You are on page 1of 14



Brisbane, 23-25 October 2012

Influencing Consumer Behaviour through Pricing Signals

Dario De Bortoli

Program Manager

Adelaide Solar City

Table of Contents

Abstract .................................................................................................................................................. .3
Background ........................................................................................................................................... ..4
Demand Management Trial.4
Metering and Communication Platform.5

Cost Reflective Pricing.6

Customer Selection Criteria....7

Marketing Strategy.8

Pricing Product Analysis....9

In Home Display.11

Solar In Home Display12

In Home Display Market Research..12

Web Portal Access..13


The Solar Cities program is a $94 million Australian Government initiative aimed at implementing
innovative products and technologies to engage consumers and encourage them to better manage
their long term energy use.

The Adelaide Solar City program commenced in October 2007 and will continue until 30 June 2013.

The Adelaide Solar City area incorporates approximately 130,000 households across four councils
including the CBD and northern suburbs of Adelaide. The trial area features consumers with a wide
range of socio demographic profiles from disadvantaged through to highly affluent households.

The program includes a market trial of commercial and residential solar photovoltaic (PV) systems,
cost reflective pricing, energy efficiency products, low income energy assistance programs and
community engagement initiatives.

The location was primarily chosen as a Solar City due to the high proportion of sunny days, peak
electricity supply challenges and relatively high electricity costs.

A key program initiative is a Demand Management trial with around 1,900 participants trialling
innovative electricity pricing products combined with smart metering and interactive communication

The trial aims to use pricing signals to influence behavioural change in shifting energy consumption
from peak to off-peak periods. To assist this change, participants are provided with timely
information through a web portal, with a selected number of participants also receiving an In Home
Display so that they can better understand and control their energy use.

This paper outlines the initiatives undertaken with the Demand Management trial, including the
development of the cost reflective pricing products, smart metering platform, marketing strategies
and survey outcomes.


In August 2006, Prime Minister John Howard announced that Adelaide would be the first Solar City,
noting its peak electricity supply problems, a high proportion of sunny days and higher electricity
prices for consumers compared to other capital cities.

The Adelaide Solar Citizens Consortium was the successful bidder. The Consortium is led by Origin
and includes ANZ, Big Switch Projects, BP Solar, Delfin Lend Lease, and the City of Salisbury in
association with Adelaide City Council, and the Cities of Tea Tree Gully and Playford.

The Consortiums involvement was based on the following program objectives:

demonstrate the economic and environmental benefits of implementing solar power, energy
efficiency, smart metering, and cost reflective pricing

obtain comprehensive data on the impact of the products and technologies on consumer

understand the barriers to take up of sustainable energy products in the residential and
commercial sectors

maintain an ongoing consumer engagement with the program, and

test new sustainable energy products that can be replicated on a national scale.

A key program requirement was to undertake a Demand Management trial.

Demand Management Trial

The primary objective of the Demand Management trial was to implement cost reflective electricity
pricing products and the associated technology to enable participants to shift consumption from
peak to off- peak periods.

This is based on the premise that providing pricing signals in conjunction with smart meter
technology would facilitate the reduction in the total cost of supplying energy by minimising the
peaks in demand and shifting demand to lower cost periods of the day. Consequently, this would
assist in postponing the requirement to build new electricity infrastructure in South Australia.

The Demand Management trial combines smart metering, interactive communication technology,
cost reflective pricing products, In Home Displays and access to a web portal.

A diagram of the trial components is shown below.


Smart Meters Platform

Cost Reflective In Home Web Portal

Pricing Displays Access

Time Of Use Critical Peak

Pricing Pricing

There are approximately 1,900 residential participants taking part in the trial which includes Time of
Use and Critical Peak Pricing products with all participants having smart meters installed.

Metering and Communication Platform

The implementation of a flexible metering and communication platform was considered a key
requirement of the Demand Management Trial.

On this basis, in March 2007 Origin requested expressions of interest from a number of suppliers to
provide an end-to-end technology solution. This included the sourcing and installation of meters, In
Home Displays, the communication links connecting them and a data management system to send
and receive data, collect it and provide reports.

