WP1 Consumer Insights - Behavioural underpinnings of Energy purchase, use & upgrade - Literature Review

Abstract:

This project is part of the “Smart Systems and Heat” Phase 1 Business Model Development Project. It will provide insights into consumer behaviour relating to heat decisions. The project will be made up of four small pieces of consultancy work looking at specific issues:

• Consumer Response & Behavious Analysis
• Literature Review Personality and Risky Heat Decisions
• Household Heating Design Aids
• Segmentation Analysis

This report contains the analysis carried out by Loughborough University on the data from the Consumer Response & Behaviour Project (CRaB). This analysis evaluated whether a segmentation could be developed to predict the reasons why households changed their heating systems.

Embedding a thorough understanding of the consumer is key to drive change in the Energy sector.ThisBehavioural Review evaluates different approaches of personality research as well as behavioural economics and offers a set of recommendations onhow these can be used in practice to drive change in the energy sector.

Daily energy use - individual motivation to spend for heating as well as drivers of energy use limitation were considered. Comfort as a value and priority in life may motivate consumers to spend for space and water heating. Other factors such as social recognition, health, cleanliness and independence can influence daily energy use choices. Social environment can affect daily energy use choices - social norms, such as empathy and sociability, are found to influence consumption in the energy sector.

Money attitudes were explored - these influence consumers’ spending patterns and consumption in other domains, irrespectively of an individual’s income. We outlined six differentmethods to understand individual’s proclivities when it comes to spending and, thus, understand each consumer priorities and reasons for actions related to energy daily use. We also discuss cognitive factors that affect individuals’ attitudes to daily energy use planning.

Energy purchase was explored through tariff choice, the decision-making process and underlying biases and personality elements that are involved. Convenience leads consumers to the choice of flat rate tariffs. We show how how important trust in the provider is, and how different individuals exhibit different levels of trust due to personal predispositions, which effectively affect subsequent choices. Propensity to trust the supplier can counteract the uncertainties that come with new energy systems and corresponding tariffs and as a result influence tariff choices, especially in the case where there is a default choice suggested by the provider.

Energy upgrade covers the psychological underpinnings of boiler breaking probability underestimation, which is related to individuals’ propensity towards optimistic predictions of future outcomes as well as phenomena that lead to a “resistance to change” attitude such as the status quo bias and indecisiveness scores of an individual. Positive attitude towards upgradesare from early adopters, andd the desire for social status which is found to influence home upgrade decisions. Insurance decisions was investigated through revolutionary research in the field of decision-making that explains how these decisions are made on the basis of mainly emotional (and not rational/informational) reasons, which motivate the person to make this decision based on familiarity, vividness and past experience of similar outcomesrather than insurance costs and the individual’s income.

This report has been prepared by Mindframe for the purposes of internal decision making processes and not written with the intention of publishing. The report examines the energy-related literature in personality and decision-making psychology in order to identify strategies for understanding the consumer view of a zero-carbon energy future.

Author(s):

Mindframe Consulting