Source: UNIV OF MARYLAND submitted to NRP
DETERMINANTS OF RESIDENTIAL ENERGY DEMAND AND ENERGY EFFICIENCY
Sponsoring Institution
National Institute of Food and Agriculture
Project Status
COMPLETE
Funding Source
HATCH
Reporting Frequency
Annual
Accession No.
1008992
Grant No.
(N/A)
Cumulative Award Amt.
(N/A)
Proposal No.
(N/A)
Multistate No.
(N/A)
Project Start Date
Jan 14, 2016
Project End Date
Dec 15, 2020
Grant Year
(N/A)
Program Code
[(N/A)]- (N/A)
Recipient Organization
UNIV OF MARYLAND
(N/A)
COLLEGE PARK,MD 20742
Performing Department
Agri & Resource Economics
Non Technical Summary
Residential energy use is responsible for a number of environmental externalities, including greenhouse gas emissions. Energy consumption in buildings accounts for some 20-30% of the carbon dioxide emissions in developed countries (IPCC 2007, McKinsey, 2009), and in the US the average household living in a single family home generates about 12 tons of CO2 each year (EIA, 2012). As a result, there has been significant legislative and programmatic activity to encourage the adoption of microgeneration technology based on renewables, improve the energy efficiency of homes, and tightening energy efficiency standards. At the federal level, much activity has been based on president Obama's American Recovery and Reinvestment Act of2009, which involves a mix of regulation and incentives. Since 2005, the state of Maryland has been issuing grants for the installation of photovoltaics and other renewables, and the Empower MD requires that electricity consumption in the state is reduced by 15% by 2015. Other approaches rely on improved information and real-time feedback about energy usage (see Gans et al., 2013), normative approaches (Allcott, 2011), whereas real-time pricing has been primarily applied to reduce infra-day variation and contain demand at times when it is especially high.Assessing these programs is generally difficult, for reasons that include data limitations and adverse selection (those who seek incentives would have probably made the investments anyway, or may be unobservably more productive at reducing energy usage; see Joskow and Marron, 1992, and Allaire and Brown, 2012). In some cases, the investments in energy efficiency or renewables have actually resulted in heavier, rather than less, energy usage. This phenomenon is known as the rebound effect and is explained by the fact that improved energy efficiency has made energy services (such as lighting, heating, clothes washing) cheaper (Boomhower and Davis, 2014; Davis 2008). It is also possible that knowing that they are saving energy through one or more efficient devices is pushing people to "splurge" with others.
Animal Health Component
(N/A)
Research Effort Categories
Basic
100%
Applied
(N/A)
Developmental
(N/A)
Classification

Knowledge Area (KA)Subject of Investigation (SOI)Field of Science (FOS)Percent
6050430301033%
6076010301033%
6106110301034%
Knowledge Area
605 - Natural Resource and Environmental Economics; 607 - Consumer Economics; 610 - Domestic Policy Analysis;

Subject Of Investigation
6110 - Economy of the United States and sectors thereof; 0430 - Climate; 6010 - Individuals;

