Effect and mechanism of monetary incentives and moral suasion on residential peak-hour electricity usage

Abstract One of the most important economic principles is that people respond to incentives. Economics is essentially the study of incentives. However, whether these incentives can replace attitudes and norms that deserve our protection is still unclear especially in the field of environment. And to answer this question, residents’ demand response (DR) for energy conservation and emission reduction trials have been taken. Large-scale, hybrid frequency historical data for electricity usage and microcosmic behavior data have been integrated and analyzed. Empirical results show that monetary incentives have a significant effect on residents’ electricity saving behavior, which saved 0.116 kgwatt-hours (kWh), accounting for 12% of the total demand in peak-hour consumption. Moral suasion has a significant effect only for residents from high-income communities with a reduction in usage by 8.9%. Through matching survey data analysis, we found that families participating in DR save electricity through adjusting other major and small appliances rather than reducing the usage of air conditioners. Families with large number of major and small appliances response 0.51 kWh and 0.38 kWh more, respectively. Monetary incentive is indispensable in China's current stage of encouraging families’ reducing peak-hour electricity usage.