POLICY AND MODELING BASED ON REAL BEHAVIOUR

Households account for about 27% of the EU’s final energy use. The energy used by households largely depends on the decisions that more than 500 Million Europeans make when purchasing energy-related technologies, from efficient light bulbs to building retrofits.

BRISKEE and CHEETAH are two Horizon 2020-funded research projects that help us understand why and how households make energy efficiency investments. Both projects provide empirical evidence of consumer decision-making, linked to energy modelling and effective policy design.

Discount rates are key

Implicit Discount Rates (IDRs) are the at the core of both BRISKEE and CHEETAH.

We invest today but the savings occur in the future, and we, as households, somehow try to evaluate the future value of these investments. Although very few households make a thorough calculation, this more or less intuitive decision-making process may be captured via implicit discount rates, which, among others, reveal households’ preferences for time and risk as well as reflecting “barriers” to energy efficiency such as lack of information or lack of capital.

Rather than using average implicit discount rates in policy assessment and modelling, more realistic implicit discount rates vary by household characteristics, countries, and technologies. BRISKEE and CHEETAH in total asked about 30 000 households in eight EU countries about their investment behaviour and views on energy efficiency policy. Based on an improved understanding of household decision making, policies, energy demand and macro-economic effects are modelled in the projects. The outcomes show that more energy can be saved than in traditional modelling, but there are also important lessons for more effective, targeted and realistic policies.