Field Of Science
3010 - Economics;
Goals / Objectives
The purpose of this research program is to study 1) free riding (the tendency to apply for and receive government incentives when a household would have made the investment in renewables technologies or energy efficiency upgrades anyway), 2) the rebound effect, 3) incentive based v. information-based programs (as those that rely on free or low-cost energy audits), 4) data measurement, extrapolation and adjustment issues, and 5) observed v engineering predicted energy efficiency and energy use (including stochastic frontier analyses), so that I can contribute to the development of appropriate procedures for assessing the effectiveness and cost-effectiveness of federal and state programs.I wish to emphasize that unless 1) is understood and properly accounted for, and unless programs are redesigned appropriately, free riding has the potential to compromise government programs based on incentives and to create massive wastes of taxpayers' funds.Likewise, 2) implies that efficiency gains are eroded. Earlier literature has sought to estimate the magnitude of this effect through the price elasticity of energy demand, and has come to the conclusion that the rebound effect is probably not very strong in residential energy consumption or personal transportation. Using actual energy usage measurements, Alberini and Towe (2015) find evidence consistent with almost complete rebound effect among those who replaced their existing air-source heat pump with a new, high-efficiency one and redeemed a rebate on the cost of this purchase. How widespread is this behavior? Is it possible that some households may have felt that the savings afforded by the more efficient heating and cooling equipment afforded them the luxury to "splurge" on other energy uses?Alberini and Towe also find that energy audits (where households are provided with information about what can be done to improve energy efficiency, reduce energy use, and save money) are just as promising in terms of reducing energy usage as replacing existing heat pumps with high-efficiency ones.[1][1] Alberini and Towe conduct their study in four counties of Maryland where the climate and the absence of piped natural gas make air-source heat pumps a popular choice for heating the home in the water and cooling in the summer.
Project Methods
Research in this area is affected by a number of data limitations and difficulties. I hope to get around them by developing datasets with regular (and hopefully high-frequency) meter readings from a large sample of homes/households and combining that with extensive information about the home and the household. I plan to work with local utilities, with MDPropertyView (which documents all homes in the state of Maryland), and with data from assorted sources (including our own survey of households) to develop some such databases. I will use these data to estimate residential energy demand function that account for equipment changes, rebates and incentives, and control for structural characteristics of the home, family characteristics, and energy prices.To study the possibility that household might be trading off across uses, we will use detailed data at the equipment level or surveys of households. For example, we are using survey data from Italy to study whether some households feel that restraint in the consumption of energy at home makes up for inefficient cars or driving many miles (which generate copious CO2 emissions) (see Alberini and Bigano, 2015). Ideally, we would like to conduct similar surveys in US as well--and especially Maryland.When possible, we will seek to work with large datasets already developed by government agencies--such as that documenting the trials conducted by four major utilities in the UK, which tested time-of-use, information presentation, in-home displays (the EDRP study) and that documenting structural characteristics of the home, heating equipment, energy use.and household information for over 4 million homes in the UK. We wish to use this dataset to study infra-day variation in energy use, household flexibility in re-arranging their energy usage, the rebound effect, and the effects of extremely hot summer weather (in place, like the UK, with little A/C penetration) and extremely cold winter weather (Auffhammer, 2014). These will be used to estimate complex residential energy demand models where each household's hourly consumption is explained as a function of household characteristics, structural characteristics of the home (including energy efficiency and insulation), and weather.At this time, I am also considering the possibility of collecting natural gas and electricity usage from households living in Ukraine. Due to geopolitical conflict, Gazprom halted the supply of natural gas to Ukraine in 2014-2015, which has caused a drastic increase in natural gas prices in Ukraine. The price shocks should be sufficient to cause a decline in residential natural gas usage and to push households to adopt insulation measures, efficient boilers, etc. Energy efficiency programs were indeed started by the government roughly at the same time. I am considering collecting monthly natural gas usage and electricity data from households and other information to study the uptake of energy efficiency measure, short- and long-term responses to the gas price hike, and the rebound effect (if any) in Ukrainian households. I will rely on local researchers to assist in this effort, and carefully assess the benefits and the effort required to collect these data before launching this household survey.

Progress 01/14/16 to 12/15/20

Outputs
Target Audience:Academic, government agencies, and international agencies. Changes/Problems: Nothing Reported What opportunities for training and professional development has the project provided?Several papers were co-authored with graduate students. Either they served as research assistants on the project, or were included in the authorship to help them understand the research and publication process. How have the results been disseminated to communities of interest?Generally speaking through publications and conference presentation. PD serves as Chair of the Statistcal Advisory Committee to the Energy Information Administration--a valuable experience. PD was recently contacted by the US EPA to help them with residential electricity consumption and energy poverty, and is currently advising the World Bank on a project on energy poverty and energy subsidies. These agencies contacted the PD after seeing her publications and presentations on the topic. What do you plan to do during the next reporting period to accomplish the goals? Nothing Reported

Impacts
What was accomplished under these goals? Examined various aspects of residential energy demand, including the unexpected effects of government assistance towards the purchase of energy-efficient equipment, and the undesirable effects of energy efficiency ratings based on broad classes, which engender strategic behavior on the part of builders and/or rates. The most prolific area of research has been dedicated to the estimation of the price elasticity of demand. This is a key parameter for estimating the effect of a carbon tax, for example, or of improvement in energy efficiency. PD studied the price elasticity of demand at locales where energy price increases were massive (e.g., Ukraine, where they increased by 700% in a matter of just a few months) and examined methodological issues associated with the granularity of the data used.

