Free Riding, Upsizing, and Energy Efficiency Incentives in Maryland Homes

Abstract

Abstract:We use a unique dataset that combines the responses from an original survey of households, information about the structural characteristics of their homes, utility-provided longitudinal electricity usage records, plus utility program participation information, to study the uptake of energy efficiency incentives and their effect on residential electricity consumption. Attention is restricted to homes where heating and cooling are provided exclusively by heat pumps, which are common in our study area-four counties in Maryland-and were covered by federal, state and utility incentives during our study period (2007)(2008)(2009)(2010)(2011)(2012). We deploy a differencein-difference study design. We find that replacing an existing heat pump with a new one does reduce electricity usage: the average treatment effect is an 8% reduction. However, the effect differs dramatically across households based upon whether they receive an incentive towards the purchase of a new heat pump. Among those that receive the purchase incentive, the effect is small or nil, and indeed, the larger the incentive, the smaller the reduction in electricity usage. Those that do not receive incentives reduce usage by about 16%. Our results appear to be driven by the numerous free riders in our sample and by persons who-inferred from their responses to survey questions-might be exploiting the subsidy to purchase a larger system and increase usage, with no emissions reductions benefits to society. JEL Classification: Q41, D12, H3

Belt and Suspenders and More: The Incremental Impact of Energy Efficiency Subsidies in the Presence of Existing Policy Instruments

“…Our paper represents one of the first ex post nationwide analyses of the impacts of clean energy spending on energy efficiency outcomes. Like the above studies (Boomhower and Davis 2014;Alberini, Gans, and Towe 2014), we show that the econometric estimates of the program are much less favorable than engineering estimates. This reinforces the role of using credible research designs to estimate the returns to energy efficiency programs (Allcott and Greenstone 2012).…”

“…This estimate of "freeriders" is on par with other recent studies in the United States. For instance, Alberini, Gans, and Towe (2014) find evidence that rebate programs in Maryland for energy-efficient heat pumps had a similarly high proportion of inframarginal participants (50%-89%). Our paper represents one of the first ex post nationwide analyses of the impacts of clean energy spending on energy efficiency outcomes.…”

Assessing the Energy-Efficiency Gap

“…For any energy-efficiency technology, the benefits and costs of adoption can vary substantially across potential adopters (Jaffe and Stavins 1994a, 1994bMetcalf and Hassett 1999;Alberini, Gans, and Towe 2013). Even when engineering predictions correctly find that, on average, the benefits of adoption exceed the costs of adoption, this will not be true for some potential adopters.…”

Additionality Effects of Rebate Programs in the Residential Water Sector: Indoor vs. Outdoor

“…The reason to include this explanatory variable in this regression is that some HOAs have strict regulations about landscapes which may create difficulties or disincentives for participating in the rebate programs. The inclusion of this set of variables is consistent with [14], who estimate a probit model to analyze the determinants of receiving rebates or tax credits for the adoption of energy-saving technologies and consider both house and household characteristics as explanatory variables.…”