Publications

Behavioral Economics Applied to Energy Demand Analysis: A Foundation

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Neoclassical economics has shaped our understanding of human behavior for several decades. While still an important starting point for economic studies, neoclassical frameworks have generally imposed strong assumptions, for example regarding utility maximization, information, and foresight, while treating consumer preferences as given or external to the framework. In real life, however, such strong assumptions tend to be less than fully valid. Behavioral economics refers to the study and formalizing of theories regarding deviations from traditionally-modeled economic decision-making in the behavior of individuals. The U.S. Energy Information Administration (EIA) has an interest in behavioral economics as one influence on energy demand.

Leidos Engineering, LLC (Leidos), previously known as Science Applications International Corporation (SAIC), conducted research on behavioral economics and energy demand, and reports the following in the contract report in Appendix A:

  • “Research revealing that energy consumption can vary widely (by a factor of nearly three) among homes and households with nearly identical characteristics1,2
  • Research revealing widespread and consistent disconnects between attitudes and behaviors regarding the importance of the impact of energy consumption on the environment and awareness regarding energy consumption or conservation behavior3
  • A variety of papers and studies suggesting energy efficiency policies and program adjustments to address the implications of particular irrational behaviors and cognitive limitations, such as labeling schemes, framing of energy efficient choices as avoiding losses rather than making gains, replacing small value rebates with larger value lottery-based awards, among other tactics4
  • Research suggesting that households that received reports regarding their consumption relative to neighbors were demonstrated to cut their usage by 2.5 percent, in a sustained manner.
  • Research work suggesting that a large portion of subsidies for hybrid automobiles and solar panels go to free riders, who would have adopted the more energy efficient technology anyway.”

These above findings lend strong evidence to the need for the current National Energy Modeling System (NEMS) framework to continue keeping pace with either existing or developing best practices in energy economics with respect to consumer behavior. There is substantial research interest within the government, academia, and trade organization communities in consumer behavior with respect to energy demand and efficiency, especially as program funding targeting energy efficiency continues to increase. EIA hosted a technical workshop5 on behavioral economics and recently released a nationwide inventory providing detailed summaries of energy efficiency evaluation reports—commonly called evaluation, measurement, and verification (EM&V) reports6 —on electricity and natural gas programs. Energy efficiency program budgets have rapidly expanded, and in many states now approach supply-side capital investment in scale. Behavior is commonly considered a key aspect of energy efficiency programs.7

A key finding of the contract report, reflecting expert input from the technical workshop as well as subsequent research, is that the implementation of the modeling structures in NEMS has an inherent tendency to relax key assumptions in the neoclassical framework. While this finding supports the current implementation of demand modeling in NEMS, experimentation with aggregate demand specifications remains warranted. Preliminary approaches are described in the report.

The contract report in Appendix A characterizes and defines behavioral economics with respect to energy economics and demand analysis, and helps to both inform the public and to provide the information and foundational concepts for potential enhancements in EIA’s statistical and modeling programs. When referencing the contract report in Appendix A, it should be cited as a report by Leidos Engineering, LLC prepared for the U.S. Energy Information Administration.

Confronting the West’s Water Crisis

Read the full story in FutureStructure.

The Hamilton Project at the Brookings Institution and the Stanford Woods Institute for the Environment released a new report Oct. 20 that addresses how western states can confront the crippling drought that threatens the nation’s entire water system.

The report is comprised of three papers, each of which examines particular strategies for coping with ongoing drought conditions. The first paper, Shopping for Water, advocates using market forces to manage water resources and lessen the impact and frequency of water shortages. The second paper, The Path to Water Innovation, highlights the need for innovative new technologies for promoting efficiency and conservation and suggests reviews of regulatory practices and creating statewide offices for water innovation. The third paper looks at nine economic facts about water in the United States with “the aim of providing an objective framing of America’s complex relationship with water.”

