Decarbonizing residential building energy: A cost-effective approach

Abstract

Given the problem of climate change, the world economy must eventually switch to carbon neutral energy. In this study we present a cost-effectiveness approach: given a goal of decarbonization, the objective is to accomplish this at minimum cost. For residential building energy, we show that total cost is minimized by equating marginal cost of building energy conserved with marginal cost of obtaining carbon-free energy, where we express costs of both in dollars per kWh. We describe how the cost of solar photovoltaic energy provides an upper bound on the marginal cost of carbon-free energy and thus an upper bound on marginal cost of conserved energy—one should not necessarily spend more on energy conservation than the cost of photovoltaic energy (though there are several caveats). A case study from Vermont, USA illustrates these principles and implementation issues with marginal analysis of energy conservation. From a policy perspective, the principles presented suggest that either carbon taxes or carbon limits could be used to decarbonize building energy at minimum cost, but that approaches using renewable-energy subsidies or prescriptive building codes result in greater decarbonization costs to society. This suggests that new policy approaches be adopted.