Should utility companies pay their customers to use less energy?

In a new op-ed, researchers from the Centre for Sustainability make the case for an energy savings bonus (sometimes called an energy savings premium), a program under which utility companies would pay a cash bonus to customers who reduce their energy usage. In their op-ed, co-authors Silvana Tiedemann, Research Associate at the Hertie School Centre for Sustainability, Lion Hirth, Professor of Energy Policy, and Axel Ockenfels of Universität zu Köln argue that such a scenario could be a win-win for consumers and providers alike.

In the bigger picture, society wins, too – in the current energy crisis, every effort to promote energy saving helps. The crux of the current crisis, they explain, is that demand for energy will exceed supply – gas supply, specifically. “Since an increase in gas imports from other countries and an expansion of power generation are hardly possible in the short term,” they write, “there is basically only one way to go for the coming winter: reduce energy consumption, and do it quickly.”

The savings bonus program would offer an incentive for consumers to do just that. Although the idea that firms would give money to their customers seems counterintuitive, utility providers could make a profit by re-selling unused energy.

As the authors see it, utility companies, consumers, and society at large would all stand to gain. Policymakers could play a role in mandating or structuring an energy savings bonus program, but the potential benefits to industry are significant enough that they need not wait for politics.

Read the details behind the idea in the full text here (in German).

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