Real-time information and consumption

Water conservation has become an important policy issue. Though water management has been approached as an engineering problem (Olmstead and Stavins, 2007), theory, as well as an increasing body of evidence, suggests that economic approaches are crucial in understanding how conservation programs work and how they can be designed to be effective. This chapter identifies key lessons learnt from recent experiments on information-based demand-side management in both electricity and water markets. At present, there is a fascinating parallel between demand-side management programs in both sectors: the use of smart meters to provide consumers with real-time information on usage. The implementation of smart meter technology in the water sector has lagged behind the electricity sector. Although there is a strong push to introduce real-time information for water use, ¹ we do not have a good sense of what the effects will be. But we are beginning to understand, based on a series of field experiments, how smart meters affect demand for electricity. A key contribution of this chapter is synthesizing what we know about the effects of providing real-time information on electricity use and how these might be relevant to water use.