Evaluation of Electricity Demand Management Policies: Behavioral Economics Approach

Electricity consumption has been rising with an average annual growth of 7% in Iran and the imbalance in production and consumption has caused power outage crisis and economic losses. More than 50% of peak electricity demand is related to the household sector, so the household sector can be considered as the most effective component of the electricity crisis. Investment costs for the construction of power plants, transmission, distribution networks are increasing every year. In order to manage peak electricity demand in the short term, four main solutions are proposed: customer relationship management, electricity tariff reform, quotas and voluntary reductions in electricity consumption, and the replacement of low efficiency electrical equipments with high efficiency appliances. These policies have not been much successful. The failure of these policies can be attributed to inadequate social recognition of policymakers from the community. The tools and insights of behavioral economics are, in fact, a lost circle that can promote the implementation of such policies.