This paper reviews the recent evidence on the effectiveness and cost-effectiveness of energy efficiency policies.
- 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.
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 energy efficiency evaluation, including the use of randomized controlled trials and incentives faced by those performing evaluations. We provide a summary table of energy savings results by type of efficiency intervention. We also develop an updated aggregate estimate of 2.8 cents per kilowatt hour (kWh) of net savings from utility energy efficiency programs, but note that this estimate is based on aggregate utility-reported energy savings. Our review of the economics literature suggests that energy savings are often smaller than implied by utility-reported results, but some interventions appear to be cost-effective relative to the marginal cost of electricity supply.