Publications

  • Type: Journal Articles Status: Published Year Published: 2020 Citation: Alberini, Anna, Olha Khymych, and Milan `?asn� (2020), Responsiveness to Energy Price Changes when Salience is High: Residential Natural Gas Demand in Ukraine, Energy Policy, 144, available at https://reader.elsevier.com/reader/sd/pii/S0301421520302792?token=F9D73A9935858779E70CB7C58F62EE3EE9977CC3A08F3597EA7AE7095E06E094DA0A4D2F608E446478825EE77D628A45 .
  • Type: Journal Articles Status: Published Year Published: 2018 Citation: Alberini, Anna, Andrea Bigano, Milan `casn�, and Iva Zverinov� (2018), Preferences for Energy Efficiency vs. Renewables: How Much Does a Ton of CO2 Emissions Cost? Ecological Economics, 144, 171-185.
  • Type: Journal Articles Status: Published Year Published: 2016 Citation: Miller, Mark, and Anna Alberini (2016), Sensitivity of Price Elasticity of Demand to Aggregation, Unobserved Heterogeneity, Price Trends, and Price Endogeneity: Evidence from US Data, Energy Policy, 97, 235-249.
  • Type: Journal Articles Status: Published Year Published: 2016 Citation: Alberini, Anna, Charles Towe and Will Gans (2016), Energy Efficiency Incentives: Do They Work for Heating and Cooling Equipment? Evidence from Maryland Homeowners, The Energy Journal, 37(1), 259-290.
  • Type: Other Status: Published Year Published: 2020 Citation: Alberini, Anna, Jevgenijs Steinbuks, and Govinda Timilsina (2020), How Valuable is the Reliability of Residential Electricity Supply in Low-Income Countries? Evidence from Nepal, World Bank Policy Research working paper 9311, The World Bank, Washington, DC, June, available at http://documents1.worldbank.org/curated/en/619261593538219342/pdf/How-Valuable-is-the-Reliability-of-Residential-Electricity-Supply-in-Low-Income-Countries-Evidence-from-Nepal.pdf
  • Type: Other Status: Published Year Published: 2019 Citation: Anna Alberini, Olha Khymych, and Milan `?asn� (2019), The Elusive Effects of Residential Energy Efficiency Improvements: Evidence from Ukraine, USAEE Working Paper No. 19-397, April, available at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3373720
  • Type: Other Status: Published Year Published: 2016 Citation: Hyland, Marie, Anna Alberini and Sean Lyons (2016), The Effect of Energy Efficiency Labeling: Bunching and Prices in the Irish Residential Property Market, Trinity College Economics working paper TEP 0516, Dublin, March, available at http://www.tcd.ie/Economics/assets/pdf/tep0516.pdf
  • Type: Journal Articles Status: Submitted Year Published: 2020 Citation: Alberini, Anna, Jevgenijs Steinbuks, and Govinda Timilsina (2020), How Valuable is the Reliability of Residential Electricity Supply in Low-Income Countries? Evidence from Nepal, revised and resubmitted to The Energy Journal.
  • Type: Conference Papers and Presentations Status: Other Year Published: 2016 Citation: Household Energy Use, Energy Efficiency, Emissions and Behaviors, keynote speech at the ECOCEP-Energy and Climate Economic Modeling 18th annual conference, Prague, November 2016.
  • Type: Conference Papers and Presentations Status: Other Year Published: 2016 Citation: The Effect of Energy Efficiency Labeling: Bunching and Prices in the Irish Residential Property Market, presented at the 22nd annual meeting of the European Association of Environmental and Resource Economists, Zurich, June 2016.


Progress 10/01/18 to 09/30/19

Outputs
Target Audience:My target audience is academics working in this area, policymakers, and international organizations providing financial and advisory support to policymakers in various countries. Changes/Problems:n/a What opportunities for training and professional development has the project provided?Many of our graduate students have expressed an interest in researching energy efficiency as a result of the reputation gained through the listed publications and presentation activities. I am now doing research on the topic with faculty at UMD School of Engineering. How have the results been disseminated to communities of interest?Yes (see list of presentations, which includes presentation at academic conferences, engineering schools, and international organizations). What do you plan to do during the next reporting period to accomplish the goals?I am still actively working on residential energy consumption and I have been seeking to acquire data from a number of countries where fuel poverty is a serious concern.

