The Future of OPOWER

Abstract

The idea of using social norms and behavioral science in environmental conservation is not new; however, the uniqueness of OPOWER’s approach is that they combined actionable strategies with subtle cues in their monthly energy reports. This being said, the paper surmises that there might be significant challenges in the future in trying to make OPOWER’s strategies more prevalent. In the short discussion piece that follows, this author attempts to elucidate these challenges, positing a nuanced basis for said issues and suggesting possible solutions.

Introduction

OPOWER is a publicly listed energy-efficiency software company that aims to reduce energy usage through social cues derived from behavioral science. Their results work on the premise that normative influence runs deep in people’s predilection to energy conservation.  Such normative beliefs mean that people tend to be more greatly affected by the conservation efforts of similar people around them. This was a milestone in energy conservation because energy reduction is the only method which provides a net positive value in benefits accrued to society, and OPOWER made it a cinch to integrate into existing utility billing systems. Contrast this to solutions like replacing incandescent bulbs with fluorescent lights, or installing photovoltaic panels – both require a significant sunk cost, the value of which can only be recouped over a long run. OPOWER’s solution, on the other hand, saw an almost immediate reduction in energy usage without any significant costs.

However, there are significant roadblocks to OPOWER’s widespread implementation. Firstly, there is the issue of boomerang effects (8) which might cause people who use less than average electricity to regress to the mean. Next, there is skepticism among utility companies that their methods will work on their customer base due to demographic differences. Finally, there have been questions on the sustainability and extensibility of OPOWER to other countries – would it work overseas without much modifications?

Mean Reversion

The boomerang effect describes a social phenomena where attempting to persuade people to do things in a certain way (such as conserving energy) unexpectedly results in them doing just the opposite. In this case, OPOWER knew its strategies would cause higher energy-usage households to consumer less energy, but it would also cause lower energy-usage households to use more energy. To counteract this, OPOWER used injunctive messaging such as smiley faces to signal approval and disapproval for their current energy usage. Subconsciously, the smiley faces serve as a reinforcement and approval indicator for people to continue with their above average performance. However, as seen in Exhibit 4, the boomerang effect still played its hand, albeit to a smaller extent.

One possible solution is to introduce subtle language cues into the energy report, as well as a revision of the presentation of the statistics. In figure B, we see that the Social Comparison Module (SCM) provides absolute statistics on energy usage comparison. (ie. I used 1033 kWh vs 784 kWh for my efficient neighbours) Instead of making absolute figures the central to the SCM, relative figures could be provided instead. For instance, one can place the user on a bar chart on a percentile basis. If I used 32% more energy than my efficient neighbors, then I would be placed in the 90th percentile, for example. Instead of saying “You used 32% more than your efficient neighbors”, the language could be revised to “90% of your efficient neighbours use less energy than you. What this serves is to provide reinforcement that a substantial number of people are ahead of the user when it comes to energy usage. Even if one is below average in energy usage, there will still be a percentage of households that are still using less than you. In this case, the optimal energy usage to strive for is the one that used the least. Hence, the boomerang effect can be mitigated to a certain extent.

Slow Adoption by Utilities

As mentioned in the case study, there has been less than favorable responses from utilities about the adoption of OPOWER strategies. One point that is noteworthy that most utility companies are for-profit. If they promote energy reduction, less profits accrue to them due to transmission and distribution revenue. To offset this, most companies depend on tax breaks or grants from governments in achieving green objectives. In Pittsburgh, Duquesne Light charges all customers a small sum of money in each monthly bill to recover the costs of implementing a program to educating customers on energy usage, in their WattChoices program. Without some kind of financial incentive by government stakeholders, there is a conflict of interest in power generation companies – both to their shareholders as well as energy conservation groups. Moreover, those companies believe that the demographics of each state mean that people would not be receptive to the idea at all.

It is difficult to tackle this problem due to said conflict of interest. Hence, an effective solution would call for some form of government intervention, one that does not shackle electricity generation companies, but rather rewards people for reduced energy usage. To take a leaf out of health care, some insurance companies pay people to keep fit – they provide complimentary gym passes  and even reward you based off the activity that you do [1]. The premise is that insurance companies would have a positive expectancy due to increased health that their customers have after keeping fit, even after the costs incurred in such perks. This can hopefully be applied to energy conservation, except that there is no clear stakeholder involved here – the environment benefits, but a clean environment is a public good. From economic theory, such a public good will not be funded at all. Hence a solution would have to involve the government. One way to go about this is to continue the healthcare approach – the government can offer tax breaks or refunds for reduction in energy usage, either in absolute or relative terms. Such a measure would be funded by discounting the fact that due to the reduces energy usage, less money would be needed to maintain existing power generators, or build new power plants.

To a Sustainable Future

With all these strategies being bandied about, one thing is almost certain if OPOWER sticks to its current method. It might be useful to consider the fact that people will tend to be numbed to such messages after some time. Energy conservation is not a Boolean entity. Consider the fact that some people might use more energy than other households, simply because there are more people living in it. How would we prevent such users from being discouraged and not care about energy conservation? To take a leaf out of obesity studies, most dieters successfully lose weight. However, when their weight loss flattens out, they inevitably get discouraged and start to eat more. To bring in the energy usage perspective, the most avid energy reduction users would, in the near future, start using more energy. What is needed then is a way to engage them over a long run.

One possible idea is the use of dynamic messaging. Instead of saying the same “You use xx% less energy than other households”, it might be possible to present the information in a different layout every time, like in infographics. Appealing to people’s emotions is also a good way. For example, “From the electricity you reduced this month compared to last month, you have provided enough electricity to power a school in less developed countries for 24 days.” Instead of bandering about with terms like kWh which most users do not understand, this strategy actively engages people with the real-world consequences of their actions.

Conclusion

In this short write-up, I considered the future of OPOWER as the authors of the Harvard Business School case study raised in the prologue and epilogue of their case study. I argued the need for the government to intervene because of a conflict of interest in energy conservation, as well as suggested possible amendments in data representation to avoid the dreaded boomerang effect. Finally, I also explored the possibility of changing how data is represented – not only to keep people engaged, but to allow them to see the real-world effects of their energy reduction (or increase).

Auspicium Melioris Aevi

Future Discussion

  • Do you think OPOWER should consider telling everyone that they are above average energy usage, even though they are not, thus doing away with the boomerang effect? The advantages of such a strategy is obvious, but is the key issue here ethics?
  • For those statistically inclined, would a percentile based approach really do away with the boomerang effect.

References

[1] http://www.wired.com/2014/12/oscar-misfit/

[2] http://www.nytimes.com/2011/09/20/health/20brody.html

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