Does Differential Off-Peak Electricity Pricing Affect Usage ?

1. Does Differential Off-Peak Electricity Pricing Affect Usage? John Williams, Rob Lawson and Paul Thorsnes School of Business

2. Synopsis of Project • Mercury Energy contacted Otago University for help with a pricing experiment • Rob and Paul responded and set up study, John joined later • Question: Does pricing household electricity differently at peak and off-peak times induce “load shifting”? • Peaks strain the physical infrastructure and have negative financial impacts on retailers

3. Study Design: Experimental Groups • Five experimental groups (four treatment groups + one control group) • “Off-peak” is from 7PM to 7AM weekdays; weekends & public holidays

4. Study Design: Sample • Approximately 400 households in Auckland (Pakuranga) • Recruited by Mercury Energy • Allocated by Mercury to experimental groups • All participants got: • A monthly report of usage, including daily and monthly peak and off-peak usage • Access to usage info via the Web • A list of energy-saving tips

5. Study Design: Data • Study ran from 1 August 2008 to 31 July 2009 • Mercury supplied us with daily readings for both peak and off-peak periods (i.e. two readings per day for each household) • Also supplied data for corresponding period one year before the experiment began • Technical problems with data: only December 2007 onwards is usable

6. Energy Usage: Seasonality

7. Proportion of Off-Peak Use ANZAC Waitangi Easter Christmas

8. Group Effect Start of Experiment

9. Panic! • Identified systematic variations across experimental groups which confound results • Significant amount of unusable data • Solution: compare within households • Examine the differences in energy use in a period (week, month, year) during the experiment and compare with the corresponding period beforethe experiment • Scale: proportional change from baseline (+ve values indicate increase in study period) • (Before – During) / Before

10. Total Usage Change

11. Proportional Usage Change

12. Prop. Off-Peak Usage Change

13. Differences by Year: Total (%)

14. Differences by Year: Prop Off-Peak(%)

15. Summary • Systematic differences between experimental groups complicates analysis enormously • Not possible to directly detect influence of pricing • Comparison to previous period is suspect • Don’t know if change was part of a pre-existing trend • Solution: comparison to baseline, expressed as a proportion, puts all groups on common metric and allows comparison between groups • Result:possibly a conservation effect (“significant” but R2 tiny); no evidence of a switching effect

16. Where to from here? • Caveats: data is difficult to deal with, i.e. Missing values and outliers — have not fully investigated impacts of this yet • May need to take other non-random differences into account (characteristics of households) • Not 100% (or even 95%) confident of results yet • Mercury ran a post-survey, but we haven’t had time to search it for clues yet ... • Some households did use less energy, and some used more off-peak: what makes them different from those who didn’t?

17. Tentative Conclusions • Absolute magnitude of financial incentives may have been too low — but note the large price difference is outside the margins that a retailer could realistically offer • Attitudes and values may have bigger impact than $$$, also could be interactions (further analysis)