Green electricity tariffs. Green electricity, generated from renewable sources such as wind, solar and biomass, is an environmental innovation that has not to-.
The European Business Review
Green Electricity Tariffs: Why do consumers adopt?1 By Ritsuko Ozaki
Green electricity tariffs
Green electricity, generated from renewable sources such as wind, solar and biomass, is an environmental innovation that has not todate been widely taken up by UK consumers. Signing up to a green electricity tariff can help domestic consumers reduce their carbon emissions, but less than one per cent of UK households have done so.2 Green electricity requires little or no behavioural change for householders to integrate it into their everyday practises. This ‘easyto-adopt’ service innovation might be expected to demonstrate a smooth translation of consumer values into the adoption of innovation. But consumer behaviours in energy use, including the adoption of green tariffs, are not as ‘green’ as expected. Many explanations have been suggested as to why environmentally-friendly products diffuse slowly into markets.3 Green alternatives might be perceived as being too expensive, or not offering the same functionality as existing products, or they might require consumers to change their behaviour.
Signing up to a green electricity tariff can help domestic consumers reduce their carbon emissions, but less than one per cent of UK households have done so. This article presents a summary of findings of our research as to what motivates consumers to adopt ‘green tariffs’ and considers how they might diffuse more successfully. A small-scale empirical study was carried out within our university. The study involved three stages: two focus group discussions to tease out issues that mattered to consumers; a questionnaire survey with 103 respondents to see what factors might influence on adoption intentions; and a semi-structured interview with 10 people to gain an in-depth understanding of (non) adoption contexts. The sample had a strong bias towards green consumers. This may be due to the fact that respondents were a specific group of people working in an academic institute. Many were actively engaged in environmentally-friendly activities, such as recycling, and membership of, and donation to, green movements.
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Framework
To understand how opinions about an innovation are formed and decisions to take up are made, we suggest that a combination of a number of existing perspectives might be useful: theories of innovation adoption, cognitive and normative behaviour, and consumption. Consumers’ decision to behave in a certain way in relation to energy is informed by a wide range of internal and external factors.4 When people decide to adopt an innovation, they consider not only its functionality, usability, costs and intended outcomes, but also what the innovation means to them, for example, the way it reflects their identity, image, values and norms. In the context of adopting green electricity, we might assume consumers are likely to adopt green tariffs when: • They see benefits and positive consequences from adopting (perceived benefits)
• They feel enough social pressure or see many others adopt (social influence) • They think that the service is compatible with their current practices and values, and with the identities and cultural references they like to express (perceived compatibility) • They think that they can cope with the hassles associated with adopting and are willing to pay extra (controllability) • They do not perceive uncertainties and risks in terms of functionality and economics (perceived uncertainty) We used these five themes as an analytical framework of the empirical study.
What makes consumers take up a green tariff?
Despite the fact that the empirical study was conducted with a group of people with a ‘green’ bias, we found great hesitation among them about adopting a green electricity tariff, and even those with high adoption intentions were indecisive. Positive green attitudes towards pro-environmental behaviours do not necessarily translate into the performance of the behaviours. People are capable of being contradictory or hypocritical. The challenge for those wishing to promote green electricity, therefore, is how to fill the gap between intentions and actual behaviour. Perceived benefits The benefits from adoption need to have personal relevance in order for potential adopters to take action. The environment is still too large a topic for many. Personal relevance can, however, trigger emotional reactions and thus change perceptions and attitudes, as one interviewee succinctly puts: ‘I have two young children, so when I started to have a family, I started thinking about what this will mean for them and their future.’ (CM, adopter) Social influence Stronger social pressure is needed to encourage adoption. Environmental issues may be seen as abstract and not immediate, and the reaction of many people to them may be less acute than their responses to social norms, which offers more concrete indications of what is accepted and expected: ‘Certainly the media attention has increased dramatically in the past year or so, and yes, it has influenced me. I feel more of a moral obligation now than I did four years ago. I’ve definitely changed my behaviour in the last year because I’m more conscious and more worried about carbon.’ (RA, adopter) Perceived compatibility The subject on social norms relates to an identity issue. Both personal identity (e.g. ‘I am green and act pro-environmentally’) and social
The challenge for those wishing to promote green electricity is how to fill the gap between intentions and actual behaviour. identity (e.g. ‘I am part of the group that is concerned about the environment’) are expressed by the adoption of green tariffs: ‘We are motivated with green things. We are both members of Friends of the Earth. I cycle to work, I’m working with waste management, and we try to comply with all the waste recycling schemes in our borough. We do the best we can.’ (RL, adopter) Controllability Switching to a green tariff can be seen as an inconvenience. It requires not only time to fill in a form, but also to contact the supplier, change payment settings and other actions. Most people are busy in their daily lives, and this is not an attractive proposition. Costs are also a problem. A slight increase in payment does not sound appealing especially when energy prices are rapidly rising and affecting every household. Thus, cost and (in)convenience of signing up significantly affect the adoption of green tariffs: ‘If it cost too much I would not have done this, but we could afford it. I would prefer if it were cheaper. If they could drop the price it would be a benefit for users and more people would go for it.’ (YY, adopter) ‘I intend to change supplier that is more green, but haven’t got round to it. You know, when you’ve got all sorts of things to do at home and you mean to do and you don’t. Changing electricity tariff requires thinking and research and involves hassle.’ (CF, high intender)
When people decide to adopt an innovation, they consider not only its functionality, usability, costs and intended outcomes, but also what the innovation means to them, for example, the way it reflects their identity, image, values and norms.
