Understanding consumer behaviour to accelerate India’s clean energy transition

On 19 December 2025, Tata Power and the International Growth Centre (IGC) launched the Energy Insights and Innovation Lab (EIIL) in Mumbai. This first-of-its-kind partnership brings together rigorous academic research and real-world utility operations to address a central challenge of India’s energy transition: aligning consumer behaviour with the needs of a rapidly decarbonising electricity system.

India’s clean energy ambitions are rightly focused on expanding renewable generation. Yet experience increasingly shows that infrastructure investments alone will not deliver a reliable, affordable, and low-carbon power system. As demand grows and renewable penetration rises, understanding how households and firms use electricity – and how that behaviour can be shaped – has become essential to achieving India’s decarbonisation goals.

Decarbonising a system under stress

India’s electricity demand is surging, driven by urbanisation, rising incomes, electrification, and increasingly severe heat events. In major cities such as Delhi and Mumbai, peak demand has grown sharply in recent years, placing significant stress on local distribution networks. These peaks force utilities to rely on costly and carbon-intensive generation during critical hours, undermining both affordability and climate objectives.

At the same time, India has committed to achieving 500 GW of non-fossil fuel capacity by 2030. Integrating large volumes of intermittent solar and wind into a grid historically designed around dispatchable thermal power presents fundamental operational challenges. Wholesale electricity costs now vary substantially across the day, reflecting renewable availability and demand conditions, yet retail tariffs remain largely flat for most consumers.

Price signals alone cannot manage peak electricity demand

Time-of-use (ToU) pricing – an electricity pricing plan that charges higher rates during peak demand times, encouraging customers to shift energy-intensive tasks to off-peak hours to save money and balance the grid – is often proposed as a solution. 

However, a growing body of evidence suggests that price signals alone are insufficient and can even have unintended consequences. Classic work shows that households respond more to average than marginal prices under nonlinear tariffs, limiting the effectiveness of price-based incentives. 

Even when price changes are made salient through information, attention costs and behavioural frictions constrain consumer responsiveness. The result is a system where demand continues to peak during evening hours, precisely when solar generation falls off, leaving utilities with no choice but to rely on fossil fuel generation.

What we’ve learned from early evidence on consumer behaviour

Over the past decade, experimental research has generated important insights into what does – and does not – work when it comes to managing electricity demand. Early studies on behavioural nudges, such as social comparisons that show households how their energy use compares to neighbours, demonstrated modest but persistent reductions in consumption. While cost-effective, these interventions exhibit significant heterogeneity across contexts and have limited impact on peak demand, which is when system costs are highest.

Stronger and more reliable results have emerged from studies of automated demand response, particularly when automation is combined with time-varying prices. Experimental evidence shows that smart thermostats substantially increase household responsiveness to dynamic tariffs while reducing cognitive and attention costs. 

Field experiments comparing utility- and consumer-initiated demand response mechanisms further demonstrate that automated, centralised approaches deliver larger and more predictable peak reductions than consumer-managed programmes, with fewer welfare losses.

Combining automation and incentives can improve demand response

These findings are echoed in recent work focused on emerging markets. Evidence from India shows that combining automation with well-designed incentives helps overcome the adjustment costs that limit responsiveness to price signals. Households can contribute to system reliability without continuously monitoring prices or altering daily routines, which provides demand-side flexibility while maintaining high consumer acceptance.

Understanding why automation matters also requires recognising broader barriers to technology adoption. Research on energy efficiency investments consistently finds large non-monetary costs – including time, hassle, and attention – that deter uptake even when technologies are subsidised or offered for free. These transaction costs reinforce the need for programme designs that address behavioural and logistical frictions alongside providing financial incentives.

Opportunity and risk for electric vehicles

These challenges are particularly salient for electric vehicles (EVs). Managed EV charging offers substantial potential for demand flexibility, but unmanaged charging risks exacerbating peak demand. Recent field experiments show that while monetary incentives significantly affect charging timing, they can also induce consumers to cluster demand around low-price periods, creating new peaks which can strain distribution networks. 

This evidence indicates that ToU pricing alone may increase system costs by shifting load in ways that are poorly aligned with network constraints (Bailey et al., 2025b). Encouragingly, large-scale experimental evidence suggests that AI-driven and automated charging systems can substantially improve load smoothing relative to price incentives alone. These findings highlight a broader lesson for the energy transition: realising the potential for flexibility by EVs requires intelligent, automated systems that account for both consumer preferences and grid conditions.

Why consumer behaviour is central to the energy transition

Residential cooling is a major driver of peak demand in Indian cities, accounting for a large share of peak electricity usage during the summer months. While efficient appliances and building technologies exist, adoption remains limited, and even households with efficient equipment often use it in ways that erode potential savings. 

Recent studies show that perceived control, social norms, habitual practices, and comfort expectations play a larger role in shaping cooling behaviour than attitudes toward climate change alone.

Taken together, the evidence underscores that the clean energy transition is not only a technological challenge, but a behavioural one. Smart meters, automation technologies, and intelligent charging systems create the potential for flexibility – but realising that potential depends on how consumers perceive, adopt, and use these tools. 

Randomised controlled trials and field experiments are uniquely suited to unpacking these dynamics. They allow researchers to identify not only whether an intervention works, but how it performs at scale, which design features matter most, and how costs and benefits are distributed across consumer groups. This evidence is essential for utilities making operational decisions, regulators designing tariffs and mandates, and policymakers allocating scarce public resources.

Establishing the Energy Insights and Innovation Lab

The Energy Insights and Innovation Lab was established to generate precisely this type of actionable evidence. Embedded within Tata Power’s operations and serving over 12.8 million customers across India, EIIL functions as a living laboratory where behavioural science, data analytics, and energy systems modelling are applied to real-world challenges.

EIIL is currently implementing foundational workstreams that illustrate the Lab’s approach. Large-scale randomised trials are examining smart plug adoption, automated demand response, and behavioural interventions to manage residential cooling demand in Delhi and Mumbai. These studies aim to identify scalable strategies that reduce grid stress while supporting affordability, resilience, and sustainability.

In parallel, the Lab is developing a real-time consumer insights dashboard integrating smart meter data, Internet of Things (IoT) inputs, administrative records, and experimental results. This platform supports both research and operations by enabling analysis of electricity use across consumer segments, tracking treatment and control outcomes, and visualising system-level impacts such as peak reduction, cost savings, and emissions outcomes.

Beyond these initial projects, EIIL is actively inviting proposals from researchers to study demand-side management, load flexibility, renewable integration, energy efficiency, storage, tariff design, EV charging, energy access and affordability, and applications of artificial intelligence in grid operations and consumer services.

The path ahead for India’s clean energy transition

As India accelerates its clean energy transition, understanding consumer behaviour will be essential to making the system work. By grounding energy policy and practice in rigorous evidence, the Energy Insights and Innovation Lab aims to ensure that India’s energy transition is economically viable, socially equitable, and technologically resilient. 

The goal is not simply to generate knowledge, but to develop scalable intervention models that utilities and regulators can adopt across India and other low- and middle-income countries facing similar challenges.

This post was published in collaboration with Ideas for India.

Learn more about the Energy Insights and Innovational Lab