Reducing residential energy consumption through a marketized behavioral intervention: The approach of Household Energy Saving Option (HESO)

Behavioral strategies of occupant energy conservation are essential to counter the effect of growing energy demand. The wide application of occupant energy interventions, such as providing subsidies to promote energy saving, involves continuous financial investments, which has been a particular challenge to subsidy providers, i.e. national energy agencies. Exploring the cost-effective interventions is essential in the case of promoting household energy conservation in the long term. In this study, a promising strategy to lighten the financial burden of energy policy providers - Household Energy Saving Option (HESO) is proposed and validated. HESO is an option-based strategy that offers buyers (i.e. households) an opportunity to earn the reward, depending on whether they can achieve the pre-determined energy saving goal. A conceptual framework of HESO is established, which consists of five elements, namely theoretical foundation (T), integrated interventions (I), market premises (M), energy sustainability (E), and stakeholders (S). To test the effectiveness of HESO on household energy reduction, a preliminary experiment was conducted in 101 households living in Singapore and the results demonstrated that HESO has a positive effect on encouraging home electricity conservation based on the Difference-in-Difference (DID) analysis. Compared to the baseline of household energy consumption, HESO-induced energy reduction was 8.18% and 12.56% when saving goals were set at 5% and 10%, respectively. Possible reasons to explain different effects of HESO on energy reduction have been elaborated, including the effect of positive feedback and re-adjustment of households’ energy saving motivation during the transition period. Key determinants of HESO's success have also been discussed, such as management of cash-flow liquidity and design of goal difficulty. HESO shifts costs from energy policy providers to the households who fail to achieve their goals, which significantly improves the cost-efficiency of residential energy reduction strategies. This study contributes to the literature by developing a framework of option-based residential energy saving intervention. The results enlighten a promising and scalable solution by using a marketized intervention for promoting effective energy conservation in households while minimizing the cost burden borne by the city government.