Impacts
What was accomplished under these goals? Significant progress in the role of pricing and income in understanding energy consumption and conservation behavior, as compared to external temperature, size of the home and composition of the household. Energy poverty and reduction thereof. Methodological progress in terms of combining sources of data, for example actual consumption and intentions reported under hypothetical but well spelled out conditions. Discounting future costs of energy v. higher prices of more efficient durables now.

Publications

  • Type: Journal Articles Status: Awaiting Publication Year Published: 2020 Citation: Alberini, Anna, Olha Khymych, and Milan `?asn� (2020), Responsiveness to Energy Price Changes when Salience is High: Residential Natural Gas Demand in Ukraine, forthcoming in Energy Policy.
  • Type: Journal Articles Status: Published Year Published: 2019 Citation: Alberini, Anna, Giuseppe Prettico, Chang Shen, and Jacopo Torriti (2019), Hot Weather and Hourly Residential Electricity Demand in Italy, Energy, 177, 44-56.
  • Type: Journal Articles Status: Published Year Published: 2019 Citation: Alberini, Anna (2019), Revealed v. Stated Preferences: What Have We Learned about Valuation and Behaviors? Review of Environmental Economics and Policy, 13(2), Summer 2019, 283298.
  • Type: Journal Articles Status: Published Year Published: 2019 Citation: Alberini, Anna, Olha Khymych, and Milan `?asn� (2019), Response to Extreme Price Changes: Evidence from Ukraine, The Energy Journal, 40(1), 189-212.
  • Type: Journal Articles Status: Published Year Published: 2018 Citation: Alberini, Anna (2018), Household Energy Use, Energy Efficiency, Emissions, and Behaviors, Energy Efficiency, 11(3), 577-588,
  • Type: Journal Articles Status: Published Year Published: 2018 Citation: Alberini, Anna, and Massimo Filippini (2018), Transient and Persistent Energy Efficiency in the US Residential Sector: Evidence from Household-level Data, Energy Efficiency, 11(3), 589-601.
  • Type: Other Status: Other Year Published: 2019 Citation: Alberini, Anna, Olha Khymych, and Milan `casn� (2019), The Elusive Effects of Residential Energy Efficiency Improvements: Evidence from Ukraine, University of Maryland, College Park, March.
  • Type: Conference Papers and Presentations Status: Other Year Published: 2019 Citation: Instruments at Work: Assessing Energy Efficiency Improvements, presented at the Economics Research Service, US Department of Agriculture, Washington, DC, April 2019.
  • Type: Conference Papers and Presentations Status: Other Year Published: 2018 Citation: The Effect of Energy Price Changes when Salience is High: Residential Natural Gas Demand in Ukraine, presented at the Heinz School of Public Policy, Carnegie Mellon University, November 2018.
  • Type: Conference Papers and Presentations Status: Other Year Published: 2018 Citation: Market and Non-market Valuation in Energy and Environmental Economics, presented at the GEMCLIME annual meeting, WCERE 2018, G�teborg, Sweden, June 2018.
  • Type: Conference Papers and Presentations Status: Other Year Published: 2018 Citation: Market and Non-market Valuation in Energy Economics, keynote speech at the 25th Ulv�n Conference on Environmental Economics, Ulv�n, Sweden, June 2018.
  • Type: Conference Papers and Presentations Status: Other Year Published: 2018 Citation: Energy and Behaviors: Do Consumers Understand Prices and Energy Efficiency? keynote speech at the Dual Plenary Session of the 41st International Conference of the International Association of Energy Economics, Groningen, Netherlands, June 2018.
  • Type: Conference Papers and Presentations Status: Other Year Published: 2018 Citation: Response to Extreme Energy Price Changes: Evidence from Ukraine, presented at the Microeconomics Seminar Series, Policy Research Department, The World Bank, Washington, DC, March 2018.
  • Type: Conference Papers and Presentations Status: Other Year Published: 2019 Citation: Estimating Energy Price Elasticities when Salience is High: Residential Natural Gas Demand in Ukraine, presented at the 42nd IAEE International Conference, Montreal, Canada, May 2019, and at the annual EAERE meeting, Manchester, UK, June 2019.
  • Type: Conference Papers and Presentations Status: Other Year Published: 2018 Citation: Response to Extreme Energy Price Changes: Evidence from Ukraine, presented at the 10th annual EMEE workshop, University of Southern California, Los Angeles, June 2017, and at WCERE 2018, G�teborg, Sweden, June 2018.


