What does a negawatt really cost Evidence from utility conservation programs

Journal Article · Wed Jan 01 04:00:00 EST 1992 · Energy Journal; (United States)

DOI:https://doi.org/10.5547/ISSN0195-6574-EJ-Vol13-No4-3· OSTI ID:6548574

Joskow, P L; Marron, D B ^[1]

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1. Massachusetts Inst. of Technology, Cambridge (United States)

The authors 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 megawatthours 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. The authors 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. They proceed to examine whether or not there are any systematic biases in the reporting of costs and energy savings by the utilities in the 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 from 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. While it is difficult to compute the underestimate with any precision, the evidence that they 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. 27 refs., 1 fig., 7 tabs.

• OSTI ID: 6548574
• Journal Information: Energy Journal; (United States), Journal Name: Energy Journal; (United States) Vol. 13:4; ISSN ENJODN; ISSN 0195-6574
• Country of Publication: United States
• Language: English

Related Subjects

29 ENERGY PLANNING, POLICY, AND ECONOMY
296000* -- Energy Planning & Policy-- Electric Power
ACCOUNTING
COMMERCIAL SECTOR
COST
ELECTRIC UTILITIES
ELECTRICITY
ENERGY CONSERVATION
EPRI
INDUSTRY
LIFE-CYCLE COST
PUBLIC UTILITIES
RESIDENTIAL SECTOR