Neighbors to ratepayers may hold the key in implementation of successful energy efficiency programs. This is the conclusion of a new study authored by Jon M. Jachimowicz, a doctoral candidate at the Columbia Business School, and Dr. Oliver Hauser at the University of Exeter Business School. The researchers partnered with Opower, an Oracle company that sends out personalized electricity bills comparing energy usage between neighbors.

Prior analysis had shown them that the percentage of declines in energy consumption for customers at utilities that used OPower's tools varied from 2.5% to 0.81%. The purpose of their study was to investigate reasons for disparity in those figures. Their results were surprising. The group whose energy consumption declined the most was also the group which found commonality with their neighbor’s views on energy efficiency.

“Surprisingly, what matters more than one’s own attitude and beliefs - how concerned with our energy use and the environment - is whether we believe our neighbors view saving energy as important to saving the environment,” the researchers concluded. “...the more you think that your neighbors actually care about saving energy to help the environment, the more you will engage in energy-reducing behaviors.”

Of course, the study would have had an alternate set of results under different circumstances.

Take the case of what happened when National Grid implemented a similar scheme in Upstate New York. A Columbia County customer Deborah Moore was not entirely convinced that the habits of her “energy efficient” neighbors were not worth emulating. “There are five [second homes] within easy shouting distance [of my home]. These houses are occupied one or two weekends a month. They are not my “Efficient Neighbors,” they are my “hardly ever in the house turning on a lamp, making microwave popcorn or open the refrigerator’ neighbors.” she told a newspaper. Another important factor to consider is the use of smart meters in such an exercise. The devices are necessary in order to ensure data transfer. According to EIA statistics from last year, 78.9 million advanced smart metering solutions have been installed in America by the end of 2017. At the end of 2016, this figure was 71 million, representing nearly half of all US electricity customers.

The use of behavioral psychology to induce energy-efficient behavior is not new news. A previous study conducted by the same set of researchers for McKinsey consulting arrived at the same conclusions. In fact, behavioral economics has become an important field of study and energy utilities and local governments are increasingly incorporating it into their policy-making decisions.

Briefly, there are a variety of factors which influence our decision-making. Cognitive dispositions (less choice versus more), personal experience and influences of others are just some of them. For example, between 80% to 90% of a German utility’s customers switched to a new plan, when it offered them a default Opt-out option (instead of the standard Opt-in option generally used to promote new plans). A different implementation of behavioral economics was in Berkeley, California, where the local government incorporated costs for solar panels in property taxes for homeowners.