Energy efficiency in the domestic sector : an evaluation of models of the consumer decision process

Abstract

More efficient use of energy is a desirable national goal, for a number of reasons. It can also be financially beneficial to individual consumers. Poor uptake of energy efficiency measures by domestic consumers has been well documented. Often, a financial incentive exists to take such measures, but this does not lead to action.

Purchasing decisions are typically characterised in economic theory as the outcome of a rational choice decision process. Consumers are assumed to evaluate all of the expected benefits and costs of a purchase, financial and non-financial, and make choices which maximise their utility. This assumed decision-making model is used to support conclusions about the ability of markets to deliver a maximum of social benefits.

This study examines evidence about the adoption of electricity efficiency devices, such as hot water cylinder blankets, low flow shower heads, fluorescent light bulbs and insulation. A simple rational choice model does not shed much light on why adoption of such devices has been limited, in view of the likely financial benefits. The observed data can be made to fit the model if transaction costs are assumed, but the sources of those transaction costs can only be guessed at.

An alternative model is proposed, extending the analysis of the decision process to a consideration of the reasons for choosing between alternatives, and the social context within which decisions are made. This model is based on the idea that consumers are not isolated decision-making units, and their choices are influenced by information received from other members of their community. Implications for energy efficiency programme design and for energy efficiency policy are discussed.