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Estimating the Drivers of the Cost of Saved Electricity in Utility Customer-Funded Energy Efficiency Programs

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  • Sean Murphy

    (Electricity Markets and Policy Department, Lawrence Berkeley National Laboratory, 1 Cyclotron Road, Berkeley, CA 94720, USA)

  • Natalie Mims Frick

    (Electricity Markets and Policy Department, Lawrence Berkeley National Laboratory, 1 Cyclotron Road, Berkeley, CA 94720, USA)

Abstract

Energy efficiency programs funded by utility customers provide an electricity resource in most U.S. states, but their scale and cost of saving electricity varies significantly by state. In this paper, we explore the drivers of the cost of saved electricity in these programs with an econometric model and nearly a decade of data reported by efficiency program administrators. We found strong evidence for economies of scale and weak evidence for diseconomies of scale, which suggests that states with low levels of efficiency savings relative to retail sales can increase the size of their efficiency programs without large increases to the cost of saved electricity. We discuss examples of energy efficiency forecasting and potential modeling in light our econometric analysis and identify methodological improvements relevant to utilities and grid operators. This paper provides insights into the economics of customer-funded efficiency programs that will support regulators, utilities, and policymakers to utilize energy efficiency as a resource.

Suggested Citation

  • Sean Murphy & Natalie Mims Frick, 2023. "Estimating the Drivers of the Cost of Saved Electricity in Utility Customer-Funded Energy Efficiency Programs," Energies, MDPI, vol. 16(5), pages 1-15, February.
    • Handle: RePEc:gam:jeners:v:16:y:2023:i:5:p:2177-:d:1078850
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    References listed on IDEAS

    as
    1. Kang, Heejae & Kim, Yoori & Lee, Jungbae & Baek, Jungho, 2022. "Estimating the cost of saving electricity of energy efficiency programs: A case study of South Korea," Energy Policy, Elsevier, vol. 160(C).
    2. Abhyankar, Nikit & Phadke, Amol, 2012. "Impact of large-scale energy efficiency programs on utility finances and consumer tariffs in India," Energy Policy, Elsevier, vol. 43(C), pages 308-326.
    3. Knight, Patrick & Biewald, Bruce & Takahashi, Kenji, 2022. "The cost of energy efficiency programs: Estimates from utility-reported datasets," Energy, Elsevier, vol. 239(PE).
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    Cited by:

    1. Pratik Mochi & Kartik Pandya & Joao Soares & Zita Vale, 2023. "Optimizing Power Exchange Cost Considering Behavioral Intervention in Local Energy Community," Mathematics, MDPI, vol. 11(10), pages 1-15, May.

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