EPRU brings current research to utilities policy makers

CAPE TOWN: Careful demand-side utilities management is an important tool to reduce energy and water use within South African municipalities, measures which could delay by several years the large capital outlays needed to build new infrastructure, such as new coal-based power stations or dams.

Behavioural and environmental economist Prof Martine Visser, with the University of Cape Town’s (UCT’s) Environmental Policy Research Unit (EPRU), argues that by using demand-side management to stall large infrastructure investment, municipalities can buy themselves time to choose technologies that are better suited to the country’s future supply needs.

Visser was commenting on the focus of EPRU’s annual policy day, presented at a workshop in Cape Town this March. The yearly event is aimed at bringing researchers, policy makers, and other stakeholders together, in order to inform policy processes with evidence-based studies from resource economists based in the UCT School of Economics.

This year’s focus was on emerging ideas in demand-side management of utilities, mostly at the city scale.

‘There is novel work being done on the technology front, in terms of innovations such as smart metering and phone apps,’ explains Visser. The workshop showed up that these innovations, together with developments in renewable energy solutions and behavioural nudges aimed at changing consumer habits, are the main developments in the field of demand-side management.

These can apply to water and electricity use, as well as recycling. However Visser argues that the kind of behavioural economics focus that was presented at the workshop relates to interventions that are relevant in a much broader space than just for demand-side management of utilities.

‘We would like to inform municipalities about the usefulness of these measures. The work we’re doing in terms of behavioural nudges in relation to water use is particularly topical now, as the City of Cape Town faces water restrictions,’ she says.

Since water is still relatively cheap in South Africa, behavioural nudges may potentially have greater influence on consumer behaviour than hiking up water prices. Behavioural nudges could include a drive where consumers are shown, through their billing system, how their consumption relates to those of their neighbours’ or community’s usage using social comparisons. The may show water savings in terms of a consumer’s financial gains or losses, or users might be publicly acknowledged for reducing their usage on a city website, for instance.

‘We also wanted the workshop to open the discussion to a broader audience, to learn more about the work that other researchers and consultants are doing in this space, and whether these can lead to fruitful collaborations, and increase exposure of their research in a broader forum.’

The morning-long event did not address supply side approaches to water and electricity management measures. Visser says that while this is equally important, it was difficult to focus on both areas in the scope of one morning.

The main crux of the event, however, was the fact that municipalities’ funding model means they derive a considerable portion of their income from selling water and electricity to city users. This makes it hard for municipalities to embrace initiatives aimed at reducing electricity and water usage among their client base.

‘This puts them between a rock and a hard place, as one speaker illustrated,’ says Visser. ‘It is crucial that this basic revenue model be revisited at national government level if we are to really see change in the utilities space.’

Visser presented the work that her team is doing alongside the City of Cape Town, where they are testing how billing systems can be used drive behavioural nudges relating to water use within a section of the city. The team includes EPRU researchers Dr Kerri Brick, Samantha De Martino, and Dr Jorge Garcia from the CICERO Center for International Climate and Environmental Research (CICERO) in Norway.

News | 30 March 2016