Utility Conservation Programs Research Articles

Social Comparisons, Household Water Use, and Participation in Utility Conservation Programs: Evidence from Three Randomized Trials

AbstractRegulation and political opposition often force water utilities to rely on nonprice approaches to manage water demand. Using randomized field experiments in three different water utilities, we assess the effectiveness of social comparisons to reduce demand and analyze their interaction with existing conservation programs. In two utilities, the program decreases consumption by 5%, with significant heterogeneity across the distribution of baseline water use. We do not detect a statistically significant average treatment effect in the third utility. Social norms do not appear to crowd out existing conservation programs: treated households are more likely to participate in additional programs. Of the two utilities with significant treatment effects, higher participation rates in conservation programs account for a very small fraction of water savings (3%) in one utility and a modest fraction (9%–25%) in the second. We discuss evidence that social norms may induce participation among the specific type ...

Impacts of Metering on Residential Water Use in California

The impact of water metering on residential household consumption was evaluated in the inland Northern and Central California cities of Bakersfield, Chico, and Visalia. In 2009, California Water Service Co. (Cal Water) began a process of installing water meters on unmetered single‐family residences and switching from unmetered flat rates to volumetric billing rates. Panel data were studied for two groups: single‐family residences being metered for the first time (treatment group) and already‐metered single‐family residences (comparison group). In Bakersfield, Chico, and Visalia, unmetered residences used more water than comparable metered residences by an average of 15, 22, and 31%, respectively. After six months of metering, average monthly water consumption decreased within the newly metered residences by 21% in Bakersfield, 13% in Chico, and 17% in Visalia. This research shows the impacts of meter installation on residential water conservation efforts and should be helpful in planning water utility conservation programs.

Analysis of United States' Utility Conservation Programs

This paper reviews the United States' experience with utility sponsored energy conservation programs. Such programs are central to the recent discussions about electric utility regulation in the United States and elsewhere. First it is shown that these programs are exposed to three problems on the consumers' side – rebound, adverse selection and moral hazard – which lower the effectiveness of conservation incentives and impede in most practical cases a reliable quantification of the achieved conservation. Moreover, the utilities have under the regulatory practice an incentive to invest in conservation measures but to limit factual conservation through a proper design of the program. Reviewing the recent literature shows that these four crucial points, which affect many of the applied conservation programs, are either insufficiently covered (rebound and adverse selection) or neglected entirely (moral hazard and regulated utilities' interest in little conservation). We conclude, that this undertaking has resulted in insignificant conservation and doubt the adequacy of these programs to reduce external social costs from energy use.

Falling generation costs, environmental externalities and the economics of electricity conservation

The decline in electricity production costs and the movement toward electric utility industry restructuring raise questions about the future of electric utility conservation programs. Estimates of conservation costs in the late 1980s and early 1990s were incomplete and optimistic. Better accounting suggests that conservation costs may not be lower than generation costs — which have fallen dramatically since 1981. This study uses utility plant data reported in annual regulatory filings to estimate marginal production costs since 1980 for nine utilities in California, Massachusetts and New York. The study also examines projected costs of new generating capacity, including environmental externality costs. Comparing conservation costs to generation costs, the study finds that only 12%–37% of conservation potential now appears cost-effective without externality costs. Median estimates of externality costs for combined cycle gas plants make 35%–73% of conservation potential cost-effective. The study demonstrates that, due to lower fuel and plant construction costs, the economics of conservation are much more dependent on the valuation of environmental externalities than they were in 1980.

How Many Kilowatts are in a Negawatt? Verifying Ex Post Estimates of Utility Conservation Impacts at the Regional Level

The current movement toward utility restructuring raises questions about the future of utility conservation programs, which have long suffered from illinformed and conflicting perceptions about their ability to affect customer loads. Controversy has arisen because of the inherent difficulty in measuring conservation impacts and because utilities have had clear economic incentives to overestimate impacts. This study uses econometric techniques to examine the aggregate commercial and industrial conservation impacts reported expost by 39 utilities in the Northeast U.S. and California through 1993. The study finds that 99.4% of the reported conservation impacts are statistically observable in system level sales after accounting for economic and weather effects. The results indicate that utility-run conservation programs have, indeed, been effective in reducing customer loads. The study finds no evidence the utilities have systematically overstated conservation effects.

Income Distribution Effects of Electric Utility DSM Programs

This paper uses the Residential Energy Consumption Survey undertaken by the Energy Information Administration in 1990 to estimate the statistical association between household income and participation in electric utility energy conservation programs and the association between participation and the electricity consumption. The results indicate that utility rebates, energy audits, load management programs and other conservation measures tend to be undertaken at greater frequency by high income households than by low income households. Participants in conservation programs tend to occupy relatively new and energy efficient residences and undertake conservation measures other than utility programs, which suggests that utility sponsored programs are substitutes for other conservation investments. Electricity consumption during 1990 is not significantly less for households participating in utility programs than for nonparticipants, which also implies that utility conservation programs are displacing other conservation investments. Apparently, utility programs are not avoiding the costs of new construction and instead are transferring wealth, particularly to high income participating households.

