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Effect Of Monetary Incentives On The Demand For Electricity Of Domestic Consumers €“ Case Of Israel

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  • SHIMON ELBAZ

    (Alexandru Ioan Cuza University of Iasi, Faculty of Economics and Business Administration, Iasi, Romania)

  • Adriana ZAIT

    (Alexandru Ioan Cuza University of Iasi, Faculty of Economics and Business Administration, Iasi, Romania,)

Abstract

This research, based on a pilot study performed by the Israeli Electricity Company (IEC) in the framework of a demand management arrangement, focused on an economic approach for influencing domestic customers’ electricity consumption. The main objectives were to find out if monetary incentives in the form of a constant discount in the household consumer’s electricity bill (with no connection to consumption levels) influence consumers participating in a demand management arrangement with their electricity provider (here the IEC) and if such an incentive will lead to a decrease in the participants’ electricity consumption and/or a shift in their consumption from peak to low demand hours. The study examined also the monetary incentive’s influence on the participants’ willingness to join a future arrangement. The findings show that the participants who received a constant incentive increased their consumption, contrary to the expected behaviour, suggesting the presence of a “rebound effect†. One of the incentives that predicted a tendency to save electricity was the pro environmental attitude of the consumer, whereas financial incentives did not predict a tendency to save electricity. Damage to consumer comfort caused by load shedding exerted no significant influence. The economic incentive of a discount in the electricity bill increased the consumers’ willingness to join a future arrangement, even at the cost of compromising their privacy, although the possibility that this arrangement would lead to the loss of their control of home electric appliances as a result of load shedding drastically decreased this willingness. A positive financial incentive was found to have a minor influence on consumers’ willingness to participate in a demand management arrangement, while a negative incentive (the wish to avoid fines) was found to be very influential. Comparing to previous studies, the results are mixed, confirming some previous findings and contradicting others – and they offer an important contribution for the worldwide debate on energy conservation and household electricity reduction, through the Israeli dimension in a complex puzzle.

Suggested Citation

  • SHIMON ELBAZ & Adriana ZAIT, 2018. "Effect Of Monetary Incentives On The Demand For Electricity Of Domestic Consumers €“ Case Of Israel," Review of Economic and Business Studies, Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, issue 21, pages 131-162, June.
    • Handle: RePEc:aic:revebs:y:2018:j:21:elbazs
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    References listed on IDEAS

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    More about this item

    Keywords

    consumer behaviour; Electricity Demand; Demand- Side Management; Smart Grid; Rebound Effect; Monetary Incentive; Household Electricity Consumption;
    All these keywords.

    JEL classification:

    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General
    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics
    • M38 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Government Policy and Regulation
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

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