Determinants of Demand Response Program Participation: Contingent Valuation Evidence from a Smart Thermostat Program

Abstract

As renewable electricity generation continues to increase in the United States (US), considerable effort goes into matching heterogeneous supply to demand at a subhour time-step. As a result, some electric providers offer incentive-based programs for residential consumers that aim to reduce electric demand during high-demand periods. There is little research into determinants of consumer response to incentive-based programs beyond typical sociodemographic characteristics. To add to this body of literature, this paper presents the findings of a dichotomous choice contingent valuation (CV) survey targeting US ratepayers’ participation in a direct-load-control scheme utilizing a smart thermostat designed to reallocate consumer electricity demand on summer days when grid stress is high. Our results show approximately 50% of respondents are willing to participate at a median willingness-to-accept (WTA) figure of USD 9.50 (95% CI: 3.74, 15.25) per month that lasts for one summer (June through August)—or slightly less than USD 30 per annum. Participation is significantly affected by a respondent’s attitudes and preferences surrounding various environmental and institutional perspectives, but not by sociodemographic characteristics. These findings suggest utilities designing direct-load-control programs may improve participation by designing incentives specific to customers’ attitudes and preferences.

Keywords

• demand response
• direct load control
• incentive-based
• willingness to accept
• contingent valuation