The different faces of the energy consumers: Towards a behavioral economics approach

Abstract

In the European legislator’s view, energy consumers have an important role to play in achieving the EU energy policy objectives. These include promoting competition, ensuring affordable energy prices and security of supply as well as contributing to the European environmental and climate goals. Although the legislator has high expectations of energy consumers, empirical research into their behavior has shown that, in practice, they fulfil their role as drivers of competition only partially, if at all. There are also indications that energy consumers do little to reduce CO2 emissions and make hardly if any use of existing opportunities to save energy. This paper analyzes what insights from behavioral economics can mean for the legislator’s assumptions on the role of energy consumers, as well as for shaping and regulating the energy sector. It also examines the implications of these insights for the practices of energy supervisory authorities entrusted with applying the European energy directives. The possibilities and limitations of the use of behavioral economics’ insights in the regulation of the energy sector will be reflected upon.