Saturday, November 10, 2012: 3:30 PM-5:00 PM
Adams (Sheraton Baltimore City Center Hotel)
*Names in bold indicate Presenter
Organizers: Lori Bennear, Duke University
Chairs: Lori Bennear, Duke University
While price may still be economists’ preferred method for signaling scarcity, many utilities (both water and energy) are increasingly relying on non-price programs to manage demand. This panel evaluates three different approaches to controlling utility demand without prices.
The first paper uses a randomized experiment to evaluate three different norm-based messages encouraging reduced water demand. One message provides simple technical information on how to reduce water use (technical message). The second message emphasizes the importance of reducing water use in a time of drought (pro-social message). The final message provides a comparison of the households’ water use to other households in the neighborhood (social comparison message). The social comparison message has a greater influence on behavior than either of the other two messages, particularly among households that are less price sensitive. This indicates that social norm-based policies may be a substitute for price mechanisms and may even be used as a complement to price mechanism to reduce water use among the least price sensitive households.
The second paper examines a policy to promote residential solar panel adoption through changing terms of financing, but not the price of the financing. The policy, called Property Assessed Clean Energy (PACE), allows homeowners to finance residential solar installation through a loan that is paid back through property tax assessments. Importantly, the property tax assessment payment allows a homeowner to transfer both the technology (the panels) and the payments to a new owner if the house is sold. Conventional financing requires immediate payback of the loan upon property transfer. This paper uses observational methods, both differences-in-differences and synthetic control group, to evaluate the impact of PACE financing on residential solar installation. There is significantly higher adoption of solar panels in cities with PACE programs relative to areas without PACE programs even at higher interest rates. When applied statewide, results predict an increase in installations by approximately 25 homes per year for an average-size Californian city, or 14,170 installations per year statewide.
The final paper examines the distributional impacts on non-price policies. This paper examines distributional impacts of non-price water conservation policies during a drought, particularly alternate day restrictions on lawn watering. Using survey responses and billing data, they find that watering restrictions implemented around the 2007 drought in North Carolina reduced average monthly household water demand by 1-4% and 4-9%, respectively. In terms of distributional impacts, there was no statistical evidence that these reductions were correlated with income. However, the non-price policy did seem to impact households with high levels of discretionary water use; households with automatic irrigation systems reduced their consumption by 7% more than households without irrigation systems when faced with mandatory restrictions. Moreover, results from quantile regressions suggest that high-consumption households are more responsive to mandatory policies than households in lower quantiles of consumption.
Take together these three papers offer important empirical evidence on the effectiveness of non-price policies to reduce utility use.