Modeling Energy Efficiency as a Supply Resource

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2017-08-22

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Abstract

Energy efficiency may be an inexpensive way to meet future demand and reduce greenhouse gas emissions, yet little work has been attempted to estimate annual energy efficiency supply functions for electricity planning. The main advantage of using a supply function is that energy efficiency adoption can change as demand changes. Models such as Duke University’s Dynamic Integrated Economy/Energy/Emissions Model (DIEM) have had to rely on simplistic or fixed estimates of future energy efficiency from the literature rather than on estimates from energy efficiency supply curves. This paper attempts to develop a realistic energy efficiency supply curve and to improve on the current energy efficiency modeling. It suggests an alternative approach based on saved-energy cost data from program administrators and explains the methodologies employed to create the supply curve. It illustrates this approach with results from DIEM for various electricity demand scenarios. The analysis suggests that an additional 5%–9% of energy efficiency is deployed for every 10% increase in the cost of electricity. Therefore, DIEM “invested” in energy efficiency up to an inelastic point on the energy efficiency supply curve. By contrast, the U.S. Environmental Protection Agency’s energy efficiency approach assumes that realized energy efficiency is fixed, and has no elasticity, regardless of changes to marginal costs or constraints that affect emissions or economics.

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Gumerman, Etan, and Tibor Vegh (2017). Modeling Energy Efficiency as a Supply Resource. Retrieved from https://hdl.handle.net/10161/27120.

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Vegh

Tibor Vegh

Senior Policy Associate

Tibor Vegh joined Duke's Nicholas Institute for Environmental Policy Solutions Environmental Economics Program in September 2012. He serves as a Policy Associate and is a collaborator on projects related to carbon markets, bioenergy, and blue carbon economics.

Tibor earned his master's degree in forestry from Northern Arizona University in 2011. There, his research focused on identifying whether or not partial offset of ponderosa pine forest restoration treatments is possible with payments for carbon offsets.

He earned his bachelor's degree at North Carolina State University in economics with a minor in mathematics. As an undergraduate researcher, he worked on modeling the effects of the North Carolina Renewable Energy Portfolio Standard on regional timber supply.


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