Changing defaults can have a significant and lasting effect

People often choose the standard option. Choosing to be an organ donor, printing on both sides of the page – such decisions are influenced by which is the standard setting, or default. In fact, economists and sociologists call this the default effect. Researchers at ETH Zurich and the University of Warwick in the UK have now managed to clearly demonstrate this effect. Private households, but also self-employed people and SMEs, are more likely to procure sustainably produced electricity if that is their provider’s default offer.

The scientists conclude this from an analysis of data from two Swiss electricity suppliers – one large and one medium-sized. This analysis was possible because these electricity companies changed their default offer a few years ago. Prior to this change, they supplied their customers with a conventional electric mix as standard. Anyone wanting power from renewable sources could order it at an extra charge. Following the change, this was the other way around: “green” electricity became the default and anyone wanting cheaper, conventional electricity had to explicitly ask their power company to supply it.

Lasting effect

The research team led by Andreas Diekmann, Professor Emeritus at ETH Zurich, and Ulf Liebe, Professor at the University of Warwick, were surprised at just how big this default effect was. Their team looked at nearly 234,000 private households that were supplied by the two providers mentioned above. Of that number, 3 and 1.2 percent respectively were receiving green electricity before this became the default option. After the change, that proportion shifted to 85 and 89 percent respectively.

Overall, the default effect increased demand for green electricity by over 80 percent, even though it was 3.6 percent more expensive than conventional electricity during the day and 8.3 percent more expensive during the night. “It’s worth noting that even five years after the change, some 80 percent of the households are still sticking with green electricity,” says Jennifer Gewinner, a researcher in Diekmann’s group and co-author of the study.

When it comes to the two electricity providers’ business customers, the extra cost for green electricity were even higher – at 5.8 and 14.3 percent respectively. Here too, the researchers observed a pronounced default effect. Among business customers, the proportion procuring green electricity from provider A rose from 3 to 77 percent, and from 0.7 to 84.7 percent for provider B. The effect was persistent here as well: six years on, the proportion of green electricity customers has fallen only slightly from 77 to 71 percent.

No increase in consumption

The researchers also examined whether or not purchasing green electricity led to higher consumption. It was conceivable that customers might take the perspective that “because my electricity comes from a responsible source, I don’t have to worry about consuming more of it” to give themselves a kind of “moral licence.” However, the researchers were unable to discern such an effect in relation to green electricity. Households supplied with green electricity did not consume significantly more power than those supplied with a conventional mix.

“Since having a green default dramatically shifts electricity demand towards renewable sources, it is an easy way to reduce CO₂ emissions,” Diekmann says. Because Switzerland’s electricity mix includes a large proportion of hydroelectric power, the positive impact of the default effect on the environment is minor. “But countries like Germany, the US or China could benefit greatly from a green default,” Diekmann says. “We calculated that with regard to private households, Germany would have saved 45 million tonnes of CO₂ emissions in 2018 alone. That’s a massive effect considering the simplicity of the measure.”

This study was funded by the Swiss National Science Foundation as part of the country’s National Research Programme “Managing Energy Consumption” (external pageNRP 71call_made).