Will the aggregation approach affect energy efficiency performance assessment?

Aggregate energy is usually measured in the linear weighted summation of various energy types based on thermal dynamics laws. This measurement is scientific and acceptable in the physics or energy engineering world. However, it implicitly assumes that all energy types are perfectly substitutable and thus may result in distorted conclusions in energy-economy research. In economics world, production factors are usually non-linearly aggregated using Divisia approach, which is derived from microeconomic theory and considers the heterogeneity and imperfect substitutability among various energies. Using which “ruler” to measure the aggregate energy, the linear one or the others, will certainly affect the conclusions and energy saving incentives of the economic agents. Inequitable energy aggregations may bring out speculations or discouraged behaviors. According to China's current provincial energy efficiency performance assessment policy, the central government assigned the target of reducing the national aggregate energy intensity by 20% in 2006–2010 to provincial authorities in 2006. And in July 2011, the central government formally released the provincial assessment results based on conventional linear aggregation approach (coal equivalent). Our re-examination review this policy and show that the official results are quite different to that based on Divisia approach. From the perspective of economics, some local performances are overestimated and others are underestimated. To raise the equity and incentive compatibility of the assessment, we suggest the central take the imperfect substitutability or energy structure changes into consideration. We also discuss the difficulties and deficiencies when using Divisia aggregate approach.     

Financing the UK power sector: Is the money available?

The UK power generation sector faces a major new round of investment: the coincidence of asset retiring and ambitious goals for decarbonisation is not unique, but is particularly acute in the UK. The UK government has put in place a raft of new policies that seek to promote new, low carbon investment and ensure security of supply. The traditional channel for financing the sector has been through large utility companies, but this now looks challenging for various reasons. The UK therefore offers an interesting case study on several counts; the scale of the challenge, effectiveness of new policies, and the availability of alternative finance. We find that the link between the finance sector and the electricity sector is not ‘broken’, but the flow of money to the sector is threatened by the current weakness of the utilities’ business model. This paper compares estimates of the scale of investment required in the UK with historical investment rates. It summarises contemporary finance industry views of conditions and trends, and potential policy interventions that might be needed to bridge the investment gap. The potential for channelling institutional investor funds directly into energy assets is reviewed.     

Investment in energy efficiency: do the characteristics of investments matter?

??Investment in energy efficiency: do the characteristics of firms matter??? In their famous 1998 paper, DeCanio and Watkins raised the question and answered it affirmatively. Our paper addresses a parallel question: ??Investment in energy efficiency: do the characteristics of investments matter??? To answer this question, we first describe our new investment decision-making model, applicable to all investment types. We then discuss our research results, based on questionnaires submitted to finance managers of 35 major electricity consumers in various commercial and industrial sectors. We show how characteristics other than profitability play an important role in investment choices. The investment category influences profitability evaluation, profitability requirement, and, ultimately, the decision made. For half of the firms in our study, energy-efficiency investments did not exist as a category. However, wide diversity regarding investment behavior is observed between firms. Our findings lead to a different explanation of the energy-efficiency gap and open the way for a new approach to promoting energy-efficiency investments, which is briefly discussed in the conclusion.     

Does environmental regulation affect energy efficiency in China's thermal power generation? Empirical evidence from a slacks-based DEA model

Data envelopment analysis (DEA) has gained much popularity in performance measurement of power industry. This paper presents a slack-based measure approach to investigating the relationship between fossil fuel consumption and the environmental regulation of China's thermal power generation. We first calculate the total-factor energy efficiency without considering environmental constraints. An environmental performance indicator is proposed through decomposing the total-factor energy efficiency. The proposed approach is then employed to examine whether environmental regulation affects the energy efficiency of China's thermal power generation. We find that the environmental efficiency plays a significant role in affecting energy performance of China's thermal generation sector. Decreasing the discharge of major pollutants can improve both energy performance and environmental efficiency. Besides, we also have three main findings: (1) The energy efficiency and environmental efficiency were relatively low. (2) The energy and environmental efficiency scores show great variations among provinces. (3) Both energy efficiency and environmental efficiency are of obvious geographical characteristics. According to our findings, we suggest some policy implications.     

