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Cost-Effectiveness of Electricity Energy Efficiency Programs

Author

Listed:
  • Arimura, Toshi H.
  • Newell, Richard G.
  • Palmer, Karen

    (Resources for the Future)

Abstract

We analyze the cost-effectiveness of electric utility rate payer–funded programs to promote demand-side management (DSM) and energy efficiency investments. We develop a conceptual model that relates demand growth rates to accumulated average DSM capital per customer and changes in energy prices, income, and weather. We estimate that model using nonlinear least squares for two different utility samples. Based on the results for the most complete sample, we find that DSM expenditures over the last 18 years have resulted in a central estimate of 1.1 percent electricity savings at a weighted average cost to utilities (or other program funders) of about 6 cents per kWh saved. Econometrically-based policy simulations find that incremental DSM spending by utilities that had no or relatively low levels of average DSM spending per customer in 2006 could produce 14 billion kWh in additional savings at an expected incremental cost to the utilities of about 3 cents per kWh saved.

Suggested Citation

  • Arimura, Toshi H. & Newell, Richard G. & Palmer, Karen, 2009. "Cost-Effectiveness of Electricity Energy Efficiency Programs," RFF Working Paper Series dp-09-48, Resources for the Future.
    • Handle: RePEc:rff:dpaper:dp-09-48
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    References listed on IDEAS

    as
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    JEL classification:

    • Q38 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Government Policy (includes OPEC Policy)
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices

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