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MPhil in Engineering for Sustainable Development

global challenges, engineering solutions

Studying at Cambridge

Marisa Henry

Behavioural Interventions in Massachusetts Electricity Provision

Economists widely acknowledge market and behavioural failures in the
energy services market. In theory, market failures can be corrected for using
market-based policy instruments or command and control regulations; however,
these interventions can be economically and politically challenging to implement.
Behavioural “nudges” offer a low-cost, non-price based mechanism to influence
outcomes without strictly paternalistic government involvement. In the energy
services market, home energy reports (HERs) aim to reduce residential energy
consumption and increase total social welfare using social comparison nudges and
customised information provision. Previous research by Allcott (2010) estimates
the HER programme’s reduce average household energy use by 2 percent on
average.


This dissertation expands on the HER literature and estimates the causal
impact of HERs sent electronically (eHERs) on customer attrition and household
electricity use in a deregulated, competitive electricity market. The company
Whisker Labs conducted a randomised control trial (RCT) on the distribution of
eHERs to customers of a retail electricity provider in Massachusetts from
December 2015 through December 2016. The RCT experienced one-sided
noncompliance, that is some households assigned to receive eHERs did not receive
reports due to timing issues in data collection and eHER generation. This
noncompliance limits estimates to intent-to-treat (ITT) effects. A survival analysis
estimates customer attrition over time and does not detect any significant impact
of treatment assignment on attrition. Additionally, a random effects panel data
regression estimates the ITT as a 3.4 percent reduction in electricity consumption
relative to the control group.


Although noncompliance limits estimation to ITT effects, the results are
consistent with previous estimates of the average causal effects of mailed, paper
HERs. Given the growing literature of behavioural interventions and mounting
evidence of the effectiveness of HERs, engineers should collaborate with
behavioural economists and policymakers to scale HER programmes and other