What Does a Negawatt Really Cost? Evidence from Utility Conservation Programs

We use information reported by ten utilities about their electricity conservation programs to calculate the life-cycle cost per kWh saved - the cost of a "negawatt " -- associated with these programs. These computations indicate that the cost associated with utilities "purchasing" negawatthours is substantially higher than implied by standard sources such as Amory Lovins (Rocky Mountain Institute) and EPRI. The costs calculated for residential programs, in particular, are much higher than conservation advocates have suggested. However, 80% of the expected savings from these programs are attributed to commercial and industrial customers rather than residential customers. We find substantial variation in costs between utilities for similar programs as well as significant intra-utility variation in the cost associated with various sub-programs. We proceed to examine whether or not there are any systematic biases in the reporting of costs and energy savings by the utilities in our sample. In many cases, utilities fail to report all relevant costs, rely on engineering projections of savings rather than applying methods to measure savings based on actual experience, and fail to make appropriate adjustments for free riders. Further biases may result firorn adopting measure lives that are too long. As a result, on average the cost of a negawatthour computed from utility reports significantly underestimates the true societal cost of conservation achieved this way. Mile it is difficult to compute the underestimate with any precision, the evidence that we have suggests that computations based on utility expectations could be underestimating the actual societal cost by a factor of two or more on average. Better utility cost accounting procedures and the application of more sophisticated methods to estimate actual energy savings achieved are clearly necessary before large sums of money can be expended wisely on these programs.

Demand-side management: Reflections of an irreverent regulator

This paper describes methods of introducing energy conservation as an alternative to additional generation. Such strategies should be followed if conservation costs less than generation. However, many existing utility conservation programs have not succeeded because they have increased utility costs while reducing utility sales thus resulting in reduced utility profits. Such programs have also provided inequities for consumers. The paper compares a traditional conservation program with an innovative program where utilities are able to charge consumers for energy saved as a result of utility conservation investment. This innovative program eliminates many of the problems associated with the traditional programs.

What Does a Negawatt Really Cost? Evidence from Utility Conservation Programs

What Does a Negawatt Really Cost? Evidence from Utility Conservation Programs

Do market imperfections justify utility conservation programs? A review of the evidence

There is evidence—albeit spotty and often inconclusive—that market imperfections prevent some efficiency investments. But utilities should consider further study before committing to major expenditures in some areas.

Benefits and costs of flexibility—Short-lead-time power plants

Electric utilities face unprecedented uncertainties that complicate long-term resource planning. As a consequence, many utilities emphasize small resources that can be constructed quickly. However, insufficient data and analysis exist to adequately assess this risk-reduction strategy. This paper compares the benefits of such flexible resources (including energy-efficiency and load-management programs) with their costs, relative to large, long-lead-time power plants. The program flexibility benefits computed for various examples amount to 2–20 per cent. Cost estimates from the Northwest Power Planning Council suggest that these benefits are generally not enough to justify the higher costs of small power plants. However, the benefits are more than sufficient to justify the incremental costs associated with expansion of simple-cycle combustion turbines to combined-cycle operation. Also, the benefits amply justify application of the Council's option-and-build strategy. The first stage of their strategy involves the time-consuming but inexpensive activities of siting, designing, and licensing the plant. Then, the plant can be constructed, the site can be held as an option for several years, or the plans can be terminated. This strategy permits the second stage (construction) to be timed to match changes in load growth at very little cost. Utility conservation and load-management programs can provide substantial flexibility benefits. These benefits are a consequence of the ease with which such programs can be adjusted to match load growth. Relative to construction of a single 600 MW power plant, implementing the demand-side program described here cuts electricity price by 10 per cent, 50–100 per cent more than do small, short-lead-time power plants.

Benefits and cost of flexibility—Short-lead-time power plants

Abstract Electric utilities face unprecedented uncertainties that complicate long-term resource planning. As a consequence, many utilities emphasize small resources that can be constructed quickly. However, insufficient data and analysis exist to adequately assess this risk-reduction strategy. This paper compares the benefits of such flexible resources (including energy-efficiency and load-management programs) with their costs, relative to large, long-lead-time power plants. The program flexibility benefits computed for various examples amount to 2–20 per cent. Cost estimates from the Northwest Power Planning Council suggest that these benefits are generally not enough to justify the higher costs of small power plants. However, the benefits are more than sufficient to justify the incremental costs associated with expansion of simple-cycle combustion turbines to combined-cycle operation. Also, the benefits amply justify application of the Council's option-and-build strategy. The first stage of their strategy involves the time-consuming but inexpensive activities of siting, designing, and licensing the plant. Then, the plant can be constructed, the site can be held as an option for several years, or the plans can be terminated. This strategy permits the second stage (construction) to be timed to match changes in load growth at very little cost. Utility conservation and load-management programs can provide substantial flexibility benefits. These benefits are a consequence of the ease with which such programs can be adjusted to match load growth. Relative to construction of a single 600 MW power plant, implementing the demand-side program described here cuts electricity price by 10 per cent, 50–100 per cent more than do small, short-lead-time power plants.

