Overwhelmed by Choice (2/2): Prosumers and Green Energy
As we explored in the previous article, the individual’s behavioral tendency to settle for the first acceptable option might lead to sub-optimal decisions when it comes to choosing energy providers. This tendency of “satisficing” [1] also has a detrimental effect on “prosumers” – households generating their own energy. Generating your own energy requires complex decisions involving the type of technology (e.g. solar, wind, hydro power etc.), financing method, desired capacity, etc.
Satisficing in Prosumers
There are many options available on the market regarding energy production technologies. This makes it a choice that requires a lot of time and effort, and the amount of information people need to consider is tremendous. As discussed in the last article, the more options there are, the more time and effort an individual has to invest in discerning which one best suits their needs and those of the environment.
Considering the mind’s tendency to take shortcuts, in the presence of overwhelming amounts of information prosumers are just as likely to rely on cues and heuristics to bypass the decision making process. This makes them prone to relying on the most prominent technology or provider, or the first ones they happen to come across. Doing so is not always guaranteed to encourage energy choices that have the interest of the environment at heart, especially if the first or most prominent providers are not using green energy sources.
Furthermore, if people have a natural tendency to simplify their choices, this increased complexity itself can divert them from generating their own energy altogether and instead rely on prominent non-green providers like everyone else. Moreover, in such a complex decision, it is not only the satisficing that is holding potential prosumers back.
It is important to understand the main reservations and behavioral biases they have, as well as to present the available options in a way that enables better decision-making and mitigates the biases consumers might have. 57% globally are already considering going off the grid and there are a few techniques to make it easier for them to make this choice.
References
[1] Simon H. A. (1956). Rational choice and the structure of the environment. Psychological Review, 63(2), 129-138
[2] Johnson, E. et al (2012). Beyond nudges: Tools of a choice architecture. Marketing Letters, 23(2), 487-504
About the Author
Anastasia Gavrilova
Anastasia is currently working as a Finance Analyst in the energy sector. She focuses on improving process efficiency and reducing costs. Her previous experience includes working as a management consultant, where she delivered various strategy and process improvement projects in the energy industry in Russia and Kazakhstan. Anastasia holds the BSc degree in Economics from the Higher School of Economics, Moscow, and an MSc in Business Strategy from the University of Amsterdam. She strives to combine her industry experience with behavioral economics insights to analyze how governments, companies, and consumers can enable the transition to sustainable energy.
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