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Cost-effectiveness of electricity energy efficiency programs
Abstract
We analyze the cost-effectiveness of electric utility ratepayer-funded programs to
promote demand-side management (DSM) and energy efficiency (EE) investments. We specify
a model that relates electricity demand to previous EE DSM spending, energy prices,
income, weather, and other demand factors. In contrast to previous studies, we allow
EE DSM spending to have a potential longterm demand effect and explicitly address
possible endogeneity in spending. We find that current period EE DSM expenditures
reduce electricity demand and that this effect persists for a number of years. Our
findings suggest that ratepayer funded DSM expenditures between 1992 and 2006 produced
a central estimate of 0.9 percent savings in electricity consumption over that time
period and a 1.8 percent savings over all years. These energy savings came at an expected
average cost to utilities of roughly 5 cents per kWh saved when future savings are
discounted at a 5 percent rate. Copyright © 2012 by the IAEE. All rights reserved.
Type
Journal articlePermalink
https://hdl.handle.net/10161/7010Published Version (Please cite this version)
10.5547/01956574.33.2.4Publication Info
Arimura, TH; Li, S; Newell, RG; & Palmer, K (2012). Cost-effectiveness of electricity energy efficiency programs. Energy Journal, 33(2). pp. 63-99. 10.5547/01956574.33.2.4. Retrieved from https://hdl.handle.net/10161/7010.This is constructed from limited available data and may be imprecise. To cite this
article, please review & use the official citation provided by the journal.
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Richard G. Newell
Adjunct Professor
Dr. Richard G. Newell is the President and CEO of Resources for the Future (RFF),
an independent, nonprofit research institution that improves environmental, energy,
and natural resource decisions through impartial economic research and policy engagement.
From 2009 to 2011, he served as the administrator of the US Energy Information Administration,
the agency responsible for official US government energy statistics and analysis.
Dr. Newell is an adjunct professor at Duke University, where he

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