Elke U. Weber, Columbia University Overcoming Barriers to Smart Grids & New Energy Services UT Austin Interdisciplinary Energy Conference, April 7-8, 2011 Smart Grid, Smart Decisions?

If you build it, they may not come…  Barriers to Behavior Change Information Deficits Attention Deficits Motivation Deficits 2

Information Deficits  Metrics matter “Carbon footprint” metric has created new goals 3

Information Deficits  Metrics needed “Carbon footprint” metric created new goals  Timely feedback crucial for learning Desire to improve a powerful goal Real-time feedback one of the addictive properties of video games 5

Attention Deficits  Finite attention requires selectivity  Selectivity makes us myopic Focus on status quo Framing outcomes as gains or losses  Relative comparisons  Loss aversion Present bias for intertemporal decisions  Outcomes (cost savings) in the future are disproportionately discounted  (Smart meter) info & feedback displays Provide understandable “units”  kWs vs. # of 100W incandescent lightbulbs Facilitate relative comparisons  Improvements relative to last month, last year, best neighbor, etc. 6

Motivation Deficits  Status-quo bias Inertia, risk aversion, loss aversion Biased argument recruitment (Query Theory)  Insufficient trust In companies/utilities, government agencies 7

Multiple Ways of Making Decisions  Decisions get made in qualitatively different ways (Weber & Lindemann, 2007) “by the head”  calculation-based decisions “by the heart”  emotion-based decisions “by the book”  rule-based decisions

Behavior change with calculation-based decisions  Uphill battle many decision biases will work against you  Discounting, loss aversion, status-quo biases  Make environmentally-responsible and socially- desirable options the default (Johnson & Goldstein, 2003; Thaler & Sunstein, 2008) E.g., in building codes, energy choices  Prime social goals Apollo-8 image of planet earth Use of group settings to communicate information

Behavior change with emotion-based decisions  Tempting to scare people into “right” behavior  Problematic for at least two reasons Finite pool of worry  Increase in worry about one hazard decreases worry about other hazards ( Weber, 1997) Single action bias  Tendency to engage in single corrective action (Weber, 2006)  Yet, most environmental problems require multiple and sustained responses

Behavior change with rule-based decisions  Much behavior driven by habits based on past calculations or internalized rules  Create new habits, by following new rules Respected authority to issue new rule  “What would Jesus do?” Behavior prescriptions need to be concrete  “What would Jesus drive?” Capitalize on social observation and imitation by having celebrities model desired behaviors  “What does Angelina drive?”

Conclusions  Human cognitive and emotional limitations present challenges, but also opportunities  Preferences are malleable, for better or worse Goals can be primed Choice defaults and attribute labels can direct attention Most effective mode(s) of learning and decision making can be invoked 12

Recommendations  Introduce new mental accounts and metrics to focus attention on environmental goals and to measure progress  Provide information about energy use in experiential ways direct or in form of simulations  Shape decision environment Use of environmentally responsible defaults Get people to evaluate environmentally responsible choice options first Use group decision settings to prime social and collective goals Social learning and imitation to modify undesired automatic behavior

Revision of Conference Announcement A combination of socioeconomic, psychological, technological, and legal barriers sometime impede deployment of smart grid systems. The barriers include information gaps, insufficient consideration of consumer psychology, insufficient trust in utilities, capital constraints, poor pricing methods, and outdated laws. 14

References  Johnson EJ, Goldstein D Do defaults save lives? Science 302:  Thaler RH, Sunstein CR Nudge : improving decisions about health, wealth, and happiness. New Haven: Yale University Press.  Weber, E. U. & Johnson, E. J. (2009). Mindful judgment and decision making. Annual Review of Psychology, 60,  Weber, E. U. & Lindemann, P. G. (2007). From intuition to analysis: Making decisions with our head, our heart, or by the book. In: H. Plessner, C. Betsch & T. Betsch (Eds.), Intuition in judgment and decision making (pp ). Mahwah, NJ: Lawrence Erlbaum.  Weber, E. U. (1997). Perception and expectation of climate change: Precondition for economic and technological adaptation. In M. Bazerman, D. Messick, A. Tenbrunsel, & K. Wade-Benzoni (Eds.), Psychological Perspectives to Environmental and Ethical Issues in Management (pp ). San Francisco, CA: Jossey-Bass. 15