Supporting policies based on empirical investment behaviour

BRISKEE – Behavioural Response to Investment Risks in Energy Efficiency – is a Horizon 2020 project that will provide evidence-based input to the design and evaluation of energy efficiency policy in the EU residential sector.

With the residential sector representing 27% of the EU final energy demand, households' investment in energy efficiency is a key issue for meeting energy and climate policy targets. When assessing the costs and benefits of insulating their homes, or purchasing energy-saving appliances, households wonder what will be the future value of these investments. This evaluation involves applying discount rates, which reveal households’ preferences for time and risk. Since households' willingness to wait or to take risks varies, these discount rates differ across households.

Owing to constraints on time, attention, and individuals’ ability to process information, the evaluation of investments may lead to biased choices. For example, individuals tend to value immediate rewards much more than they value future rewards. Likewise, individuals value losses larger than gains of equal amounts. As a consequence, individuals may fail to invest in energy efficiency measures which involve higher costs today, but save money on energy bills over many years. Moreover, the discount rates observed from actual investments reflect other “barriers to energy efficiency” such as poor information about the energy performance of appliances and homes, or limited ability to borrow money from banks.

Discount rates are key parameters in energy-economic models used by policy makers in designing and evaluating energy efficiency policies.

BRISKEE addresses household decision-making and its implications at three levels: The micro, meso and macro level. At the micro level, factors influencing individual decision-making will be elicited in a representative survey. At the meso level, the impact of policies addressing decision-making on long term energy demand will be investigated using the energy demand models FORECAST and Invert/EE-Lab. At the macro-level, BRISKEE will assess the effects of energy efficiency improvements on the economy using the macroeconomic model ASTRA.

BRISKEE: will explore

  • The time and risk preferences of individuals accounting for differences in household characteristic, technology characteristics and countries. The impact of time discounting and risk preferences on the diffusion of energy efficient technologies.

  • The impact of policies influencing micro-economic investment decision-making and technology diffusion on residential energy demand until 2030.

  • The effects of technology diffusion and energy efficiency policy on European Union gross domestic product (GDP), employment and exports in 2030.