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Changing Energy Efficiency Technology Adoption in Households

Periodic Reporting for period 1 - CHEETAH (Changing Energy Efficiency Technology Adoption in Households)

Reporting period: 2016-12-01 to 2018-05-31

There is a need to develop more socially and behaviourally realistic energy demand models that incorporate insights from social science theories of decision-making, behaviour and diffusion. Energy-economic models typically employ so-called implicit discount rates (IDRs) to govern decision makers’ adoption of energy-using technologies (EET). Since higher IDRs usually mean lower investments in energy efficiency, there is a direct link between EET adoption and IDR estimates used in these models. According to the relevant literature, the size of the IDR generally depends on (i) preferences such as time preferences, risk preferences, reference-dependent preferences such as loss aversion, and pro-environmental preferences; (ii) predictable (ir)rational behaviour, i.e. bounded rationality, rational inattention, and behavioural biases, such as present bias or status quo bias; and (iii) external barriers to energy efficiency such as split incentives, lack of information, or lack of capital. Thus, the IDR should vary, for example, with household response to technology characteristics and energy efficiency policies. So far, though, the leading energy-economic models typically use the same IDR (and changes in the IDR in response to policies) for all technology choices, and do not distinguish between households. Choice models are a suitable method to elicit individual preferences for technology characteristics and responses to policies, and to analyse how these preferences and responses vary by household characteristics and individual attitudes. Thus, integrating results from choice experiments into energy-economic models is expected to improve the modelling of technology adoption and policy effectiveness.
Against this background, CHEETAH provides empirical evidence on household response to energy efficiency policies and factors driving adoption of energy-efficient technologies, allowing specifically for heterogeneity across households and technologies. CHEETAH considers the effects of established policies such as energy labelling as well as of new policies such as energy performance tenders or energy saving obligations. CHEETAH employs a wide range of methodologies, including an EU-wide representative survey involving stated preferences discrete choice experiments, state-of-the-art econometric analysis, and innovative linking of energy and macro-economic models. In addition, CHEETAH involves specific activities to engage in a dialogue with stakeholders, policy-makers, and researchers. In sum, CHEETAH provides evidenced-based guidance for policy making, improved modelling of energy-efficiency technology adoption, and a significant contribution to the academic literature.
The overarching objective of CHEETAH is therefore to provide empirical evidence on how policies affect decision-making processes in the residential sector in the EU and to improve the modelling of household behaviour in response to these policies.
The main focus of the first reporting period was on the development of a conceptual approach to reflect energy efficiency investment behaviour in surveys and models and how it can be influenced by energy efficiency policies. A broad set of relevant literature on energy efficiency in households was reviewed. The review included the following elements:
• A literature review on concepts
• A review of existing models
• A literature review of energy efficiency policies

The conceptual work provided vital input for developing and refining the survey questions and choice experiments, because it has identified which survey questions are vital for populating the models. In the first reporting period, the survey questionnaire was fully developed. It is available on the website and includes several stated preferences choice experiments to be carried out in all (or in a subset of) the following countries: France, Germany, Italy, Poland, Romania Spain, Sweden, and in the United Kingdom. For example, one set of choice experiments on energy efficient technology adoptions relates to choices among different refrigerators. Attributes for this choice experiment include the price, size, length of warranty, customer ratings and – as particular policy instruments - subsidies (for A+++ labelled refrigerators), and the energy label class. Other technology-based choice experiments refer to thermostats and heating systems. Similarly, a choice experiment on policy acceptance included attributes such as policy type, additional costs for participants, or contribution to achieving national energy policy targets (e.g. energy efficiency target). In all choice experiments so called “cheap talk” design was implemented to mitigate hypothetical bias, typically via opt out options. The questionnaire was further completed to include items on socio economics, socio-psychological factors (including values, identity, social norms, personality traits) as well as items addressing acceptance of particular policies, or trust in organizations providing recommendation or financing of energy efficiency measures. Survey results will be available in autumn 2018.
Until the end of the CHEETAH project, the following results and impacts will be available and communicated among the academic community, policy makers and other relevant stakeholders:
• A better understanding of household energy efficiency decision making and households’ response to policy (in particular acceptance), allowing for differences across countries. This will improve the design of energy-efficiency policies by better tailoring them to the household’s needs.
• Significantly improved tools for energy-efficiency policy evaluation, allowing for heterogeneity in household responses to policies and heterogeneous determinants of adoption. The approaches will be transparently described and can be applied by the modelling community.
• The results of the energy demand modelling assessing the impact of policy measures addressing household decision-making on the long-term energy demand of the residential sector will be published in a policy paper and can be used directly by policy makers.
• The results of the macro-economic modelling provides policy makers with relevant information on the multiple benefits of policy measures going beyond the cost savings for households and reduction of CO2 emission. This especially infers to the creation of new highly-skilled jobs and the stimulation of economic growth at the national and EU level.
• A broad range of communication activities are performed to inform the academic