In May 2007, Origin selected the following suppliers,

EDMI to supply the smart meters

Metropolis Metering Assets to install the smart meters
Centurion Metering Technologies to read the meters and provide the back office support
Millennium Electronics to supply the In Home Displays.

The mobile (GPRS) network was selected as the communication link because of its capacity to deal
with the anticipated data requirements.

The roll out of smart meters for the cost reflective pricing trial commenced in April 2008 and was
completed in May 2011.

Cost Reflective Pricing

The cost reflective pricing products were developed in July 2007 in conjunction with a consultant
from the University of Melbourne. The development was based on the mathematical modelling of
the financial savings if a consumer reduced their air conditioning usage on high energy consumption

Two variants of Critical Peak Pricing and Time of Use pricing were developed to provide a number of
choices that best suited the individuals circumstances.

Time of Use pricing includes an all year price where the peak and off-peak components are
applicable throughout the year and a seasonal price where participants are charged different peak
rates during the summer and non summer periods. The off-peak rate remains the same throughout
the year.

The two Critical Peak Pricing options have a differential pricing structure that targets critical peak
periods with an increased rate for a set number of hours that can only occur for a maximum number
of days per year. The rest of the time is a flat energy rate.

The energy rate during the critical peak period is far more expensive than the flat rate to reflect the
increased cost of energy, sending a price signal to consumers about the cost of their consumption at
that point in time.

The significant energy rate increase during the critical peak period necessitated the development of
the following guidelines for the calling of peak events.

Events to be called during the summer season defined as between 1 December and 31
A maximum of 10 peak events were to be called per season on weekdays (excluding
public holidays).
The event applied from 2pm - 8pm on the specified day.
Participants notified of a peak event 24 hours in advance.
Notification of a peak event to be communicated either through In Home Displays,
internet, mobile (SMS) or phone messaging, with participants able to select their
preferred communication option with the constraint that only a limited number of In
Home Displays are available.
Events to be called on 30 degree plus days (though in practise a number of events have
been called below that threshold in order to obtain an understanding of behavioural
change at different temperature points).
Events not to be called on more than two consecutive days.
Yearly notification to be sent to participants advising them of the dates of the critical
peak season commencement.

A description of the Cost Reflective Pricing structure is included in the table below.

Cost Reflective Pricing Structure

Product Pricing Structure Peak Off-Peak Supply

(7am-9pm, Mon-Fri) (Other Times) Charge
(c/kWh) (c/kWh)
Time of Use Summer: 1 Jan - 31 March 61.3
(Seasonal) Non Summer: other times 50.5 16.9 68.5

Time of Use Same all year 53.8 71.1

(All Year)
Product Pricing Structure Peak Off-Peak Supply
(2pm-8pm, up to 10 (Other Times) Charge
days p.a.) (c/kWh)
Critical Peak 1 Dec - 31 March 390.4 28.6 71.1
(Option 1)
Critical Peak 1 Dec - 31 March 179.4 32.8 71.1
(Option 2)
Note: Prices as at 1 July 2012 (GST inclusive).

The expected outcome from the Cost Reflective Pricing trial was to:

identify customer preferences for different pricing structures

quantify the impact of behavioural change on energy consumption
estimate the bill savings associated with different pricing structures
determine the potential for replicating the pricing structure outside of the trial area.

Customer Selection Criteria

The development of the pricing products was based on the expectation that consumers who have
the ability to shift their discretionary (i.e. non essential) peak electricity usage were likely to be best
suited for the Time of Use product. However, Critical Peak Pricing was likely to be more suitable for
consumers with appliances such as air conditioners, pool pumps and second fridges.

It was also anticipated that high energy users were most likely to respond to pricing signals, as they
have more capacity to generate significant bill savings than low energy users.

Based on this criteria, qualifying questions were developed to identify participant suitability for each
of the pricing options.