Do homes that are more energy efficient consume less energy?: A structural equation model of the English residential sector

Energy consumption from the residential sector is a complex socio-technical problem that can be explained using a combination of physical, demographic and behavioural characteristics of a dwelling and its occupants. A structural equation model (SEM) is introduced to calculate the magnitude and significance of explanatory variables on residential energy consumption. The benefit of this approach is that it explains the complex relationships that exist between manifest variables and their overall effect though direct, indirect and total effects. Using the English House Condition Survey (EHCS) consisting of 2531 unique cases, the main drivers behind residential energy consumption are found to be the number of household occupants, floor area, household income, dwelling efficiency (SAP), household heating patterns and living room temperature. In the multivariate case, SAP explains very little of the variance of residential energy consumption. However, this procedure fails to account for simultaneity bias between energy consumption and SAP. Using SEM its shown that dwelling energy efficiency (SAP), has reciprocal causality with dwelling energy consumption and the magnitude of these two effects are calculable. When non-recursivity between SAP and energy consumption is allowed for, SAP is shown to have a negative effect on energy consumption but conversely, homes with a propensity to consume more energy also have higher SAP rates.     

Do vehicle efficiency improvements lead to energy savings? The rebound effect in Great Britain

Fuel efficiency improvements in vehicles reduce the cost of travel, which could stimulate drivers to travel further limiting energy savings. Estimates of this effect, known as the rebound effect, have varied widely, partly due to data constraints and a reliance upon highly aggregated government statistics. This paper instead uses a dataset of over 275 million vehicle roadworthiness tests. The high level of detail in our dataset can reveal, for the first time, how the response to changes in travel costs may differ across types of vehicles and socio-economic areas in Great Britain.We find that the rebound effect in Great Britain is just 4.6%, meaning efficiency improvements are unlikely to stimulate increased mileage in the short-run. We find that larger, less fuel efficient vehicles are more responsive to fuel price changes than smaller vehicles and that drivers in urban areas are more responsive to fuel price changes than drivers in rural areas. Our findings shed light on the effects that policies such as fuel taxation and fuel economy standards may have on vehicle mileage. This has implications for both CO₂ emissions savings and social equity.     

Are energy efficiency standards within the electricity sector a form of regulatory capture?

There is a growing trend to introduce energy efficiency standards at the state level. We examine why electricity utilities may be in favor of such a standard and conclude that energy efficiency standards may be a form of regulatory capture.     

Changes in energy requirements of the residential sector in India between 1993–94 and 2006–07

A substantial amount of primary and secondary energy is consumed by the residential sector. Residential energy consumption includes energy required for construction activity and household consumption. Hence there is a need to quantify energy consumption, its significance and causes. Calculating energy intensity of goods and services is the first step towards quantifying the causes. This research is based on the 115 sector classification input–output tables for India, for 1993–94, 1998–99 and 130 sector classification input–output tables for 2003–04 and 2006–07. Energy intensity of sectors related to household consumption has been calculated to analyze the trend between 1993–94 and 2006–07. Indirect energy requirements of Indian households have been assessed in this study from calculations of total primary energy intensity along with private final consumption expenditure. Results indicate that energy consumption has increased for all categories except “medical care and hygiene”. Percentage increase in indirect primary energy consumed by households is maximum for “house building” and “recreation” categories. Finally a complete decomposition analysis of indirect primary energy consumed by households has been carried out based on changing structural composition of the private final consumption expenditure, energy intensity patterns, per capita expenditures on energy and population.     

Energy performance contracts in the municipal sector in Norway: overcoming barriers to energy savings?

In this paper, we investigate which factors are significant for the uptake of energy performance contracts (EPCs) in Norway’s municipal sector, based on qualitative case studies. An EPC consists of a set of energy efficiency measures provided by an energy service company. The model used in Norway guarantees that savings produced by a project will finance its full cost. Estimates indicate that an EPC is a promising way of substantially increasing savings. We find that a committed individual in the administration is essential for the adoption of an EPC. Such individuals have the technical and/or economic competence to see the potential for energy savings and the organizational competence for moving an EPC through to the political level. Further, we find that the guarantee that accompanies an EPC is well suited for addressing the logic of politicians, and is crucial when the final decision is made. These findings indicate that a standard economic understanding of energy savings is not sufficient. Efforts to increase energy savings might benefit from being targeted at the contexts where measures are to be implemented and at the logic of those making energy-saving decisions.     

Cool or school?: the role of building attributes in explaining residential energy burdens in California

This paper quantifies the dimensions of an important energy efficiency conversation: the energy burden of low-income households. Due to budgetary constraints, low-income households face a stark consumption trade-offs described as “cool or school”. This study is the first to apply multivariate building energy regression modeling to assess the independent effects of various building characteristics and appliances on a household’s energy burden in the USA. We find that more attic insulation and newer air conditioners significantly predict lower energy burdens. Furthermore, homeowners enjoy ~?27% more attic insulation compared to renters. Our results offer empirical support for programs that offer deep retrofits to low-income households. We conclude by offering suggestions for leveraging weatherization funding to fund building energy retrofits.     

