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Demand-Side Management and Energy Efficiency Revisited

The key finding of Loughran and Kulick (2004) is that utilities have been overstating electricity savings and underestimating costs associated with energy efficiency demand-side management (DSM) programs. This claim is based on point estimates of average DSM-related savings and costs implied by an econometric model of residential electricity demand. We first argue that the chosen test statistics bias results in favor of rejecting the null hypothesis that utility-reported savings reflect true values. We also note that utility estimates of average program savings and costs are rejected based on point estimates alone. We use the same data and econometric model to estimate the appropriate test statistics. We then construct nonparametric bootstrap confidence intervals. These intervals are quite large; we fail to reject the average electricity savings and DSM costs reported by utilities. Our results suggest that the evidence for rejecting utility estimates of DSM savings and costs should be re-interpreted.

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

JEL Codes: Q41: Energy: Demand and Supply; Prices, L95: Gas Utilities; Pipelines; Water Utilities, C51: Model Construction and Estimation, L94: Electric Utilities, Q42: Alternative Energy Sources, Q54: Climate; Natural Disasters and Their Management; Global Warming, C58: Financial Econometrics

Keywords: Energy efficiency, DSM, electricity demand, electric utilities, US

DOI: 10.5547/ISSN0195-6574-EJ-Vol29-No3-5

Published in Volume 29, Number 3 of the bi-monthly journal of the IAEE's Energy Economics Education Foundation.


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