The qualifying questions for Critical Peak Pricing were primarily aimed at identifying participants

- had discretionary appliances such as air conditioners, pool pumps, second fridges and
standby power
- like to have control over their energy bills
- are keen budgeters
- had the economic means to invest in energy efficient appliances and building technology
- are attracted to new technology and innovative ideas
- had an appetite and eagerness for knowledge and information
- had a strong community, environmental and social focus.

Participants who did not fit the overall criteria were offered the Time of Use options and all Cost
Reflective Pricing customers were required to complete a questionnaire.

Marketing Strategy

The key consumer benefits of smart meters is that they facilitate visibility of consumption through In
Home Displays and web portals which is a major step in providing control over energy usage.

On this basis, the marketing strategy focussed on participants being able to reduce their electricity
bills by better managing their energy consumption. The primary messaging used for the pricing
products was:

- Critical Peak Pricing is about providing a real choice in controlling peak energy consumption and
realising real savings

- Time of Use pricing is about better managing daily energy consumption by being compensated
for shifting usage from peak to off-peak periods.

The four pricing options were advertised under the Smart Energy brand. The two Time of Use
products were marketed as Smart Time of Use while the two Critical Peak Pricing products were
referred to as Dynamic Saver. Pre-registration of participants commenced in October 2007.

The pricing product offer included the following features.

- Installation of a smart meter at no cost.

- Access to a web portal which displays 30 minute energy usage and greenhouse gas emissions
- A free In Home Display (provided to a maximum of 550 pricing product participants only).
- A complimentary home assessment which included the replacement of inefficient showerheads
and light bulbs.
- Energy tips about how to shift load.
- Contract included no exit fees.

The offer was advertised through a number of campaign channels. However, direct marketing
combined with follow up outbound telemarketing proved most successful.

On the closure of the Cost Reflective Pricing trial in May 2011 there were 1,957 participants
comprising of the following:

Pricing Product Participants %

Critical Peak Pricing 1,600 81.8
Time of Use Pricing 357 18.2
Total 1,957 100.0

Take up was heavily skewed towards Critical Peak Pricing, with 81.8 per cent of participants selecting that

Pricing Product Analysis

Studies of the impact of Cost Reflective Pricing on energy usage during the critical peak season have
been conducted over a number of years.

A summary of the outcomes is as follows:

Critical Peak Pricing

In general, analysis of customer behaviour indicates that there was reduced consumption on critical
peak days.

The Critical Peak Pricing Option 1 (i.e. 390.4 c/kW Peak, 28.6 c/kW Off Peak) with about 85 per cent
of all participants is by far the most popular option in the pricing trial.

Analysis indicates that Critical Peak Pricing participants have reduced their overall energy use by an
average of 14 per cent (2009-2011) on the days where a critical peak event was called.

Initial indications are that cost conscious participants are more likely to modify their behaviour
on critical peak days.

Time of Use Pricing

Studies to date indicate that Time of Use participants have experienced a load shift in their energy

For example, during the 2010/11 Peak season, Time of Use participants on average shifted 7 per
cent of their consumption from peak to off-peak periods when compared to the control group.

This is illustrated in the following graph which shows the average proportional energy consumption
on weekdays of Time of Use participants compared to the control group.

Average Proportional Time of Day Consumption (Weekdays)

Control TOU








An analysis of the graph indicates that Time of Use participants showed a higher proportion of
energy consumption outside the peak periods (before 7am and after 9pm). They also showed a more
pronounced spike in consumption in the period 11.00pm-11.30pm and 6.00am-7.00am, possibly
indicating the load shift of high energy consumption appliances.

The load shift was approximately uniform, regardless of temperature. This suggests Time of Use
participants apply the same load shifting behaviour to air conditioners and similar high-consumption
appliances, delaying their use during peak periods and thus reducing overall network load during
those periods.

The study also indicated that the average quarterly bill saving on energy consumption charges
compared to standard peak only gazetted tariffs was $139.14.

In Home Display

The In Home Display was originally developed to provide participants with close to real time
information on energy consumption and as a means of communicating advance notice of a peak
event to Critical Peak Pricing participants.

