Do Energy Efficiency Investments Deliver? Evidence from the Weatherization Assistance Program
Conventional wisdom suggests that energy efficiency (EE) policies are beneficial because they induce investments that pay for themselves and lead to emissions reductions. However, this belief is primarily based on projections from engineering models. This paper reports on the results of an experimental evaluation of the nation’s largest residential EE program conducted on a sample of more than 30,000 households. The findings suggest that the upfront investment costs are about twice the actual energy savings. Further, the model-projected savings are roughly 2.5 times the actual savings. While this might be attributed to the “rebound” effect – when demand for energy end uses increases as a result of greater efficiency – the paper fails to find evidence of significantly higher indoor temperatures at weatherized homes. Even when accounting for the broader societal benefits of energy efficiency investments, the costs still substantially outweigh the benefits; the average rate of return is approximately -9.5% annually.
We received many helpful comments from seminar participants at Carnegie Mellon, Columbia University, ETH Zurich, National University of Singapore, NBER Summer Institute, Resources for the Future, the University of Basel, the University of Maryland, the University of Michigan, and the University of Wisconsin. The authors gratefully acknowledge the financial support of the Alfred P. Sloan Foundation, the MacArthur Foundation, the Rockefeller Foundation and the UC Berkeley Energy and Climate Institute, and institutional support from the Poverty Action Lab (JPAL) at MIT, the Center for Local, State, and Urban Policy (CLOSUP) at the University of Michigan, and the Energy Institute at Haas. We thank James Gillan, Brian Goggin, Walter Graf, Erica Myers, Daniel Stuart, and Matthew Woerman for excellent research assistance. We are indebted to Jesse Worker for outstanding management of a challenging project. Finally, we thank our contacts at both our partner utility and the community action agencies, without whom this project would not have been possible. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
As part of a diversified portfolio, I hold more than $10,000 in stock of various public companies whose financial interests may be impacted by the success of energy efficiency programs like the one studied in this paper.
Meredith Fowlie, Michael Greenstone, Catherine Wolfram; Do Energy Efficiency Investments Deliver? Evidence from the Weatherization Assistance Program, The Quarterly Journal of Economics, , qjy005, https://doi.org/10.1093/qje/qjy005 citation courtesy of