Cost-Effectiveness of Electricity Energy Efficiency Programs

Toshi Arimura, Shanjun Li, Richard Newell and Karen Palmer

No 17556, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We analyze the cost-effectiveness of electric utility ratepayer-funded programs to promote demand-side management (DSM) and energy efficiency (EE) investments. We specify a model that relates electricity demand to previous EE DSM spending, energy prices, income, weather, and other demand factors. In contrast to previous studies, we allow EE DSM spending to have a potential long-term demand effect and explicitly address possible endogeneity in spending. We find that current period EE DSM expenditures reduce electricity demand and that this effect persists for a number of years. Our findings suggest that ratepayer funded DSM expenditures between 1992 and 2006 produced a central estimate of 0.9 percent savings in electricity consumption over that time period and a 1.8 percent savings over all years. These energy savings came at an expected average cost to utilities of roughly 5 cents per kWh saved when future savings are discounted at a 5 percent rate.

JEL-codes: H76 L94 Q41 Q48 (search for similar items in EconPapers)
Date: 2011-10
New Economics Papers: this item is included in nep-ene
Note: EEE PE
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Citations: View citations in EconPapers (17)

Published as Toshi H. Arimura, Shanjun Li, Richard G. Newell, and Karen Palmer, 2012. "Cost-Effectiveness of Electricity Energy Efficiency Programs," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2).

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Related works:
Journal Article: Cost-Effectiveness of Electricity Energy Efficiency Programs (2012)
Journal Article: Cost-Effectiveness of Electricity Energy Efficiency Programs (2012)
Working Paper: Cost-Effectiveness of Electricity Energy Efficiency Programs (2011)
Working Paper: Cost-Effectiveness of Electricity Energy Efficiency Programs (2009)
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