European nations can cut billions of euros from citizens power bills using psychology to nudge them into consuming less, says energy-management business Opower Inc. (OPWR)

Using data and behavioral-science insights, popularized in the book Nudge by Richard H. Thaler and Cass R. Sunstein, utilities can cut consumption as much as 3 percent, Opower said.

The reduction, across an entire population, has a greater impact than programs like those that spur use of double glazing or insulation and are only taken up by a fraction of people.

Theres growing momentum for energy efficiency obligations in Europe, John Webster, head of marketing in the region, said in an interview in London. An Italian incentive to use behavioral science has been a huge market opener for the company, while Denmark and Ireland also encourage measures.

Opower uses data from utilities to analyze customer habits and tailor recommendations on how to cut use. The company, with clients including EON SE and Electricite de France SA, can send households reports comparing usage with neighbors. It can also offer early warning if theyre using more energy than normal and alert customers to rewards for curbing demand at peak times.

When users have smart meters that offer more detailed information, Opower can provide reports with such more details such as which appliances use the most energy. Reducing demand by customers helps utilities by curtailing the need to bring expensive plants reserved for peak demand on line.

European energy consumers could save 2.4 billion euros ($3.2 billion) a year through behavioural-efficiency programs, Opower said in a report on June 12. The company is calling on European Union governments to reward utilities for using the technology and analysis it produces, and spur energy savings.

Germany could gain annual savings of more than 500 million euros, France more than 325 million euros and the U.K. almost 300 million euros, according to Opower.

The cost of achieving the savings would be 3 euro cents to 7 euro cents per kilowatt-hour saved, according to Emily Hallet, associate director at Opower. That compares with German retail power prices of about 30 cents per kilowatt-hour consumed and prices elsewhere in Europe of 20 cents to 25 cents, she said.

To contact the reporter on this story: Alex Morales in London at amorales2@bloomberg.net

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Nudging Can Save Europe Billions of Euros on Energy Bills