Cost-effectiveness of electricity energy efficiency programs

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2012-08-20

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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.

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Published Version (Please cite this version)

10.5547/01956574.33.2.4

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Arimura, TH, S Li, RG Newell and K Palmer (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.

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Newell

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 was previously the Gendell Professor of Energy and Environmental Economics and founding director of its Energy Initiative and Energy Data Analytics Lab. He has also served as the senior economist for energy and environment on the President's Council of Economic Advisers and was a senior fellow, and later a board member, at RFF.

Dr. Newell has published widely on the economics of markets and policies for energy and the environment, including issues surrounding global climate change, energy efficiency, and energy innovation. He is a member of the National Petroleum Council and has provided expert advice to many institutions, such as the National Academy of Sciences, the Intergovernmental Panel on Climate Change, and the International Energy Forum.

Dr. Newell holds a PhD from Harvard University, an MPA from Princeton's Woodrow Wilson School of Public and International Affairs, and a BS and BA from Rutgers University.

Specialties: Energy and environmental economics, markets, policies, and technologies.


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