ACEEE: Massachusetts Tops California as Most Energy-Efficient State, while Arkansas, D.C., Kentucky, and Wisconsin are Most Improved

Governors and lawmakers in state capitals across the nation continue to take major steps to lower energy costs, reduce pollution, and save consumers money by increasing their states’ energy efficiency, according to the findings of the 8th edition of the State Energy Efficiency Scorecard released today by the American Council for an Energy-Efficient Economy (ACEEE).

Available online at http://aceee.org/state-policy/scorecard, the report found that in 2014 Massachusetts (#1) continues to edge out California (#2) as the most energy-efficient state in the nation for the fourth year in a row. Following these states in the top 10 are: Rhode Island (marking the state’s first time in top five), Oregon, and Vermont (all tied for #3); Connecticut (#6); New York (#7); Washington (#8); Maryland (#9); and Minnesota (#10).

Other key State Energy Efficiency Scorecard findings include the following:

  • Arkansas, the District of Columbia, Kentucky, and Wisconsin are the four most improved energy-efficiency states for 2014. Arkansas pushed forward with strong utility programs. The state’s budgets for electric efficiency programs increased 30% between 2012 and 2013, while electricity savings more than tripled. The District of Columbia and Wisconsin also saw upticks in energy savings. Kentucky took notable steps to adopt a more efficient commercial building energy code.
  • From dead last and up, the five states most in need of improvement on energy efficiency in 2014 are North Dakota, Wyoming, South Dakota, Mississippi, and Alaska.
  • Overall, states are ramping up their commitments to energy efficiency. Savings from electricity efficiency programs in 2013 totaled approximately 24.4 million megawatt-hours (MWh),a 7 percent increase over 2011 savings reported last year by ACEEE. Gas savings for 2013 were reported at 276 million therms (MMTherms), a 19 percent increase over the 2011 savings reported in the previous ACEEE State Scorecard.
  • A total of 23 states fell in the energy efficiency rankings in 2014. Indiana dropped the furthest, by 13 spots, due inpart to state legislators’ decision to eliminate the state’s long-term energy savings goals. Legislators in Ohio made a similar decision to freeze and substantially weaken the state’s energy efficiency resource standard (EERS), contributing to the state’s fall of 7 spots down the rankings.  Despite these policy setbacks, utilities in both states have indicated they will continue running efficiency programs, albeit at levels below what would have been required by the standards.
  • ACEEE found that states that enforce and adequately fund an EERS drive investments in utility-sector energy efficiency programs. The states with the most aggressive savings targets include Arizona,Massachusetts,and Rhode Island.

Maggie Molina, Director of ACEEE’s Utilities, State, and Local Policy program, said: “More and more governors and state lawmakers understand that they have a choice: Do nothing as costly energy is wasted or take action by creating incentives to waste less energy. Smart energy efficiency choices maintain the same comfort, convenience, and quality of life that consumers want and expect. Energy efficiency is also good for business. State action on energy efficiency improves bottom lines, drives investment across all sectors of the economy, creates jobs, and offsets the environmental harms created by the energy production system.”

Massachusetts Governor Deval Patrick said: “We have treated efficiency as our first fuel because saving energy, managing costs, and reducing environmental impacts while building a stronger cleantech economy helps fulfill our responsibility to future generations to leave a stronger Commonwealth than we found.”

JD Lowery, Director of the Arkansas Energy Office, a division of the Arkansas Economic Development Commission, said: “Much of Arkansas’ improvement must be attributed to the ongoing leadership of our Arkansas Public Service Commissioners, our utility partners, and our citizens. Through innovative programs, both businesses and households in Arkansas have discovered the economic benefits of investing in energy efficiency. Energy efficiency is no longer this unknown thing. We’re creating jobs while saving Arkansans money. Everybody wins.”