WILL ELECTRIC UTILITIES COMPETE EFFECTIVELY WITHOUT A PROFIT MOTIVE?

This paper reviews the factors leading to the decline of utility participation in the energy conservation market over the past decade in California. The analysis finds that California's regulatory focus on mandating conservation program funding levels, rather than on measuring and rewarding the achievement of energy savings from utility conservation programs, has contributed to a decline in both program scope and program effectiveness. Other major reasons for this decline include potential revenue losses resulting from conservation programs on the generation side, a preoccupation with identifying winners and losers using benefit‐cost tests, and a regulatory focus on “system” impacts from conservation programs that precluded a more direct marketing focus on utility customers' values and needs. The paper concludes that both regulators and utilities should work to develop new indicators of success in the conservation market. These should focus on achieving energy conservation results and rewarding the results with increased profits as opposed to rewarding just effort with expense recovery.

Review of Government and Utility Energy Conservation Programs

Government and utility conservation programs have increased tremendously in scope, breadth, intensity, and sophistication since the 1973 oil embargo. Early programs were mainly ''soft'' information and education efforts designed to increase citizen and customer awareness of energy issues and energy-efficiency options. In general, these programs were developed in a crisis atmosphere. The prevailing views then were that something had to be done, that almost any well-intentioned program was likely to be of value, and that we could not afford the luxury of carefully assessing program alternatives.

Demand-side management: Research opportunities for electric utilities

Because of dramatic changes in electricity costs, prices, and consumption during the past decade, electric utilities are faced with many new opportunities on the customer side of the meter. Design, analysis, and implementation of successful conservation and load management programs, however, require additional research. This paper discusses several important research topics related to assessment of electricity-conserving technologies, impacts of utility conservation and load management programs, and the electric utility planning process.

Improving utility conservation programs: Outcomes, interventions, and evaluations

Four major California utility companies have active energy conservation programs mandated by the State's Public Utilities Commission (CPUC). These companies evaluate their programs and send reports of the evaluations to the CPUC. A review of 213 of these reports revealed a marketing research approach toward promoting conservation. Advertising and informational campaigns characterize most programs, and attitudes and self-reported behavior were the major outcome measures. This approach is shown to be ineffective. Suggestions for improvement include: 1. (1) the use of actual energy consumption as the primary outcome measure in evaluating conservation programs; 2. (2) the abandonment of conventional advertising, and the use of it only for the promotion of “hard” interventions; 3. (3) increased use of social diffusion methods to disseminate information; 4. (4) the design of more effective educational material by incorporating cognitive social psychological principles; and 5. (5) the utilization of “hard” interventions that have a direct, verifiable link to conservation.

Qualitative response models and the estimation of energy savings from utility conservation programs

Reducing uncertainty in the measurement of energy-saving effects of conservation retrofit programs is the focus of this paper. Measuring the actual quantity of energy savings is an elusive goal. The goal of an evaluation of energy savings is to measure the difference between energy consumption of participant households and that of the same households in the absence of the program. Because the program exists, this difference can only be estimated. We present methodologies which can be used to approximate participant usage in the absence of a program. The first two models are currently applied in evaluating these conservation programs. The last are innovative models using qualitative choice techniques designed to correct for self-selection bias.

Evaluating utility residential energy conservation programmes: an overview of an EPRI workshop

The Electric Power Research Institute sponsored a two-day workshop, ‘Measuring the Effects of Utility Conservation Programs’, in February 1982. The workshop featured 10 presentations by electric utility analysts on several subjects related to evaluation of utility residential energy conservation programmes. This paper summarizes the major themes and findings of the workshops. The workshop papers are published in the Proceedings, available from EPRI.

Effects of improved energy efficiency on U.S. energy use: 1973–1980

Between 1973 and 1980, U.S. energy use grew at an average annual rate that was only one-tenth the pre-embargo rate. This dramatic change in energy growth was caused by a combination of rapidly rising fuel prices, slower economic growth, occasional shortages of fuels, and government and utility conservation programs. This paper examines the post-embargo period in terms of energy use in each of the major sectors: residential and commercial buildings, transportation, and industry. The analysis deals with two issues: what changes occurred in energy use during this period relative to pre-embargo trends and why these changes occurred. Energy use in 1980 (76 quads) was about 20 quads lower than pre-embargo trends would suggest. About half of this reduction was due to slower growth in economic activity. The remainder was due to improvements in energy efficiency, spurred primarily by rising fuel prices and also by government and utility conservation programs. The 1980 increase in overall energy efficiency (10 quads) was due primarily to technical efficiency improvements and secondarily to operational changes.

Electric utility conservation programs and the decision to abandon partially completed supply projects

Electric utility conservation programs are examined in the context of a decision to terminate partially completed supply projects, using the case of Philadelphia Electric Company's Limerick generating station. A cost-effectiveness criterion is developed for such utility programs. Methodology for determining the cost of various loan and grant programs is outlined, and particular programs are evaluated. It is found that 1. (1) utility financial incentives for end-use conservation are usually cost-effective; 2. (2) in the case study,conservation programs could replace one of the two units under construction; 3. (3) except for the lowest cost-programs, conservation competes with continued construction.