Cost-benefit analysis of domestic energy efficiency

Abstract

There are a number of driving forces behind energy efficiency. In recent times, the Kyoto Protocol has been the most prominent in bringing energy efficiency to the fore. In some countries, the domestic sector has been highlighted as an area which has a significant potential for improvement. However, prior to the implementation of large-scale energy-efficiency programmes, it is important to evaluate whether they make economic sense. Heretofore, most economic evaluations of energy-efficiency programmes have concentrated purely on the associated costs of the programmes and the energy savings that result. At best, reductions in environmental benefits are also estimated, but rarely are other benefits calculated, such as increases in the levels of household comfort and improvements in human health. This paper endeavours to provide a template for ex ante economic evaluations of domestic energy-efficiency programmes. A comprehensive cost–benefit analysis of a programme to retrofit various energy-efficiency technologies and heating upgrades to the Irish dwelling stock is taken as a case study. The study demonstrates how energy savings, environmental benefits, and health and comfort improvements may be assessed. In so doing, it provides insights into the methodological difficulties and solutions for assessing the social efficiency of large-scale domestic energy-conservation projects.