Other key findings include the following:

  • Total budgets for electricity efficiency programs in 2013 reached $6.3 billion. Adding that to natural gas program budgets of $1.4 billion, total efficiency program budgets were estimated to be more than$7.7 billion in 2013.
  • The leading states in utility-sector energy efficiency programs and policies were Rhode Island, Massachusetts, and Vermont.With long records of success, all three continued to raise the bar on cost-effective programs and policies. Both Massachusetts and Rhode Island earned maximum points in this category.
  • The leading state in building energy codes and compliance was California. Eleven states and the District of Columbia have officially adopted the latest standards for both residential and commercial buildings.
  • California and New York led the way in energy-efficient transportation policies. California’s requirements for reductions in greenhouse gas (GHG) emissions have led it to identify several strategies for smart growth,while New York is one of the few states in the nation to have a concrete vehicle-miles-traveled reduction target.
  • Other states have also made recent progress in energy efficiency. Nevada scored additional points for its building codes and compliance measures. Delaware passed a significant energy efficiency bill in early July, laying the ground work for customer-funded energy efficiency programs. This policy shift did not result in an improved score this year, but it will likely garner additional points in future editions of the State Scorecard as programs are implemented and regulations are finalized.
  • The U.S. territories of Puerto Rico, Guam, and the U.S. Virgin Islands have taken steps to improve energy efficiency in new construction by adopting building energy codes, but have generally not made investments in efficiency in other sectors. This is the first year these territories have been included in the State Scorecard.

ACEEE State Policy Research Analyst Annie Gilleo, lead author of the 2014 State Energy Efficiency Scorecard, said:  “The State Scorecard provides an annual benchmark of the progress of state energy efficiency policies and programs. It encourages states to continue strengthening their efficiency commitments in order to promote economic growth, secure environmental benefits, and increase their communities’ resilience in the face of the uncertain cost and supply of the energy resources on which they depend. The State Scorecard offers a toolkit that policymakers can use to increase energy savings in their state.”

Methodology

The State Energy Efficiency Scorecard benchmarks states across six policy areas – utility policies and programs, transportation initiatives, building energy codes, combined heat and power development, state government-led initiatives, and state-level appliance standards. In total, states are scored on more than 30 individual metrics. Data is collected from publicly available sources and vetted by state energy offices and public utility commissions.

About ACEEE

The American Council for an Energy-Efficient Economy acts as a catalyst to advance energy efficiency policies, programs, technologies, investments, and behaviors. For information about ACEEE and its programs, publications, and conferences, visit http://aceee.org.

We can provide power to everyone without a huge leap in emissions, study finds

Read the full story in Grist.

When we talk about international climate action, it’s often taken for granted that developing countries need room to pollute as they pull their citizens out of poverty. More than a billion people worldwide don’t have access to electricity, the argument goes, and getting them connected will require major development projects that will come hand-in-hand with significant new emissions.

But that might be a false assumption, according to a new paper in Nature Climate Change.

Protection of Stratospheric Ozone: Determination 29 for Significant New Alternatives Policy Program

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This Determination of Acceptability expands the list of acceptable substitutes for ozone-depleting substances under the U.S. Environmental Protection Agency’s (EPA) Significant New Alternatives Policy (SNAP) program. This action lists as acceptable additional substitutes for use in the refrigeration and air conditioning, foam blowing, and fire suppression and explosion protection sectors.

DATES: This determination is effective on October 21, 2014.

Final Rule: Protection of Stratospheric Ozone: Adjustments to the Allowance System for Controlling HCFC Production, Import and Export 2015-2019

The EPA Administrator, Gina McCarthy, signed the following final rule on 10/16/14, and EPA is submitting it for publication in the Federal Register. While we have taken steps to ensure the accuracy of this Internet version of the rule, it is not the official version of the rule for purposes of regulatory requirements. Please refer to the official version in a forthcoming Federal Register publication, which will appear on the Government Printing Office’s FDsys website: http://www.gpo.gov/fdsys/search/home.action and on Regulations.gov: http://www.regulations.gov in Docket No. EPA-HQ-OAR-2013-0263. Once the official version of this document is published in the Federal Register, this version will be removed from the Internet and replaced with a link to the official version.

Enhanced EPA Oversight Needed to Address Risks From Declining Clean Air Act Title V Revenues

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Weaknesses in the EPA’s oversight of Title V revenues and expenditures jeopardize program implementation and, in turn, compliance with air regulations for many of the nation’s largest sources of air pollution.