Progress 10/01/17 to 09/30/18

Outputs
Target Audience:Professional conferences, academic audiences Changes/Problems: Nothing Reported What opportunities for training and professional development has the project provided?Using tests to test whether instruments are appropriate. How have the results been disseminated to communities of interest?IAEE working papers, professional conferences, seminars What do you plan to do during the next reporting period to accomplish the goals?I am continuing the analysis and estimation of short and long run response to price changes and incentives to improve energy efficiency.

Impacts
What was accomplished under these goals? Wrote a survey paper describing the state of knowledge about residential energy behavior; also wrote a paper on response to residential energy tariff changes based on data collected in Ukraine. Currently working on showing the short-run elasticity and long-run effect of energy efficiency upgrades using data from Ukraine.

Publications

  • Type: Journal Articles Status: Published Year Published: 2018 Citation: Alberini, Anna (2018), Household Energy Use, Energy Efficiency, Emissions, and Behaviors, Energy Efficiency, 11(3),577-588, available at https://link.springer.com/article/10.1007/s12053-017-9597-1?wt_mc=Internal.Event.1.SEM.ArticleAuthorAssignedToIssue


Progress 10/01/16 to 09/30/17

Outputs
Target Audience: Nothing Reported Changes/Problems: Nothing Reported What opportunities for training and professional development has the project provided? Nothing Reported How have the results been disseminated to communities of interest?Through papers and presentations: Alberini, Anna, and Markus Bareit (2017), "The Effect of Registration Taxes on New Car Sales and Emissions: Evidence from Switzerland," forthcoming in Resource and Energy Economics, available at http://dx.doi.org/10.1016/j.reseneeco.2017.03.005 Alberini, Olha Khymych and Milan Š?asný (2017), "Response to Extreme Energy Price Changes: Evidence from Ukraine," USAEE working paper 17-325, November, available at http://ssrn.com/abstract=3096323 and https://papers.ssrn.com/sol3/Jeljour_results.cfm?form_name=journalbrowse&journal_id=1077018&Network=no&lim=false Alberini, Olha Khymych and Milan Š?asný (2017), "Response to Extreme Energy Price Changes: Evidence from Ukraine," CER-ETH working paper 17/280, ETH Zurich, November, available at https://www.ethz.ch/content/dam/ethz/special-interest/mtec/cer-eth/cer-eth-dam/documents/working-papers/WP-17-280.pdf Cerruti, Davide, Anna Alberini, and Joshua Linn (2017), "Charging Drivers by the Pound: The Effects of the UK Vehicle Tax," CER-ETH Working Paper 17/271, ETH Zürich, May, available at https://www.ethz.ch/content/dam/ethz/special-interest/mtec/cer-eth/cer-eth-dam/documents/working-papers/WP-17-271.pdf. Cerruti, Davide, Anna Alberini, and Joshua Linn (2017), "Charging Drivers by the Pound: The Effects of the UK Vehicle Tax," RFF Report, Washington, DC, May, available at http://www.rff.org/files/document/file/RFF-Rpt-Charging%20Drivers.pdf. Invited talks: "Benefit-Cost Analysis, Non-market Valuation, and Regulatory Tradeoffs," presented at the Quantitative Risk Methods in Regulatory Analysis workshop, Clark School of Engineering, University of Maryland, College Park, MD, May 2017. "Household Energy Use, Energy Efficiency, Emissions and Behaviors," keynote speech at the ECOCEP-Energy and Climate Economic Modeling 18th annual conference, Prague, November 2016. Contributed talks: "Response to Extreme Energy Price Changes: Evidence from Ukraine," presented at the 10th annual EMEE workshop, University of Southern California, Los Angeles, June 2017. What do you plan to do during the next reporting period to accomplish the goals?Clean and analyze the data from Ukraine (combining the first wave from 2016 with that collected in 2017) to answer the questions: 1) what are the patterns of consumption of natural gas in homes?, 2) have higher prices spurred investments in energy efficiency upgrades? 3) what is the effectiveness of these investments? In other words, by how much have they reduced natural gas usage? 4) do people who make investments in insulation and other energy-efficiency upgrades save more natural gas than those who appear to simply curtail their consumption?

