Quantifying the economic effects of energy literacy

As the U.S. continues to make large investments in energy efficiency and renewable energy, relatively modest investments in energy literacy could potentially reduce consumer and governmental costs.  Numerous surveys have identified inadequate energy literacy in our nation.  For example, while 75% of respondents stated they have a lot or fair amount of knowledge of energy, only 12% were actually able to pass a basic quiz on energy awareness.

In an effort to gauge the potential causal link between energy literacy and spending, we partnered with National Grid, a large electric and gas utility, to survey thousands of consumers in their New York, Rhode Island, and Massachusetts markets.  For the purposes of this research, energy use is a proxy for consumer expenses and savings; if a consumer’s electricity usage decreases, then that represents a cost savings for that particular month.  After extensive research, we constructed a 25-question quiz to gauge the energy literacy of respondents.  The survey includes three main focus areas: energy literacy, demographics, and consumer behavior.  Responses are matched with objective energy usage data from National Grid, and the de-identified data are made available for this study.  We are not aware of any previous study that has utilized such large-scale matching between energy literacy and usage.  Our goal is to test both practical and academic energy knowledge of consumers, while also retrieving key demographic and behavioral data that may help identify salient relationships between energy literacy and costs.  Upon the launch of the survey to a random sample of 120,000 National Grid consumers, we have received an initial sample of 4,306 responses (~4% initial sample) within 2 weeks.  The study is ongoing over the summer.  Initial responses are not significantly different from the National Grid user base in the 3 markets in terms of observable demographics (age, race/ethnicity, household income, education) or their energy usage.

This study develops a conceptual and empirical framework for modeling relationships that will provide estimates of cost-savings resulting from additional spending in energy-related education.  Preliminary estimates based on the first-round sample, which account for various fixed effects and unobservable selection bias, suggest that higher energy literacy at the household level leads to energy cost-savings for that household.  As the public becomes more energy literate, aggregate demand for energy usage will decrease.  These household-level estimates will be used to impute cost-savings at the national level that may be realized from a national energy literacy policy.