Economic incentive framework for sustainable energy use in US residential construction

K. R. Grosskopf and Charles Kibert

Construction Management and Economics, 2006, vol. 24, issue 8, 839-846

Abstract: Searching for new ways to be competitive in an increasingly deregulated market, energy suppliers worldwide have turned to energy conservation measures (ECMs) to avoid costly generation expansion, to build relationships with consumers and to comply with new international emissions standards. To maximise the cost effectiveness of an energy conservation programme, a framework is presented to assess consumer 'willingness-to-pay' for ECMs and avoided supply costs. The goal of this framework is to provide a methodology to optimise supplier incentives that will maximise consumer adoption and minimise energy production costs. A survey of 400 US homebuyers found that nearly 90% would invest in ECMs. Yet for every two years required to 'payback' the initial investment, consumer willingness-to-pay declines 25%. A case study of a medium-size US utility found that most ECMs contribute more to profitable base load reduction than to costly peak load reduction, meaning utility loss in revenue often exceeds avoided supply costs. However, the average housing unit conserving 7,718kWh/yr could save US$216.10 per year, in addition to electricity costs, if the cost of avoided emissions abatement were credited back to the consumer. Based on these savings, expected ECM adoption could eliminate 1.65×108 kWh of energy use and 107,197 tons of CO2 emissions for every 20,000 single family homes.

Keywords: Energy conservation; incentives; residential; USA (search for similar items in EconPapers)
Date: 2006
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DOI: 10.1080/01446190600601818

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