Recent Efforts by Utilities Offer a Glimpse at What Programs Work Best With Consumers
It's a nearly universal maxim in the energy world: Efficiency is a vast, barely tapped resource that can be unlocked with the right policies and incentives.
The trick is finding the key.
Some efficiency programs have failed to get the desired effects, at least as cheaply as their proponents had hoped. Some even backfire, causing people to use more energy.
"Not all energy-efficiency programs deliver," says Lucas Davis, an associate professor at the Haas School of Business at the University of California, Berkeley. "But for me, this means that we need to design them better."
The payoff could be billions of dollars in energy savings. A recent report by McKinsey & Co. says that up to 20% of U.S. residential energy use can be cut by a few changes in consumer behavior, from slight changes in thermostat adjustments to shorter showers. "There are lots of attractive options for efficiency" that wouldn't greatly inconvenience consumers but that aren't being widely adopted, says Humayun Tai, a senior partner and a leader of McKinsey's energy practice.
So what are the best ways to get consumers on board? A pair of approaches have shown they can deliver results.
We're in This Together
One fairly modest new technique has proved remarkably effective: telling consumers how their energy use compares with that of their neighbors.
Several times a year, households in one program receive a two-page sheet that compares their energy use with that of similar homes and "efficient" homes in the area. It also includes tips for saving energy, such as turning off the water heater while on vacation.
The program, run by Opower Inc. of Arlington, Va., for more than 90 utilities, has reduced energy use for participating utilities by 1.8% to 3%. That's not a huge amount, but the results are consistent, and they come at little cost—about three cents for each kilowatt-hour saved. (The cost is crucial, because utilities see efficiency in part as a way to meet future energy demand at a lower cost than building new plants.)
"You can have a program that has small effects but that's not very costly," says Hunt Allcott, an assistant professor of economics at New York University who has conducted several studies of the Opower program. "It's a lot easier to implement and cheaper to implement" than some other programs.
The approach works, Dr. Allcott says, because "it makes people feel like part of a community. If you have a program that guilted people into conserving, you probably wouldn't want to run that program."
Make It Easier
Rebates are another way to get people to save energy, by encouraging them to purchase energy-efficient appliances or light bulbs, which typically are more expensive than less efficient options.
But the hassle of rebates, which often involve clipping a coupon and waiting for a check, is enough to keep many people from considering more-efficient products.
So some efficiency programs are making it easier for consumers—giving them discounts directly and letting retailers or distributors handle the rebate paperwork.
Efficiency Vermont, an arm of the nonprofit Vermont Energy Investment Corp., offers technical advice and incentives aimed at getting consumers and businesses to reduce their energy use. It has run a rebate program in Vermont for energy-efficient light bulbs since 2000, with funding from an energy-efficiency surcharge on electric bills in the state.
For most of that time, it offered traditional mail-in rebates that covered about half the cost of the bulbs.
Beginning in 2012, Efficiency Vermont did away with those mail-in rebates. Consumers and businesses now simply pay a discounted price for energy-efficient bulbs, and Efficiency Vermont pays retailers or distributors who file for rebates for the difference between that price and the full price.
The results are dramatic: Sales of LED bulbs to consumers jumped to about 117,000 in 2013 from about 5,000 in 2012. Sales to commercial customers rose to about 96,000 in 2013 from about 74,000 in 2012 and 18,000 in 2011.
Efficiency Vermont says its portfolio of programs spent 4.1 cents per kilowatt-hour saved in 2013, compared with an electricity supply cost in the state of 8.4 cents per kilowatt-hour.
What Not to Do
There's also something to be learned from programs that haven't worked. In 2009, Mexico adopted an ambitious "cash for coolers" program, which gave nearly two million households subsidies to help them replace older refrigerators and air conditioners with new, more efficient models.
Over the two years of the program, according to a study of utility bills by Berkeley's Mr. Davis and others, refrigerator replacement reduced electricity consumption for the participating households by about 8%—a significant amount, but only a quarter of the savings predicted before the program started.
One reason was that the original estimates assumed households would replace much older, much less efficient models. In fact, most of the replaced refrigerators were less than 12 years old and already were somewhat more efficient than older models. Consumers also took advantage of the program to trade up to refrigerators that were somewhat larger and had more features.
Worse, the air-conditioner program resulted in higher energy use. People used the new air conditioners more, partly because they were willing to keep their houses cooler since they knew the new models used less energy—what economists call the "rebound" effect.
So, while the program reached an enormous number of households and produced large overall savings, the reduction in energy use was far smaller than expected and came at a large cost: about 29 cents a kilowatt-hour for the energy saved. By comparison, energy-efficiency programs by U.S. electric utilities spend an average of about 3.3 cents per kilowatt-hour saved.
Mr. Davis says a few changes in the program could have made it more effective.
It could have excluded air conditioners, which don't offer the same potential efficiency gains that refrigerators do and are more vulnerable to the rebound effect. It also could have required replacement refrigerators to be even more efficient. The result would have been a smaller program, with lower overall savings. But the cost of cutting each ton of carbon-dioxide emissions would have been lower.
"It is challenging to design these programs so that they're cost-effective," Mr. Davis says. "Free riders are going to be a problem. The rebound effect, though not as big as some critics say, is real. And the savings are going to be less than predicted."
