HH Income, Energy Priorities, Context, and Decision-Making
How could household income and geographic differences influence the priorities placed by individuals on the 3 primary tradeoffs of energy sources – Reliability, Affordability, and the Environment? And what could this sort of analysis teach us about decision-making?
To make sure we’re aligned on our understanding of these terms…
Reliability refers to the extent to which we can depend on a source supplying energy when we need it. Coal and natural gas score high on this one because you can burn these fuels indefinitely provided the mines keep producing fuel to burn. Solar, without battery storage, doesn’t score as highly; the sun doesn’t shine at night, or when it is cloudy or rains, or as much in the winter.
Affordability is obvious – how inexpensively can a source of energy be delivered. Energy based on resource extraction tends to have constant or rising costs. Depending on the location, wind and sunshine may be abundant, and generation is free with the manufacturing costs of solar panels and wind turbines per kWh on a steep decline over time.
Environment refers to the impact of a particular energy source on the world around us. On this dimension, fossil fuels score poorly, whereas solar, wind, and wave-powered turbines score highly.
Consider three families:
➤ Family A earns 3x the national average and lives in a temperate climate like Seattle where few days are exceptionally hot, and few are exceptionally cold.
➤ Family B’s wages are at the national average but live in Denver, where temperatures hover around 100 Fahrenheit (38 Celsius) for weeks on end in the summer and can stay in the single digits Fahrenheit (-17 to -12 Celsius) for multiple days in a row in the winter.
➤ Family C earns half the national average and live in Minneapolis where summers can get hot, but winters can be long and bitter cold.
To keep it simple, let’s just think in terms of relative priorities. How might each family rank the three tradeoffs?
➤ Family A might respond Environment, Reliability, Affordability. They have the financial resources to think long-term but still want the heat to work on those winter days when the mercury drops.
➤ Family B might say Reliability, Environment, Affordability – provided cost don’t rise too steeply. If Excel Energy jacks up the rates and blows their careful budget, affordability is likely to rise in importance.
➤ Family C, on the other hand, is likely to say Affordability, Reliability, Environment. In the winter, Affordability and Reliability could change positions.
Context matters. Climate mandates that assume every population, within regions and around the world, has or should have the same priorities ignore this fact at their peril.
The same goes for leadership teams who set objectives and make decisions assuming uniformity of priorities across a large enterprise. At Tilt Global, we help leaders discover and map out these context differences to make better decisions in the face of complexity.