1. Energy Waste in Homes The Untapped Potential Energy Waste in Homes The Untapped Potential George Malek Energy Efficiency Portfolio Manager Disclaimer: This presentation includes energy usage estimates for illustrative purposes only. Although most of the assumptions can be sourced, some have been made solely based on the authors professional experience.

2. Page 1 Energy Consumption in Homes Electricity End Use Profile in Homes Waste Due to Inefficiencies Waste Due to Behavior Typical Utility Rate-Based Programs Behavioral Economics Example of Behavioral Energy Efficiency Initiatives Outline

3. Page 2 Energy Consumption in Northern Illinois Homes ComEd Average for Single-Family home: 9,800 kWh a year Average Gas Heated Home : 1,200 therms a year Average Electric Cost for Single-Family home: $0.11 per kWh Current Natural Gas Cost for Single Family Home: $0.60 per therm

4. Page 3 Average Annual Energy Usage in Northern Illinois by Enduse (% of Annual Cost)

5. Page 4 Energy Waste by Enduse Electric Enduse Category Energy Cost Percent of Cost Behavior Waste Cost Less Behavioral Waste Inefficient Waste Space Heating $ 70038% $ 132 $ 567 $ 145 Space Cooling $ 22712% $ 23 $ 204 $ 11 Water Heating $ 20111% $ 87 $ 114 $ 35 Lighting $ 17310% $ 24 $ 150 $ 87 Electronics $ 1267% $ 6 $ 119 $ 20 Refrigeration $ 1066% $ 27 $ 79 $ 47 Washers/Dryers/Dishwashers $ 734% $ - $ 73 $ 32 Cooking $ 845% $ 9 $ 76 $ 14 Computers $ 412% $ 17 $ 24 $ 4 Other $ 905% $ 18 $ 72 $ 21 Total $ 1,820100% $ 325 $ 1,405 $ 395

6. Page 5 Energy Waste (% of Annual Cost) Waste due to Equipment and System Inefficiencies: Furnaces and air conditioners with low efficiency ratings (Low AFUE, Low SEER) Refrigerators and appliances with substandard efficiencies (Non ENERGY STAR ® ) Building construction quality (insulation, air leakage) Incandescent Lighting vs. CFL and LED Occupant Driven Unnecessary and/or Excessive Use: Thermostat Settings (over heating/cooling) Failure to turn off lights and equipment when not in use Lack of system maintenance (ex: replacement of air filters) Failure to use sleep or power savings modes for computers Useful Energy Use

7. Page 6 Waste Due to Inefficiency Targeted Typically by Energy Efficiency Programs Electric Enduse CategoryEnergy Cost Percent of Cost Behavior Waste Cost Less Behavioral Waste Inefficient Waste Space Heating $ 70038% $ 132 $ 567 $ 145 Space Cooling $ 22712% $ 23 $ 204 $ 11 Water Heating $ 20111% $ 87 $ 114 $ 35 Lighting $ 17310% $ 24 $ 150 $ 87 Electronics $ 1267% $ 6 $ 119 $ 20 Refrigeration $ 1066% $ 27 $ 79 $ 47 Washers/Dryers/Dishwashers $ 734% $ - $ 73 $ 32 Cooking $ 845% $ 9 $ 76 $ 14 Computers $ 412% $ 17 $ 24 $ 4 Other $ 905% $ 18 $ 72 $ 21 Total $ 1,820100% $ 325 $ 1,405 $ 395 Rebates on high SEER-rated air conditioners Discounts on ENERGY STAR ® qualified CFL and LED bulbs and fixtures Rebates on ENERGY STAR ® qualified appliances and electronics Rebates on high- AFUE furnaces and energy efficient water heaters

8. Page 7 Waste Due to Behavior Electric Enduse Category Energy Cost Percent of Cost Behavior Waste Cost Less Behavioral Waste Inefficient Waste Space Heating $ 70038% $ 132 $ 567 $ 145 Space Cooling $ 22712% $ 23 $ 204 $ 11 Water Heating $ 20111% $ 87 $ 114 $ 35 Lighting $ 17310% $ 24 $ 150 $ 87 Electronics $ 1267% $ 6 $ 119 $ 20 Refrigeration $ 1066% $ 27 $ 79 $ 47 Washers/Dryers/Dishwashers $ 734% $ - $ 73 $ 32 Cooking $ 845% $ 9 $ 76 $ 14 Computers $ 412% $ 17 $ 24 $ 4 Other $ 905% $ 18 $ 72 $ 21 Total $ 1,820100% $ 325 $ 1,405 $ 395 Energy Efficiency Programs tend to lack elements that address behavioral waste

9. Page 8 Old School Marketing… Traditional Energy Efficiency/Conservation Marketing Relied on standard economic theory –Consumers are rational. Given incentives and complete information, they will make the best possible decision to maximize their gain – regardless of internal biases. But a consumers internal biases undermine standard economic theorys ability to influence purchase decisions and behaviors –Emotional factors can stymie logical purchase decisions

10. Page 9 New School Marketing: Behavioral Economics Five decision-making biases influence the way people consume energy. 1.Bounded Rationality -Too much information can be overwhelming and can de-motivate decision-making. 2.Gain versus Loss Framing-A negative consequence is more motivating than a positive benefit. 3.Dynamic Inconsistency- People value immediate gratification and tend to put off or delay unpleasant costs or conditions. 4.Social Preferences - People tend to do what other people do regardless of what information they have, and regardless of what they predict they will do. 5.Small Rewards - Enticing behavior modification with small incentives can reduce desired efforts and behaviors.

11. Page 10 Further Findings and the Insights they Precipitated FindingInsight Not influenced by any 1 single factorNo magic bullet Behavior change is long-term process Energy efficiency incentives are transactional and fleetingly finite in nature Hard to measure: The effects of Behavioral change are not easily seen or identified Implementing requires keeping the faith, while working on customers to stay engaged. Unique barriers and motivators can compete with each other Motivation doesnt always come from the desire to save money; and feedback is a critical ingredient for overall success. Behavior change is different for every person Accurate customer segmentation/messaging plays an important role. Loyalty programs are best able to effectively change the behavior of targeted consumers A strategy of customer acquisition, engagement and retention is the only framework that demonstrates longevity. Electricity is cheap, clean, plentiful and always there, it will always be very low involvement commodity The desired behavior must be attached to something that people care about.

12. Page 11 Behavioral Type Programs Energy Consumption Feedback –Home Energy Reports –In-Home Displays Contests Community Challenges

13. Page 12 ComEd Home Energy Report

14. Page 13 Contests Small Business Showdown

15. Page 14 Community Challenges