Information and Awareness among Consumers

Private households and companies often suffer from what is called “bounded rationality” (rational actions based on incomplete information) because energy efficiency measures are not evaluated thoroughly due to lack of time, incorrect financial incentives or lack of knowledge. Energy consumers, citizens or businesses, are thus often passive energy users, unaware of how their actions affect their energy consumption. This can create end-user inertia in the area of energy management. This may also lead to erroneous decisions when replacing appliances, with decisions being ruled by upfront capital costs rather than lifetime costs.

For private households, bounded rationality is often strengthened by the small share of household income spent on energy, which does not encourage consumers to inform themselves about potential savings. The effort and costs may not outweigh the value of alternative activities. The relatively small yearly potential savings also strengthen the importance given to the upfront cost, rather than encouraging a choice based on lifecycle costs. The resources of many households are also often too limited to allow such investments.

Companies may also underestimate the value of employing an energy manager. These may be aware of the costs of an active energy management, but underestimate the positive costs reduction implications due to lack of information.