these factors—shown in Figure 1—may influence the decision process.
One class of variables associated with the decision to get an audit pertains to the homeowner’s awareness of the energy related features of their house. Homeowners in our survey who had audits were more likely to know the age of their heating systems (at the time of the audit) than homeowners who had not had audits. They were also more likely to have a general idea of their annual total energy expenditures and especially more likely to know how much attic insulation they had.
We also asked respondents whether they had received a home energy report (a letter, usually from the local utility, comparing their home’s energy use to that of other similar houses), whether they service their heating and AC equipment regularly, and whether they had set their monthly electricity bill to be paid based on an annual average level of monthly use (to avoid month-to-month fluctuations). People who had had audits were more likely to have serviced their equipment regularly, pay a levelized electricity bill, and have received a home energy report.
Between homeowners in our survey who had audits and those who hadn’t, we saw the sharpest contrast in the number of friends or neighbors that each group said they knew had had audits. Among the non-audit respondents, only 7 percent said that they knew someone who had had an audit. In contrast, almost 50 percent of the respondents who had an audit said they knew one or more persons who had an audit prior to having theirs (see Figure 2). Among those who had had audits, 21 percent knew one other person who’d had an audit, 21 percent knew 2 to 3 people and nearly 6 percent knew more than three.
We cannot conclude from this preliminary look at our raw survey data that attentiveness to one’s house and energy use or cues, such as receiving a home energy report, spurs people to get home energy audits. But the associations we are seeing, especially in light of previous research, reinforce the need to dig into this possibility more deeply.
How and why attention and salience affect decisions, such as arranging for an audit, are the subject of several theories, many of which have strong foundations in the psychology literature. One theory, based on the idea of “prospective memory,” suggests that people often intend to take beneficial actions in the future but put them off and then forget to do them. Some people may be overconfident in their ability to remember to do something and they are even more likely to not follow through. Another theory is built around the observation that people often focus disproportionately on certain attributes of their choices. When this is the case, choices tend to be biased toward options with more concentrated benefits and/or more dispersed costs. When payoffs accrue over time but costs are up-front, as with many home energy investments, including audits, people may forego those options. A third theory proposes that even if decisionmakers could properly account for the future benefits of an investment, such as the energy savings from efficiency improvements, the time and effort to self-educate often makes the overall costs of that investment exceed the benefits.
If our planned in-depth analysis reveals that attentiveness and cues do indeed affect audit uptake, there could be important policy implications. For one thing, subsidies and other financial incentives for audits may have limited effects in the absence of complementary information programs that make energy use more salient to homeowners. Or it might be important to combine financial incentives with deadlines. Another option may be a series of cues to jog people’s memories. Conducting careful field experiments around some of these options could provide useful information as to what works. Our survey should provide guidance for such experiments. A more in-depth analysis of the survey data will be released later this fall.
