Posts Tagged market transformation

Cheap and Free Ways to Promote Energy Efficiency

by Tom Konrad, Ph.D.

Big spending Demand-Side Management programs are not the only way to promote Energy Efficiency.

The Sierra Club’s Rocky Mountain chapter has decided that one of their priorities for 2010 is promoting Energy Efficiency. Since that decision was, at least in part, due to my suggestions as part of their Energy Committee, I volunteered to chair the effort for at least as long as I’m still in Colorado. (I’m planning a move to Connecticut with my wife, but we are waiting for our house to sell first.)

In normal times, we might consider lobbying the state government for incentives to promote energy efficiency, such as those offered as part of the stimulus package. However, a state legislator who came to our last Energy Committee meeting was quite clear: Colorado will be eliminating all (or nearly all) tax incentives next year, so Energy Efficiency programs that rely on state funds are not going to be an effective way forward. For people who, like me had hoped to use Colorado’s recently passed 85% tax credit for PHEV conversions next year, that means we’re probably out of luck. You heard it here first.

Not All Bad News

As I wrote at the start of the financial crisis, even though there may be less subsidies for energy efficiency, leaner budgets make people more open to the idea of cost saving from energy efficiency. Since subsidies are less likely to be available to break down some of the cost barriers against energy efficiency, it makes sense to use our efforts to break down some of the non-cost barriers.

Eric Hirst of Oak Ridge National Laboratory identifies these barriers to energy efficiency improvements:
Barriers to improving U.S. energy efficiency:

Structural barriersĀ­conditions beyond the control of the end user

  • distortions in electricity pricing
  • supply infrastructure limitations

Behavioral barriersĀ­conditions that characterize end users

  • efficiency attitudes and awareness
  • perceived riskiness of efficiency measures
  • obtaining and processing information
  • limited access to capital
  • misplaced incentives
  • inconvenience, loss of amenities

The ones that might be addressed without much money are:

  • efficiency attitudes and awareness
  • perceived riskiness of efficiency measures
  • obtaining and processing information
  • misplaced incentives

Attitudes and Awareness

This barrier has to do with people’s mistaken beliefs: For instance, the belief energy efficiency always requires giving something up (not true: a better sealed and insulated home is less drafty and more comfortable as well as being more energy efficient.) Similarly, some people like to waste energy because conserving is un-macho.

Public relations efforts to make people feel better about efficiency can be very inexpensive. For instance, SMUD’s monthly reports to its customers as to how their consumption compares to their neighbors is something that could be emulated by other utilities.

Another method that might also help to make energy efficiency a social norm also involves competition with neighbors: households with low energy use might also be given inexpensive yard signs, allowing them to brag about their energy sipping lifestyle. This might also address some of the perceived riskiness barrier, because when people see others doing something, they are much more inclined to feel that it is both acceptable and safe.

Misplaced Incentives

Misplaced incentives occur when the person who would pay for efficiency improvements is different from the person who pays the energy bill (and would receive the benefits.) Two examples are landlords and tenants, and homebuilders and home buyers.

Builders have been making strides communicating the energy efficiency of their homes through various certification schemes, such as LEED, Built Green, and Energy Star. When the building buyer can assess the efficiency of a building because it carries a widely recognized green certification, he is likely to be willing to pay more for that building. The same is true for renters.

These voluntary moves are a start, but making energy use disclosure mandatory, as opposed to voluntary, should help bring along the reluctant majority who are not already following these practices. If an energy audit or past energy bills were required to be provided by the seller or landlord whenever a building is sold or leased, buyers and renters could decide for themselves how much more they would be willing to pay for an efficient building, and the current owner would have an incentive to make cost-effective improvements beforehand.

Markets and Information

Efficient markets require good information. A large part of the reason that so many opportunities for energy efficiency exist is that information about energy use is not widely available and often difficult to come by. Measures such as those I suggest above all improve information about energy use, and hence should promote the more efficient use of energy at very little cost.

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