Watts-to-Wellbeing: does residential energy conservation improve health?

Residential energy conservation has been increasing in number of houses treated, frequency, and scope, but few studies have examined whether modern energy conservation measures improve the health status of the occupants. We measured self-reported general, respiratory, cardiovascular, and mental health via structured telephone interviews using an adaptation of the National Health Interview Survey at baseline and follow-up in 2009–2012 [n?=?248 households in Boston, Chicago, and New York City (248 adults and 75 children)]. Housing included buildings with one to three units (n?=?106 units) located in Boston and buildings with >3 units/building (n?=?142) located in Chicago and New York. The energy conservation typically included insulation, heating equipment, and ventilation improvements. Adult respondents reported a 0.29-point improvement in the mean general health score (1 = excellent, 2 = very good, 3 = good, 4 = fair, 5 = poor) (3.07 to 2.78, p?<?0.001). Sinusitis, hypertension, overweight, and reduced use of asthma medication during asthma attacks showed 5 %, 14 %, 11 %, and 20 % differentials between improvement and worsening (p?=?0.038, p?<?0.001, p?<?0.001, and p?=?0.077, respectively). Forty-two adult respondents reported doctor-diagnosed asthma at baseline. Two measures of asthma severity worsened (days with problems sleeping—differential between improvement and worsening ?28 %, p?=?0.009; and frequency of symptoms such as cough, wheezing, and shortness of breath—differential between improvement and worsening ?26 %, p?=?0.031). Nitrogen dioxide, carbon monoxide, and carbon dioxide were low and showed no significant changes from baseline to follow-up in 41 housing units. This study found that residential energy conservation work conducted by trained professionals that balances energy efficiency and indoor environmental quality improves general health, sinusitis, and reduced asthma medication. Further research is needed to understand asthma-related outcomes.     

Putting renewables and energy efficiency to work: How many jobs can the clean energy industry generate in the US?

An analytical job creation model for the US power sector from 2009 to 2030 is presented. The model synthesizes data from 15 job studies covering renewable energy (RE), energy efficiency (EE), carbon capture and storage (CCS) and nuclear power. The paper employs a consistent methodology of normalizing job data to average employment per unit energy produced over plant lifetime. Job losses in the coal and natural gas industry are modeled to project net employment impacts. Benefits and drawbacks of the methodology are assessed and the resulting model is used for job projections under various renewable portfolio standards (RPS), EE, and low carbon energy scenarios We find that all non-fossil fuel technologies (renewable energy, EE, low carbon) create more jobs per unit energy than coal and natural gas. Aggressive EE measures combined with a 30% RPS target in 2030 can generate over 4 million full-time-equivalent job-years by 2030 while increasing nuclear power to 25% and CCS to 10% of overall generation in 2030 can yield an additional 500,000 job-years.     

Beyond economics—understanding the decision-making of German small private landlords in terms of energy efficiency investment

The German government aims to achieve virtually climate-neutral building stock by 2050 to tackle climate change. To realise this goal, comprehensive policy packages based on neoclassical economic theory are in place to foster energy efficiency investment. However, in the building sector, there is increasingly a gap between this aspiration and the reality. It is claimed that one of the main reasons for this is that the existing policy framework fails to address the specific characteristics and needs of different groups of building owners. This is a particular challenge in Germany, where 80% of all dwellings are owned privately and 37% are rented out by small private landlords (SPL). Despite the significant numbers of SPL, they often follow black box decision-making processes when considering energy renovations. In this study, the author uses an explanatory model to understand the decision-making processes of SPL, combining theoretical aspects from different research disciplines. This model was applied to a low-demand housing market in a neighbourhood in the Ruhr area. Eighteen semi-structured interviews (each lasting between 37 and 115 min) were conducted, demonstrating that in addition to economic factors, the values, beliefs, norms and routines of SPL—as well as their personal capabilities and contextual factors—play an important role in their decision-making. Based on the findings, recommendations are made for enhancing the effectiveness of existing energy efficiency policies and other supporting instruments (e.g. tenancy law and social legislation), tailored to the specific needs of SPL.     

Sure,but who has the energy? The importance of location for knowledge transfer in the energy sector

Using over 350,000 U.S. patent citations, we test whether knowledge transfers in the energy sector are sensitive to distance, and whether that sensitivity has changed over time. Controlling for self-citation by inventor, assignee and examiner, multivariate regression analysis shows that physical distance is becoming less important for spillovers with time, but differs by energy subsector.     