Impacts
What was accomplished under these goals? During this project period the data was cleaned from the survey of households in Ukraine, which was collected in May-June 2016. A paper was written, which was presented at the annual EMEE workshop at the University of Southern California in June 2017. The paper studied the monthly electricity consumption and related it to the electricity tariffs, which were changed several times during the study period (Jan 2013-Apr 2016), with a major reform taking place in April 2015. Since there is increasing block pricing (IBR), I instrument for marginal price using the full tariff schedule. The price elasticity of demand ranged between -0.5 to -0.3, depending on the subsample of households used and on the knowledge of the tariffs and of consumption habits reported by the respondents. During the spring 2017 (May-June 2017), conducted another wave of survey data collection. This time, the sample was comprised of persons living in homes that had clearly undergone energy efficiency renovations, plus a sample randomly selected from the local population. Finally, continued the research on the fuel economy of cars and how that can be influenced and improved through policies that penalize the purchase and use of guzzlers and encourage the purchase and use of fuel-efficient vehicles. The data from Switzerland and the UK was used for these purposes, because their car taxation system is structured exactly in this fashion.

Publications


    Progress 01/14/16 to 09/30/16

    Outputs
    Target Audience: Nothing Reported Changes/Problems: Nothing Reported What opportunities for training and professional development has the project provided? Nothing Reported How have the results been disseminated to communities of interest?The results were disseminated to the communities of interest through papers and presentations: "The Effect of Energy Efficiency Labeling: Bunching and Prices in the Irish Residential Property Market," presented at the 22nd annual meeting of the European Association of Environmental and Resource Economists, Zurich, June 2016. Miller, Mark, and Anna Alberini (2016), "Sensitivity of Price Elasticity of Demand to Aggregation, Unobserved Heterogeneity, Price Trends, and Price Endogeneity: Evidence from US Data," Energy Policy, 97, 235-249. What do you plan to do during the next reporting period to accomplish the goals?Clean and analyze the data from Ukraine to answer the questions: 1) If higher prices resulted in less electricity and natural gas used in Ukrainian homes, 2) Whether higher prices spurred investments in energy efficiency upgrades? 3) If these investments resulted in less electricity or natural gas being used? 4) If there is an evidence of a rebound effect?

    Impacts
    What was accomplished under these goals? During this project period special attention was paid to whether changes in the price of energy inputs (e.g., gas and electricity) trigger the adoption of energy-efficient technologies, and whether these in turn spur reductions in energy inputs or result in the rebound effect. If so, one wishes to establish how severe the rebound effect is. For the purpose, data collection was done about household electricity and gas use in Ukraine, where between 2013 and 2016 several extreme tariff reforms were enacted. Over three years, the price of natural gas increased seven-fold, and that of electricity by almost 300%. The study design and planning was conducted in Jan-Apr 2016, and the data collected in May-June 2016. The data were cleaned and supplemented with additional information from government sources starting in Sept. 2016. Data obtained from Ireland was also studied, where any home for sale must have an energy-efficiency label that follows the format prescribed by European Union. Based on the energy consumption of the home, the home receives an energy-efficiency grade, with A the best and G the worst. The grades assigned were based on a numerical score which is compared with a government-established scale. The numerical score is calculated by an assessor, who inspects the premises and enters all sorts of materials, heating system and construction type information into a spreadsheet. The scores and the grades from a large sample of homes sold in Ireland in the last few years were examined, finding effects of "bunching" (excessive frequency of homes) just to the left of the cutoffs between grades, suggesting manipulation of the scores in hopes of making the better letter grade. This means that the label does work in the sense that it is taken into account in the real estate market, but that it generates unanticipated consequences in that the true energy efficiency reported is distorted. The important relationship between energy demand and prices, and how data and statistical model may affect the estimate of the price elasticity of demand was studied.

    Publications