Working Paper

Motivating and Evaluating Energy Efficiency Policy

Nov 17, 2017 | Kenneth Gillingham, Amelia Keyes, Karen L. Palmer

Summary

This paper reviews the recent evidence on the effectiveness and cost-effectiveness of energy efficiency policies.

Key Findings

  • Empirical studies of energy efficiency measures typically find that energy savings fall short of expected savings.
  • Behavioral and information-based programs tend to be most cost-effective although savings are typically small.
  • Increasing the use of randomized controlled trials (RCTs) and quasi-experimental methods could improve the accuracy of program evaluations.
  • Improving incentives for evaluators could also help improve evaluation accuracy.

Abstract

This paper reviews the recent evidence on the effectiveness and cost-effectiveness of energy efficiency interventions. After a brief review of explanations for the energy efficiency gap, we explore key issues in the evaluation of energy efficiency, including challenges and benefits to randomized controlled trials and incentives faced by those performing evaluations. We provide a summary table of savings results by type of efficiency intervention. We also develop an updated estimate of the aggregate cost-effectiveness of utility energy efficiency programs of 2.86 cents per kilowatt hour (kWh) net savings, but note that this estimate is based on utility-reported aggregate energy savings. Our review of the economics literature provides a mixed picture of the cost-effectiveness of specific interventions, with only some appearing to be highly cost-effective.