Calling Out the Efficacy of Energy Efficiency

A new study claims the fiscal cost of upgrades outshine the savings by 50%.

Amber Plante for Zondits, June 29, 2015. Image credit: Bullhorn

Energy efficiency gives us a way to use less power, reduce costs, and still live comfortably. This principle has been at the forefront of the movement to upgrade lighting, household appliances, windows, and insulation for years. But, what if these energy efficiency upgrades don’t really save money? A new study from the E2e Project suggests that, while energy efficient home upgrades do conserve energy, the savings passed on to the homeowner don’t even come close to making up the initial purchase fees.

The study, led by economists from the University of Chicago and the University of California Berkeley, looked at the federal Weatherization Assistance Program that covered nearly 30,000 low-income households across Michigan. The homes were upgraded with $5,000 in free energy improvements – including insulation, weather stripping, new furnaces, etc. – yet only earned $2,400 in savings over the life of the upgrades.

And what about the environmental benefits to upgrading our homes’ energy efficiency? According to scientific news specialist site, “The cost per ton of CO2 avoided in the sample amounted to $329, significantly larger than the $38 per ton that the federal government estimates as the social cost of carbon.” In other words, while the homes notched reduced energy consumptions of 10% to 20%, these reductions cost nearly 10 times more than what is deemed “normal” in today’s society.

Other important topics covered by the study include the following:

  • The “rebound effect” has been postulated in previous reports as the act of homeowners adjusting their energy usage post-improvement to actually consume more energy than they had pre-improvement.
  • Energy efficiency programs have a reputation for being difficult for homeowners not only to find but to take advantage of. Researchers have acknowledged that more societal research should be done regarding the apparent stigma of energy efficiency upgrades.

Energy efficiency can be incredibly valuable — but we do need to measure it properly

Vox, June 26, 2015

Earlier this week, I wrote about a new paper by three economists affiliated with the E2e Project suggesting that a federal program to improve the energy efficiency of low-income homes in Michigan wasn’t nearly as cost-effective as we thought.

What made this study interesting, to me, was that it suggested we shouldn’t just assume energy efficiency is always the cheapest way to reduce emissions based on modeling that suggests massive potential for eliminating waste at negative cost. As Michael Greenstone, one of the co-authors of the paper, told me, that hypothesis needs to be field-tested, rigorously, to make sure those savings actually occur.

However, a number of readers thought this study (and my post) could be interpreted as an attack on all energy efficiency. So I figured it was worth clarifying this point. It’s not! The researchers only scrutinized a single federal program in Michigan. As Greenstone explicitly told me, this hardly undermines the rationale for every single efficiency policy out there, many of which operate very differently. But it does raise some worthwhile questions.

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