Customer Acceptance of Smart Grid Products and Services: The role of incentives and psychological interventions

Practitioners and researchers alike agree upon smart grids being essential for a sustainable energy future because they allow for a high penetration of renewable energy production and a more efficient usage of energy. Whereas smart grids seem to be feasible from a technological point of view, the question of how to engage consumers in a smart grid remains a key challenge. This research project aimed at identifying effective ways to increase customer acceptance of smart grid products and services. By integrating research on customer acceptance, innovation diffusion, intervention studies aimed at improving pro-environmental behavior, environmental decision making, choice architecture and on judgment and decision making, this research project developed three distinct interventions which where tested in several field and laboratory experiments. The results prove useful for researchers, practitioners and policy makers to design interventions which successfully increase customer engagement in a smart grid and thus allow for a better exploitation of the benefits of smart grids as well as for the attainment of political goals such as energy efficiency, a reduction of CO2 emission and a higher integration of renewable energies.The first research contributions of this project investigated to what extent incentive schemes can increase customer acceptance of smart grid products and services. The paper integrates the economic perspective on the price effect of incentives and the psychological perspective on incentives, and compares the effectiveness of rewards versus punishments on increasing customer participation in a demand response program. The paper remedies a research gap as it examines the mechanisms of when and how one incentive type is more effective than the other. Based on a laboratory experiment with students in their role as energy consumers and two online experiments with a representative sample of the Swiss population, it demonstrates that punishment-based incentive schemes are sometimes more effective than reward-based incentive schemes. Punishments are particularly effective to overcome customer concerns about smart grid technologies and do not have any negative side effects on customer loyalty. Punishments also seem to have a stronger signal function than rewards and could therefore foster customer acceptance of demand response programs more than reward-based incentive schemes.The second contribution focuses on a pure psychological intervention by testing the moderating role of the construal level mindset on the influence of cognitive dissonance on increasing customer acceptance of an energy efficiency online portal. Cognitive dissonance following an act of hypocrisy has been proven to be effective for increasing conservation behavior. However, this effect is moderated by the construal level mindset of a person. An online experiment with Swiss energy consumers revealed that cognitive dissonance following an act of hypocrisy increases the adoption intention of an energy efficiency online portal only when people have adopted a high-level construal mindset but not when they have adopted a low-level construal mindset. According to the action-based model of dissonance there are strong behavioral implications of conflicting cognitions and reducing the dissonance allows for effectively carrying out a behavior in line with the cognition most resistant to change. In the case of this research project joining the energy efficiency online portal allows to reduce cognitive dissonance and to be in line with the advocated behavior. It is possible that participants who adopted a concrete and low-level construal mindset were already highly action oriented (implemental mindset). Reminding them of past failures to save energy, although provoking cognitive dissonance, therefore was not able to increase this action tendency any further.Based on literature reviews on the effect of reward programs on customer loyalty and the moderating role of the reward type, the third contribution investigated to what extent monetary and social reward programs are able to increase customer engagement with energy efficiency. A five-month field experiment with 91 customers of a Swiss energy provider, revealed that monetary reward programs are particularly effective when it comes to positively influence customer behavior. However, only social reward programs improve aspects of attitudinal customer loyalty, such as the image of and satisfaction with the energy provider.