Does environmental heterogeneity affect the productive efficiency of grid utilities in China?

China's electric power industry has experienced a reform whereby the generation sector is being opened up to competition but the transmission and distribution sectors are still under regulation. Efficiency and benchmarking analyses are widely used for improving the performance of regulated segments. The impact of observable environmental factors, together with unobservable characteristics, on efficiency has gained increasing attention in recent years. This study uses alternative stochastic frontier models combined with input distance functions to measure the productive efficiency of 29 grid firms of China over the period of 1993–2014 and investigates whether the observed environmental and unobserved heterogeneity factors affect the productive efficiency. The results indicate that adverse environmental conditions may bring negative influence to the production of grid utilities while the number of customers and the network length have positive impacts on the utilities' efficiency; Besides, the efficiency is sensitive to the model specification, which illustrates the presence of observed and unobserved heterogeneity; Moreover, there is no significant efficiency improvement in the grid utilities after the unbundling reform of 2002; Finally, the regional grids differ significantly in efficiency, and there is room for improvement, which could be achieved by incentive regulation taking due account of environmental heterogeneity.     

Systemic risk in the energy sector—Is there need for financial regulation?

The credit crisis points at serious systemic risks in Over The Counter derivative trading. This has resulted in new financial regulation, covering both the financial sector and non-financial sectors. The actual extent to which non-financial companies trading on OTC markets contribute to systemic risk has hardly been the subject of research. This paper investigates the need for financial regulation in the energy sector, which shows a high use of OTC derivatives, by modeling systemic risk measured by the expected fraction of additional failing firms (EAF). Contagion risk within the energy sector and from the energy sector towards the banking sector is compared with that in other non-financial sectors. This paper adds to existing systemic risk literature by specifically looking at financial interdependence between a non-financial sector showing a high usage of OTC commodity derivatives and the banking sector, while contributing to the discussion on energy sector regulation with technical systemic risk analysis. Results indicate that contagion risk from the energy towards the banking sector is not relatively high compared to other non-financial sectors. Our results provide a first indication to question the need for generalized regulation of OTC derivative transactions, as recently introduced by the European Market Infrastructure Regulation (EMIR).     

Spillovers between oil and stock returns in the US energy sector: Does idiosyncratic information matter?

This paper investigates the inter-connectedness between WTI oil price returns and the returns of listed firms in the US energy sector. Specifically, we focus on the issue of whether firm-level idiosyncratic information matters. A generalised dynamic factor model is used to separate common components from idiosyncratic components in these energy stocks. Systemic connectedness is then estimated following Diebold and Yilmaz (2014). Our empirical results demonstrate the important role of industrial-level common information in understanding the oil–stock relationship. A number of interesting points include: the US energy sector is the net contributor to WTI price changes, but the effect is mainly driven by industrial-level common information; the oil and gas industry dominates other industries in the energy sector; the dynamic analysis shows that although idiosyncratic information is mostly independent of oil shocks, individual energy stock returns do respond to WTI price movements.     

Low energy efficiency in rental properties: Asymmetric information or low willingness-to-pay?

Asymmetric information may explain low energy efficiency in rented properties. Energy ratings, while a solution to the information problem, will only lead to higher efficiency levels if renter's willingness-to-pay (WTP) exceeds landlord's investment costs. Using a sample of renters from one university, this paper estimates this WTP using a discrete choice experiment where respondents choose from a hypothetical set of single-bedroom apartments that differ according to a number of attributes including the energy rating. Results show that there is a strong disutility associated with the least efficient properties and that renters will pay significantly more for efficiency improvements at the lower end of the efficiency scale. Importantly, our WTP estimates are calculated in a setting where respondents were informed about the energy rating system prior to choosing and where the rating was shown for every property. Therefore, in order to maximise the impact of energy rating systems, policymakers are encouraged to ensure that both these informational characteristics are in place.     

Robust MACCs? The topography of abatement by fuel switching in the European power sector

This paper employs a simulation model of the European power sector to analyze the abatement response to a CO₂ price through fuel switching, one of principal means of reducing greenhouse gas emissions in any economy. Abatement is shown to depend not only on the price of allowances, but also and more importantly on the load level of the system and the ratio between natural gas and coal prices. The interplay of these different determinants vitiates any simple relation between a CO₂ price and abatement and requires the development of more than two-dimensional graphics to illustrate these complex relationships. In the terms of the literature on the use of marginal abatement cost curves (MACCs), we find that these MACCs are not robust as usually defined and we suggest that the more complex topography developed in this paper may be more helpful in visualizing this abatement response to a CO₂ price.