Consumers reluctant to embrace time-of-use energy pricing

March 04, 2020

Irish consumers do not warm to time-of-use electricity tariffs, even when the tariffs would save them money, according to new ESRI research. Using a controlled experiment, the ESRI’s Behavioural Research Unit found that consumers avoided choosing deals where the price of electricity varied throughout the day.

The study was undertaken in collaboration with the Commission for the Regulation of Utilities (CRU) and designed to inform policy as Ireland introduces smart meters. The new meters will allow energy providers to offer time-of-use tariffs that reward households for using electricity at off-peak rather than at peak times of day.

In principle, consumers will be able save money and help the environment, provided they understand the deals and choose an appropriate tariff. In the experiment, a representative sample of consumers were broadly in favour of smart meters. Yet they were reluctant to choose new time-of-use tariffs and had difficulty comparing prices against usage patterns – costing them an average of 13% on electricity bills.

The experiment also tested whether consumers found it easier when they were able to use a personalised online comparison tool. Most made better decisions when they had access to the tool.

“Shifting consumers to time-of-use tariffs will not be straightforward,” said Dr Cameron Belton, lead researcher at the ESRI. “This experiment shows that consumers fight shy of these more complex tariffs even when they can save significant amounts of money. Designing and promoting good online comparison tools may help.” 

Commenting on the research, Commissioner Aoife MacEvilly, of the CRU, said “The introduction of smart meters is a key building block in enabling consumers to participate in the low carbon transition. We know from customer trials that smart services can deliver real benefits for consumers. The results of this research help the CRU to better understand consumer attitudes and difficulties they face when assessing and choosing offers from energy suppliers. Clearly, we have work to do to communicate the benefit of time of use tariffs, from both a cost-saving and environmental perspective, to positively influence consumer behaviour. For the CRU, the research points to the opportunity and necessity of developing more advanced information tools to demonstrate the value proposition of smart meters as the project continues.”