Facebook LinkedIn Twitter

IAEE Members and subscribers to The Energy Journal: Please log in to access the full text article or receive discounted pricing for this article.

Cost-Effectiveness of Electricity Energy Efficiency Programs

We analyze the cost-effectiveness of electric utility ratepayer–funded programs to promote demand-side management (DSM) and energy efficiency (EE) investments. We specify a model that relates electricity demand to previous EE DSM spending, energy prices, income, weather, and other demand factors. In contrast to previous studies, we allow EE DSM spending to have a potential long-term demand effect and explicitly address possible endogeneity in spending. We find that current period EE DSM expenditures reduce electricity demand and that this effect persists for a number of years. Our findings suggest that ratepayer funded DSM expenditures between 1992 and 2006 produced a central estimate of 0.9 percent savings in electricity consumption over that time period and a 1.8 percent savings over all years. These energy savings came at an expected average cost to utilities of roughly 5 cents per kWh saved when future savings are discounted at a 5 percent rate. Keywords: Energy efficiency, Demand-side management, Electricity demand

Purchase ( $25 )

Energy Specializations: Energy Efficiency; Electricity – Markets and Prices ; Electricity – Policy and Regulation

JEL Codes:
Q55 - Environmental Economics: Technological Innovation
D42 - Market Structure, Pricing, and Design: Monopoly
E60 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook: General

Keywords: Energy efficiency, Demand-side management, Electricity demand

DOI: 10.5547/01956574.33.2.4

References: Reference information is available for this article. Join IAEE, log in, or purchase the article to view reference data.

Published in Volume 33, Number 2 of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.