The In Home Display shows household energy usage and greenhouse gas emissions in 30 minute
intervals as well as other information including weather forecasts.

In Home Display

For instance, the weather forecasts can be used by participants to predict the likelihood of a critical peak
day occurring.

Some examples of the In Home Display screens are shown below.

Energy Usage Screen Weather Forecast Screen

A small market trial of In Home Displays began in March 2009 with the main rollout commencing in
February 2010. The In Home Displays are sent to participants with instructions enabling them to self
install the units.

To date, about 500 participants in the Cost Reflective Pricing and residential Solar PV trials have
received the device.

Solar In Home Display

Based on participant feedback, Origin has recently developed a solar PV version of the In Home
Display. This version was introduced in May 2012 with 25 participants.

The solar In Home Display uses leading edge technology to provide near real time information on
how much electricity the household is using, how much electricity the solar system is generating,
how much electricity is being imported or exported to the grid, the households greenhouse gas
emissions from electricity use and weather forecasts.

Some examples of the solar In Home Display screens are shown below.

Summary Screen Solar Generation Screen

In conjunction with the solar In Home Display trial, participants are required to complete two
questionnaires six months apart.

In Home Display Market Research

Market research has been conducted on participant attitudes to In Home Displays and an analysis
undertaken on the impact of the device on their energy consumption.

Market research was conducted in December 2010, when Origin surveyed a small number of
respondents who had been provided with an In Home Display.

The key outcomes of the survey were:

75 per cent of respondents were positive to very positive about the devices. With most of them
believing they saved energy.

All respondents liked having a physical device and would have recommended it to others.

Respondents found energy consumption and weather reports to be the most popular features.
However, there was very little interest in greenhouse gas emissions information.

All respondents found the installation process very easy and about 50 per cent were prepared
to pay a small amount for the device.

The survey also indicated that the In Home Display is seen to address a pre-existing need to monitor
energy usage and as a means of managing the households budget.

Research was also conducted in May 2012 in conjunction with the annual analysis of critical peak
events. The analysis was based on data for the period January to March 2012 and compared the
energy consumption of Critical Peak Pricing participants with the control group.

In this survey, In Home Display respondents were segmented into active and passive user

The active category was defined has those In Home Display users who successfully received
software updates and were therefore more likely to have been frequently using the In Home Display.

The general conclusion was that In Home Display usage appears to be correlated with a decrease in
energy consumption during critical peak events.

The survey also highlighted the following:

Passive In Home Display users consumed 4.4 per cent less energy during peak events when
compared to the control group (refer Table 1 below).

Active In Home Display users (with software updates) consumed 10.9 per cent less energy
during the same events compared to the control group (refer Table 2 below).

Table 1: Passive In Home Display Users Table 2: Active In Home Display Users

7 7

6.5 6.5

kWh 5.5 kWh -10.9%
-4.4% 5
4 3.5
Control CPP (IHD CPP (IHD Not Control CPP (IHD CPP (IHD Not
Sent) Sent) Used) Used)

Web Portal Access

The Adelaide Solar City metering and communication platform also includes the provision of access
to energy usage and other information to around 2,600 cost reflective pricing, solar PV, and solar hot
water participants via a web portal.

Users are able to view their energy consumption and greenhouse gas emissions data via the Your
Power website. The information includes both current and historical data in 30 minute intervals
enabling the user to compare their energy usage over time from the date the smart meter was
installed. This feature has been available to trial participants since 2008.

A screenshot of the Energy Usage graph on the Your Power web page is shown below.

The website has had more than 50,000 sessions since launch, with more detailed reporting
indicating that about 800 - 1,000 sessions are hosted per month. See graph below for monthly data
between April and July 2012.

On Line Sessions
Apr-12 May-12 Jun-12 Jul-12

The availability of timely, detailed energy information on line was identified on commencement of
the Demand Management trial as a key tool in assisting participants better understand their energy
consumption and manage their energy usage.