The Power of Change Innovation for Development and Deployment of Increasingly Clean Electric Power Technologies (2016) / Chapter Skim
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4 The Role of Energy Efficiency in Increasingly Clean Electricity
4 The Role of Energy Efficiency in Increasingly Clean Electricity
Pages 87-112
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From page 87... ...
The improvements in energy efficiency achieved over the past 30 years can be attributed to a variety of factors, including technological progress and pressures on households and businesses to cut their spending on energy. In addition to those market forces, there is evidence that policies and programs designed to improve energy efficiency, such as energy-efficiency standards, funding for research and development (R&D)
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From page 88... ...
. This chapter details potential electricity savings through energy efficiency, barriers to achieving the development and adoption of cost-effective energy 2 It should be noted that there are other, unobservable costs and benefits to energyefficiency investments that make their net benefits difficult to measure even if energy savings are correctly assessed (Allcott and Greenstone, 2012, p.
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From page 89... ...
municipalities, building energy use can be responsible for 50 to 75 percent of citywide carbon emissions -- much higher than the national average (City Energy Project, 2014, slide 9)
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From page 90... ...
BARRIERS TO THE DEVELOPMENT AND ADOPTION OF COST-EFFECTIVE ENERGY-EFFICIENCY TECHNOLOGIES There is a literature investigating whether and why firms and consumers leave profitable or cost-effective energy-efficiency investments on the table. This "energy-efficiency gap" literature compares actual energy savings with the costs of energy-efficiency investments to see whether there are really unexploited energy-efficiency opportunities (Allcott and Greenstone, 2012; Jaffe and Stavins, 1994; Jaffe et al., 2004, Gillingham et al., 2009)
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From page 91... ...
; • inadequate and imperfect information and -- as anyone who has rushed to replace a broken water heater, furnace, or refrigerator knows -- often insufficient time to make good energy-efficiency decisions; • so-called "split incentives," denoting cases in which decisions about energy efficiency often are made by those who do not pay the utility bills, and therefore will neither reap the benefits of improved efficiency nor bear the cost of poor efficiency; • capital market failures, whereby customers may lack access to -- or face competing demands for -- the funds needed to make structural improvements or replace major pieces of equipment to improve efficiency;
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From page 92... ...
labels Comparative bills/home energy audits Split incentives Appliance standards Building codes Capital market failures Third-party energy-service providers On-bill repayment programs Behavioral constraints EnergyGuide/Energy Star/LEED labels Comparative bills/home energy audits Appliance standards Building codes Knowledge spillovers Investments by the federal government R&D tax credits Inducement prizes
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From page 93... ...
Measures intended to move toward real-time pricing for electricity (or time-of-day pricing) -- for example, by encouraging the adoption of advanced metering infrastructure or "smart meters" -- could help reduce peaks in demand and perhaps overall electricity usage as well (Cappers et al., 2016)
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From page 94... ...
and comparative bills/home energy audits whereby consumers receive personalized information on their electricity use compared with that of their neighbors and receive tips for reducing their electricity consumption (Allcott and Rogers, 2014)
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From page 95... ...
. Potential policy solutions to the problem of split incentives include appliance standards and building codes.
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From page 96... ...
Electricity and fuel supplies, distribution services, lighting, appliances, heating and cooling, building shell improvements, and control systems often are provided by different vendors, none of which necessarily have an incentive to optimize the consumer's overall energy usage. The advent of advanced metering infrastructure, platform markets, data analytics, and "intelligent efficiency" providers that leverage increased data availability could help change the fragmented efficiency landscape.
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From page 97... ...
State and local governments also offer incentives to utilities to encourage retail customers to adopt energy-saving measures, among other incentives. Energy Labeling and Certificates Energy labels on appliances provide information about the energy savings that can be realized from adopting more energy-efficient appliances or equipment or assure consumers that a product is more efficient than the average appliance on the market.
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From page 98... ...
While these energy labeling programs may be effective at reducing energy use in a cost-effective way, there is evidence that the state and utility energy rebates associated with Energy Star products may not be cost-effective (Alberini and Towe, 2015)
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From page 99... ...
. In addition, with both commercial and residential buildings, it is unclear whether certified buildings sell for higher prices because of the perceived energy savings, or they are perceived as having higher-quality building materials or better designs (Gillingham et al., 2009; Ramos et al., 2015)
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From page 100... ...
Figure 4-1 shows the 17 In the 1970s and 1980s, appliance standards were used in states such as California, New York, and Florida. A federal program that included energy targets was established in the Energy Policy and Conservation Act of 1975, although the federal minimum standards did not preempt state-level standards until the passage of the National Appliance Energy Conservation Act of 1987.
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From page 101... ...
It is likely that standards did spur manufacturers to innovate to ensure that their products would exceed the minimum standards, although how much of that innovation was due to the standards, to increasing energy prices, or to exogenous R&D efforts is unclear (see Newell et al., 1999)
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From page 102... ...
Building codes are the primary policy instrument for influencing the energy efficiency of newly built or renovated buildings and can provide information on best practices to the multiplicity of builders and contractors across the United States. National model energy codes exist (see below)
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From page 103... ...
. Although evidence shows that energy use for heating and cooling buildings has decreased over time, it is unclear how much of that decline is due to building codes versus improvements in building materials that would have occurred in the absence of the codes.
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From page 104... ...
. More recently, a study of the weatherization assistance program in Michigan found that, even accounting for the social benefit of reduced energy use, the rate of return on weatherization was negative and that the up-front costs were twice as great as the energy savings (Fowlie et al., 2015)
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From page 105... ...
. A study of free audits in Maryland found that residential energy audits reduce energy usage by about 5 percent, with the cost per ton of carbon dioxide emissions abated ranging from just under $50/ton to nearly $70/ton (Alberini and Towe, 2015)
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From page 106... ...
, focused on enhancing energy efficiency, reducing greenhouse gas emissions, and reducing consumer costs for cooling commercial buildings; and SWITCHES (Strategies for Wide-Bandgap, Inexpensive Transistors for Controlling High-Efficiency Systems) , aimed at developing next-generation power switches that could increase the efficiency of appliances and lighting.
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From page 107... ...
In addition to improvements in industrial buildings, more energy-efficient production processes could help reduce electricity consumption. Efforts to improve information on energy use or change the behavior of workers to improve energy efficiency could prove valuable in the industrial sector as well as in the residential and commercial sectors (see, e.g., Gosnell et al., 2016 [showing that performance information, personal targets, and prosocial incentives induced pilots to improve their fuel efficiency on flights]
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From page 108... ...
. Encouraging companies to institute a management structure focused on energy savings -- strategic energy management -- also could help realize the potential of operational/behavioral energy efficiency.
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From page 109... ...
In addition, much of HUD's building stock consists of large housing blocks built in the 1950s through the 1970s that are overdue for major capital upgrades. Similar blocks of midcentury social housing in Europe have been rewrapped with highly insulating facades and retrofitted with efficient equipment to achieve energy savings in excess of 50 percent.
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From page 110... ...
Performance contracts such as energy savings performance contracts (ESPCs) or utility energy service contracts (UESCs)
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From page 111... ...
. Some energy-efficiency programs -- such as advanced metering infrastructure and comparative energy bills -- may be run more efficiently through utilities because of access to information or lower transaction costs.
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From page 112... ...
Moreover, the effectiveness of increased electricity prices in inducing conservation is limited by the very low measured price elasticity of demand for electricity, especially in the short term. The committee notes that energy efficiency is also an area in which innovation is critical.
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