Source: http://online.wsj.com/articles/how-to-cut-residential-energy-use-1411937802
Visit us: http://energyhousefresno.com/
from energyhouse http://energyhouse.livejournal.com/29651.html
It's a nearly universal maxim in the energy world: Efficiency is a vast, barely tapped resource that can be unlocked with the right policies and incentives.
The trick is finding the key.
Some efficiency programs have failed to get the desired effects, at least as cheaply as their proponents had hoped. Some even backfire, causing people to use more energy.
"Not all energy-efficiency programs deliver," says Lucas Davis, an associate professor at the Haas School of Business at the University of California, Berkeley. "But for me, this means that we need to design them better."
The payoff could be billions of dollars in energy savings. A recent report by McKinsey & Co. says that up to 20% of U.S. residential energy use can be cut by a few changes in consumer behavior, from slight changes in thermostat adjustments to shorter showers. "There are lots of attractive options for efficiency" that wouldn't greatly inconvenience consumers but that aren't being widely adopted, says Humayun Tai, a senior partner and a leader of McKinsey's energy practice.
So what are the best ways to get consumers on board? A pair of approaches have shown they can deliver results.
We're in This Together
One fairly modest new technique has proved remarkably effective: telling consumers how their energy use compares with that of their neighbors.
Several times a year, households in one program receive a two-page sheet that compares their energy use with that of similar homes and "efficient" homes in the area. It also includes tips for saving energy, such as turning off the water heater while on vacation.
The program, run by Opower Inc. of Arlington, Va., for more than 90 utilities, has reduced energy use for participating utilities by 1.8% to 3%. That's not a huge amount, but the results are consistent, and they come at little cost—about three cents for each kilowatt-hour saved. (The cost is crucial, because utilities see efficiency in part as a way to meet future energy demand at a lower cost than building new plants.)
"You can have a program that has small effects but that's not very costly," says Hunt Allcott, an assistant professor of economics at New York University who has conducted several studies of the Opower program. "It's a lot easier to implement and cheaper to implement" than some other programs.
The approach works, Dr. Allcott says, because "it makes people feel like part of a community. If you have a program that guilted people into conserving, you probably wouldn't want to run that program."
Make It Easier
Rebates are another way to get people to save energy, by encouraging them to purchase energy-efficient appliances or light bulbs, which typically are more expensive than less efficient options.
But the hassle of rebates, which often involve clipping a coupon and waiting for a check, is enough to keep many people from considering more-efficient products.
So some efficiency programs are making it easier for consumers—giving them discounts directly and letting retailers or distributors handle the rebate paperwork.
Efficiency Vermont, an arm of the nonprofit Vermont Energy Investment Corp., offers technical advice and incentives aimed at getting consumers and businesses to reduce their energy use. It has run a rebate program in Vermont for energy-efficient light bulbs since 2000, with funding from an energy-efficiency surcharge on electric bills in the state.
For most of that time, it offered traditional mail-in rebates that covered about half the cost of the bulbs.
Beginning in 2012, Efficiency Vermont did away with those mail-in rebates. Consumers and businesses now simply pay a discounted price for energy-efficient bulbs, and Efficiency Vermont pays retailers or distributors who file for rebates for the difference between that price and the full price.
The results are dramatic: Sales of LED bulbs to consumers jumped to about 117,000 in 2013 from about 5,000 in 2012. Sales to commercial customers rose to about 96,000 in 2013 from about 74,000 in 2012 and 18,000 in 2011.
Efficiency Vermont says its portfolio of programs spent 4.1 cents per kilowatt-hour saved in 2013, compared with an electricity supply cost in the state of 8.4 cents per kilowatt-hour.
What Not to Do
There's also something to be learned from programs that haven't worked. In 2009, Mexico adopted an ambitious "cash for coolers" program, which gave nearly two million households subsidies to help them replace older refrigerators and air conditioners with new, more efficient models.
Over the two years of the program, according to a study of utility bills by Berkeley's Mr. Davis and others, refrigerator replacement reduced electricity consumption for the participating households by about 8%—a significant amount, but only a quarter of the savings predicted before the program started.
One reason was that the original estimates assumed households would replace much older, much less efficient models. In fact, most of the replaced refrigerators were less than 12 years old and already were somewhat more efficient than older models. Consumers also took advantage of the program to trade up to refrigerators that were somewhat larger and had more features.
Worse, the air-conditioner program resulted in higher energy use. People used the new air conditioners more, partly because they were willing to keep their houses cooler since they knew the new models used less energy—what economists call the "rebound" effect.
So, while the program reached an enormous number of households and produced large overall savings, the reduction in energy use was far smaller than expected and came at a large cost: about 29 cents a kilowatt-hour for the energy saved. By comparison, energy-efficiency programs by U.S. electric utilities spend an average of about 3.3 cents per kilowatt-hour saved.
Mr. Davis says a few changes in the program could have made it more effective.
It could have excluded air conditioners, which don't offer the same potential efficiency gains that refrigerators do and are more vulnerable to the rebound effect. It also could have required replacement refrigerators to be even more efficient. The result would have been a smaller program, with lower overall savings. But the cost of cutting each ton of carbon-dioxide emissions would have been lower.
"It is challenging to design these programs so that they're cost-effective," Mr. Davis says. "Free riders are going to be a problem. The rebound effect, though not as big as some critics say, is real. And the savings are going to be less than predicted."
Source: http://online.wsj.com/articles/how-to-cut-residential-energy-use-1411937802
Visit us: http://energyhousefresno.com/
from energyhouse http://energyhouse.livejournal.com/29651.html
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