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

Peter Christensen, Paul Francisco, Erica Myers and Mateus Souza
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Paul Francisco: University of Illinois at Urbana-Champaign

The Review of Economics and Statistics, 2023, vol. 105, issue 4, 798-817

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.

Date: 2023
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