Cost-effectiveness of electricity energy efficiency programs
Cost-effectiveness of electricity energy efficiency programs / T.H. Arimura, S. Li, R.G. Newell and K. Palmer. NBER, October 2011 (Working Paper 17556)
We analyze the cost-effectiveness of electric utility ratepayer-funded programs to promote demand-side management (DSM) and energy efficiency (EE) investments. We specify a model that relates electricity demand to previous EE DSM spending, energy prices, income, weather, and other demand factors. In contrast to previous studies, we allow EE DSM spending to have a potential long-term demand effect and explicitly address possible endogeneity in spending. We find that current period EE DSM expenditures reduce electricity demand and that this effect persists for a number of years.