Love Thy Neighbor’s Energy Bill: Using Behavioral Science to Save Money

In this series of commentaries on analytics-related TED Talks, we examine how insights from predictive analysis can solve real-world problems and how various experts are making that happen.

If you're obsessed with checking your e-mail, finances, and other personal matters—you may be obsessing over the wrong things. We're wasting energy all around us, but few are paying enough attention. In this TED Talk: How Behavioral Science Can Lower Your Energy Bill, Alex Laskey explores how we can use data analytics and quantitative analysis to motivate individuals around the globe to pay more attention to the energy they use, and thus waste less.

Laskey says the answer lies in behavioral science. He describes a graduate school experiment performed one hot summer in a California neighborhood. Signs with various motivational messages were placed on individual homes asking residents to turn off their air conditioners and turn on their fans. Of the messages used, social pressure trumped financial incentives and moral persuasion. This exemplifies the power of social pressure—which, when harnessed, can be a "powerful force for good." In fact, Laskey says it already is.

In what he says is "the largest behavioral science experiment in the world," Laskey describes Opower, the company that he started with his friend Dan Yates. By developing software and partnering with utility companies, they've used the power of social pressure to help customers save energy.

"We deliver personalized home energy reports that show people how their consumption compares to their neighbors in similar-sized homes," Laskey says. "We have people comparing themselves to their neighbors, and then we give everyone targeted recommendations to help them save. We started with paper, we moved to a mobile application, Web, and now even a controllable thermostat."

The results speak for themselves: "This year alone, in partnership with more than 80 utilities in six countries, we're going to generate another two terawatt hours of electricity savings." How much is two terawatt hours? More than enough to power every home in St. Louis and Salt Lake City combined for more than a year—and roughly half what the U.S. solar industry produced in a year.

Laskey says that the best news about this savings is that it's passive energy generation—nothing is being burned to create it. It exists merely through the savings generated by data analytics and smart technology to tap into human motivation and behavior. He says that 20 percent of electricity in homes is wasted through careless use—which translates to "$40 billion a year wasted on electricity that does not contribute to our well-being, but does contribute to climate change."

He closes with two great examples of the effectiveness of business analytics and behavioral science to decrease energy use: the Prius and Harriet. The two aren't directly related, but function on the same principle.

Toyota's energy-saving pioneer, the Prius, is effective because the company included real-time readings in the dashboard to show drivers how much energy they're saving—which reinforces efficient driving habits.

Harriet is an elderly acquaintance that Laskey and his family met while on vacation. When she found out what Laskey did, she said, "You're exactly the person I need to talk to. You see, two weeks ago, my husband I got a letter in the mail from our utility. It told us we were using twice as much energy as our neighbors. And for the last two weeks, all we can think about, talk about, and even argue about, is what we should be doing to save energy. We did everything the letter told us to do, and still I know there must be more."

Although the integration of behavioral science may be unique, the use of data science to save energy is widely being used in urban and business environments as well. "Smart cities" is an increasingly familiar term, which is why 10 cities in the U.S. have committed to be part of the City Energy Project (CEP). Administered by the National Resources Defense Council and the Institute for Market Transformation, the project—started in 2014—began with pilots in Atlanta; Boston; Chicago; Denver; Houston; Kansas City, Missouri; Los Angeles; Orlando; Philadelphia; and Salt Lake City. In this effort, "CEP hopes to reduce annual carbon emissions by five to seven million tons … and lower energy bills by almost $1 billion."

In addition, eight of these cities are also participating in the U.S. Department of Energy's Better Buildings Energy Data Accelerator program—which is also using a bit of behavioral science and social pressure, by benchmarking building owners' energy usage.

With the massive surge in the Internet of Things, which includes smart home devices to help homeowners and businesses quantify and control their environments more thoroughly, data science and analytics have a bright future in helping to decrease energy waste—and save the planet in the process.

As founder and president of Opower, Alex Laskey and his team use data science, behavioral science, and computer science to help utility companies use business intelligence to show customers how to cut down on energy waste—and save money in the process. For more on this topic, read "Science of Motivating Consumer Behavior," an op-ed by Daniel Yates, CEO and founder of Opower, in Kogod Now, a digital magazine by American University's Kogod School of Business.