One of the most common behavioral biases – loss aversion – manifests itself here as well. According to Accenture, 89% want to address the risk of power outage when becoming energy self-sufficient, and this is where the traditional utility companies have an important role to play. Since energy is considered a basic good for every household in developed countries, balancing out the intermittent nature of renewables becomes essential. This is a chance for the traditional utility companies to take action. They could offer the “back-up” energy supply, thus both addressing the risk of outage and adjusting their business models to the new energy markets.

Another bias that hinders private investment in renewables is hyperbolic discounting: most people put too much emphasis on the immediate benefits rather than future gains, as the future seems “too far away”. Setting up solar panels or a wind turbine at home requires a significant upfront investment, while the payback period can range from 6 to 30 years. Therefore, for many households spending several thousand dollars today hoping to get it back in 10 years might not seem justified.

Luckily, there is an easy solution: “by segregating later time periods into separate categories and integrating earlier time periods into a single category, one can induce greater patience in consumption” [2]. In practice, the companies offering solar panels and wind turbines for households can leverage this by adjusting the way they advertise the expected cash flows from their products. For renewable energy generation, we can think of dividing the years following the purchase of PV or a wind turbine into several periods, for instance, first 5 years when a government subsidy is available, followed by the next period after it expires. It could look somewhat like this:

Depending on the arrangement, different categories can be shown: e.g. the payback period vs. the time beyond it. Another set of categories could be seasonal fluctuations of the amount of energy produced (summer months vs. winter months).

One more bias that stands in the way of prompt decision-making is procrastination. Most people tend to defer making choices or completing tasks if they feel that there is plenty of time to do so in the future. Setting a limited window of opportunity is a way to encourage faster decision-making [2]. In practice this can be done via limiting the amount of time certain incentives (discounts, tax credits) are available in order to create the sense of urgency. Thus, people will be encouraged to start generating their own energy sooner rather than later.

Encouraging people to generate green energy is even more difficult than helping them switch to greener and more beneficial providers. As the complexity of the decision increases, the number of various behavioral biases affecting it also goes up. However, behavioral science suggests several simple steps that traditional utility companies and providers of the home energy generation solutions can employ in order to turn more of us into prosumers.

Traditional utility companies should adjust their business models and offer energy back-up options to prosumers to address their loss-aversive behavior. This will allow utility companies to survive in the changing markets as well as support green energy solutions. There are simple marketing strategies for the companies offering home energy generation solutions that they could use to incentivize customers:

• Visualizing the long-lasting nature of benefits from home energy generation to avoid hyperbolic discounting
• Mitigating the effects of procrastination by offering limited-time discounts and other incentives

This would not only boost the revenues of the company, but also increase the share of sustainable energy. Currently only around 10% of all energy and about 22% of all electricity comes from the renewable sources worldwide. Using the simple strategies described above, each market player can help increase these percentages considerably.