Yesterday the Wall Street Journal published an article by Greg Ip which summarized the findings of an economic study conducted by Michael Greenstone, Meredith Fowlie and Catherine Wolfram. (Their original paper is entitled “Do Energy Efficiency Investments Deliver? Evidence from The Weatherization Assistance Program.”) These researchers looked at the actual energy savings and costs of a specific Weatherization Assistance Program (WAP). What they found was that the homes that took advantage of the WAP only achieved about 40% of the energy savings that engineering calculations had projected. When they compared the actual savings (not estimated savings) to the costs they concluded 1) that the investments would never pay for themselves (i.e., the cost of the energy saved over 16 years was less than the amount spent on the energy efficiency investments), and 2) the amount of money spent per metric tonne of carbon saved (over these 16 years) is $338/tonne — about 10X more than estimates for the longterm cost to society to solve the carbon emissions problem.
This article caught my attention for two reasons. First, this simply illustrates again the large gap between measured energy savings and those estimated by promoters of energy effciency programs. In particular, I have seen this over and over with green buildings. All the data I have analyzed show that, on average, LEED-certified buildings do not achieve the energy savings that their designers predict. Many organizations pride themselves on their portfolio of green buildings yet the fact is, these buildings consume no less primary energy than other other buildings. Society will not arrest climate change with this approach — even though it leads to all kinds of green awards.
But the second reason this caught my attention is due to the parallel these investments have with what is going on in my community of Oberlin, OH. The Oberlin City Council has made a commitment to make the City climate-positive (I guess it is like giving 110% effort). Apparently all divisions of the City are instructed to act in accordance with the City’s Climate Action Plan. The City’s Municipal Power Company has contracted with Efficiency Smart to promote energy efficiency programs for its customers. Efficiency Smart reports to the City on how much energy its programs have saved — savings that are based on projected estimates not measurements.
A year ago the City had the opportunity to purchase new garbarge/recycling trucks. The City spent an extra $300,000 in order to include hydraulic-hybrid, fuel saving technology in these trucks. The City Public Works director estimated the deisel fuel savings to be 2,800 gal annually. At a cost of $3.75/gal this represents an annual return of $10,600 on a $300,000 investment. Since the trucks are expected to last only 10 years the invesment will never pay for itself.
What about the carbon savings? If you work through the math you find that the reduced carbon emission (associated with less fuel usage) comes at a cost of about $600 per ton CO2. This is equivalent to $2,400 per metric tonne carbon savings. It was an utterly foolish decision to spend money this way. And this was made based on projected savings. In a few months we will see how much fuel the trucks have actually used.
Don’t get me wrong. I am an advocate for energy efficiency that leads to real, cost-effective savings. But there must be a cost/benefit analysis. We cannot afford to throw money away on schemes that yield such little return. And we cannot base our decision on “projected” savings. I like the way that Wal-mart approaches energy efficiency. Perform the up-front calculation to find the projected savings. If these look good, retrofit a couple stores and measure the actual savings. If the trial study confirms the savings — roll out the same changes to all the other stores. If not, move on.