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Perceived uncertainty People are generally uncertain about the quality of green electricity (e.g. ‘is it really generated from renewable sources?’ and ‘is it reliable?’). The nature of the contract and costs can also cause some anxiety, which in turn leads to rejection. Potential adopters, especially those who have high green values and awareness, need accurate information to evaluate and make a decision. Currently, information is fragmented and inaccurate: ‘As it’s turned out, the supplier we’ve chosen isn’t a perfect supplier of renewable energy. They invest money in developing renewable resources. So it’s not as green a tariff as we would like.’ (RA, adopter) ‘There are always strings attached. If I go for green electricity, will I be able to change to a better one in the future? I don’t know how tied I will be to the contract… They are claiming they are green, but who knows. Media or even the government does not say which companies, who are not really green, are claiming to be green.’ (FP, high intender) To conclude, what pushes people from ‘intention to adopt’ to ‘actual adoption’ is a combination of: perceived personal benefits as a consequence of signing up to a green tariff; compatibility with their values, identity and social references; strong social influence and normative beliefs; a sense of control over costs and associated inconveniences attached to switching over; no perceived risk/ uncertainty; and good information.
What can organizations do?
So, how should electricity providers and policy-makers act in response of those findings? As the following quote shows, consumers are generally unwilling to sacrifice their quality of life: ‘We wanted to make sure we were not producing as much carbon. Just from a pure interest in minimising your carbon footprint,
Green electricity suppliers need to engage with the consumer and communicate the benefits of adoption at both a social and personal level.
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Potential adopters, especially those who have high green values and awareness, need accurate information to evaluate and make a decision. Currently, information is fragmented and inaccurate. we wanted to make sure we were doing what we could. [But] when it’s a big holiday once a year I’m quite happy to pay for a long haul flight. We try to recycle as much as possible. I try to turn lights off and use as little electricity as possible. We had new insulation put in a year ago. I try to do things when I can, but perhaps sometimes my quality of life cannot be compromised.’ (RA, adopter) Green electricity is, as mentioned above, an ‘easy-to-adopt’ innovation that does not require behavioural change on the consumer’s part; and as such, it has potential for high consumer uptake if suppliers play their game strategically. Here are some suggestions. First, green electricity suppliers need to engage with the consumer and communicate the benefits of adoption at both a social and personal level. On the social level, a guarantee of social benefits, such as a promise that suppliers will make a donation to a charity when customers sign up to their green tariffs, may incentivise potential consumers who already have strong green awareness and values. More importantly, on the personal level, there must be an emphasis on personal benefits and an attempt to make
the matter more relevant to each consumer. Since green electricity cannot provide visible benefits to households, there should be an emotional appeal with personal engagement. As shown above, environmental risks in relation to people’s own children have a strong effect. Similarly, news about flooding in home towns where people’s relatives live, for example, could have an emotional impact. These messages could be used to make the effects of green electricity adoption more relevant and can be communicated through the media. Advertisements on television and in magazines are an effective tool. Currently, advertisements on green electricity are more likely to be seen in specialist magazines such as the Ecologist, but the messages should be aimed at the general public, publicised in non-specialist magazines such as TV guides and women’s magazines. Green electricity is still at an early stage of the diffusion process and there are many ways of promoting it. People gain knowledge about an innovation from their social networks. Without knowledge, adoption (and consequently diffusion) does not happen. What is needed is strong, emotional
