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Decomposing the Wedge between Projected and Realized Returns in Energy Efficiency Programs

Author

Listed:
  • Peter Christensen
  • Paul Francisco

    (University of Illinois at Urbana-Champaign)

  • Erica Myers

    (University of Calgary)

  • Mateus Souza

    (Universidad Carlos III de Madrid)

Abstract

Evaluations of energy efficiency programs reveal that realized savings consistently fall short of projections. We decompose this “performance wedge” using data from the Illinois Home Weatherization Assistance Program (IHWAP) and a machine learning-based event study research design. We find that bias in engineering models can account for up to 41% of the wedge, primarily from overestimated savings in wall insulation. Heterogeneity in workmanship can also account for a large fraction (43%) of the wedge, while the rebound effect can explain only 6%. We find substantial heterogeneity in energy-related benefits from IHWAP projects, suggesting opportunities for better targeting of investments.

Suggested Citation

  • Peter Christensen & Paul Francisco & Erica Myers & Mateus Souza, 2023. "Decomposing the Wedge between Projected and Realized Returns in Energy Efficiency Programs," The Review of Economics and Statistics, MIT Press, vol. 105(4), pages 798-817, July.
    • Handle: RePEc:tpr:restat:v:105:y:2023:i:4:p:798-817
    DOI: 10.1162/rest_a_01087
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    Citations

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    Cited by:

    1. Vincent P. Roberdel & Ioulia V. Ossokina & Vladimir A. Karamychev & Theo A. Arentze, 2023. "Energy-efficient homes: effects on poverty, environment and comfort," Tinbergen Institute Discussion Papers 23-082/V, Tinbergen Institute.
    2. Christensen, Peter & Francisco, Paul & Myers, Erica & Shao, Hansen & Souza, Mateus, 2024. "Energy efficiency can deliver for climate policy: Evidence from machine learning-based targeting," Journal of Public Economics, Elsevier, vol. 234(C).
    3. Bishop, Kelly C. & Kiribrahim-Sarikaya, Ozgen, 2024. "Energy-efficient investments in housing," Regional Science and Urban Economics, Elsevier, vol. 107(C).
    4. Enrich, Jacint & Li, Ruoyi & Mizrahi, Alejandro & Reguant, Mar, 2024. "Measuring the impact of time-of-use pricing on electricity consumption: Evidence from Spain," Journal of Environmental Economics and Management, Elsevier, vol. 123(C).
    5. Tobias Wekhof & Sébastien Houde, 2023. "Using narratives to infer preferences in understanding the energy efficiency gap," Nature Energy, Nature, vol. 8(9), pages 965-977, September.
    6. Corey Lang & Kevin Nakolan & David Rapson & Reid Taylor, 2024. "Do Bill Shocks Induce Energy Efficiency Investments?," Working Papers 2405, Federal Reserve Bank of Dallas.
    7. Omar Isaac Asensio & Olga Churkina & Becky D. Rafter & Kira E. O’Hare, 2024. "Housing policies and energy efficiency spillovers in low and moderate income communities," Nature Sustainability, Nature, vol. 7(5), pages 590-601, May.
    8. Considine, Brian & Liu, Ying & McNabola, Aonghus, 2024. "Energy savings potential and life cycle costs of deep energy retrofits in buildings with and without habitable style loft attic conversions: A case study of Irelands residential sector," Energy Policy, Elsevier, vol. 185(C).

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