More user-friendly websites from each supplier, and report from consumer organisations comparing different tariffs, could especially help consumers with high adoption intentions to decide. and relevant information to be directed at consumers, taking full account of the importance of social norms. Second, information has to be provided with clarity and consistency to consumers, and the industry, consumer groups and government have a role to play in this regard. Consumers are essentially confused: there is often not enough information and when there is it contains different and inaccurate messages. There is a need for clear messages and accurate information about green electricity tariffs, e.g. how electricity is generated, how the premium prices consumers pay are used, etc. Such detailed information will enable potential adopters to compare suppliers, help choose one that suits them, and encourage them to sign up. More user-friendly websites from each supplier, and report from consumer organisations comparing different tariffs, could especially help consumers with high adoption intentions to decide. Stakeholders can learn from the example of eco-labelling. Eco-labelling was originally developed by NGOs and the European Union now legislates for its use. Labels are not only a message about a product or a service, but also validate claims about sustainability standards verified by a formally recognised and accredited independent third party.5 Ecolabelling encourages companies that want to differentiate themselves based on their sustainable product attributes and helps consumers identify more environmentallyfriendly products/services and suppliers.6 Thus, standardised information would help consumers with high adoption intentions consider green electricity. At present, there is not much trust among consumers and green electricity suppliers; this needs to be addressed if the innovation is to be adopted more widely. Third, greater incentives are needed to allow consumers to overcome their resistance to the cost and hassles of switching to green electricity. Suppliers have to recognise the
scale of the deleterious consequences of the premium of green tariffs. Energy bills are already expensive and even environmentally aware people are not keen to pay extra. The switch-over procedure should also be easier, especially when switching from one supplier to another. Form-filling requirements should be simple and suppliers’ administrative errors must be avoided. Fourth, the government and local authorities need to help create stronger social norms and critical mass to boost adoption rates. As green values and awareness on their own do not seem to convince people to adopt a green tariff, a strong message that our behaviours can make a difference is needed. School education can play an important role. Educational institutes can show documentary films about the benefits of using green energy and affirm its use as a social norm. Such consumer education, especially targeted at the young, should be part of public policy encouraging sustainability. It would foster public recognition of the positive consequences of adopting green electricity and create shared societal norms among consumers. What we found was that consumers who are generally sympathetic to environmental issues are not necessarily adopting green electricity, due to lack of strong social norms and personal relevance, inconvenience of switching over, uncertainty about the quality of green electricity and lack of accurate information. As a managerial consequence of this reticence, organisations promoting the use of green electricity need to change their strategies by offering better information, greater
The government and local authorities need to help create stronger social norms and critical mass to boost adoption rates.
incentives, and creating trust among consumers.
About the author
Ritsuko Ozaki is a Senior Research Fellow in the Innovation Studies Centre at Imperial College Business School. Her background is sociology and has been working on consumer perceptions and experiences of energysustainable innovations. In particular, she is interested in the way in which consumers respond to new energy offerings and the way they use and interact with adopted energy services and technologies in their everyday life.
Notes 1. The original full article was published in Business Strategy and the Environment (‘Adopting sustainable innovation: What makes consumers sign up to green electricity?’, volume 20, issue 1, pp.1-17, 2011). 2. Graham V. (2007) Reality of Rhetoric? Green Tariffs for Domestic Consumers. National Consumer Council: London. 3. For example: Fraj-Andrés, E. and MartínezSalinas, E. (2007) ‘Impact of environmental knowledge on ecological consumer behaviour: an empirical analysis’, Journal of International Consumer Marketing, 19(3): 73-102; Rehfeld, K.M., Rennings, K., Ziegler, A. (2007) Integrated product policy and environmental product innovations: an empirical analysis. Ecological Economics, 61(1): 91-100. 4. Faiers, A., Cook, M. and Neame, C. (2007) ‘Towards a contemporary approach for understanding consumer behaviour in the context of domestic energy use’, Energy Policy, 35(8): 4381-4390. 5. de Boer, J. (2003) ‘Sustainability labelling schemes: the logic of their claims and their functions for stakeholders’, Business Strategy and the Environment, 12(4): 254-264. 6. Gunne, G. and Anders, B. (2007) ‘The impact of environmental information on professional purchasers’ choice of products’, Business Strategy and the Environment, 16(6): 421-429; Sammer, K. and Wüstenhagen, R. (2006) ‘The influence of eco-labelling on consumer behaviour: results of a discrete choice analysis for washing machines’, Business Strategy and the Environment, 15(3): 185-199.
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