Modeling energy efficiency as a supply resource: a bottom-up approach
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Energy efficiency may be an inexpensive way to meet future demand and reduce greenhouse gas emissions, yet little work has been attempted to estimate annual energy efficiency supply functions for electricity planning. The main advantage of using a supply function is that energy efficiency adoption can change as demand changes. Models such as Duke University’s Dynamic Integrated Economy/Energy/Emissions Model (DIEM) have had to rely on simplistic or fixed estimates of future energy efficiency from the literature rather than on estimates from energy efficiency supply curves. This paper attempts to develop a realistic energy efficiency supply curve and to improve on the current energy efficiency modeling. It suggests an alternative approach based on saved-energy cost data from program administrators and explains the methodologies employed to create the supply curve. It illustrates this approach with results from DIEM for various electricity demand scenarios. The analysis suggests that an additional 5–9% of energy efficiency is deployed for every 10% increase in the cost of electricity. Therefore, DIEM “invested” in energy efficiency up to an inelastic point on the energy efficiency supply curve. By contrast, the U.S. Environmental Protection Agency’s energy efficiency approach assumes that realized energy efficiency is fixed, and has no elasticity, regardless of changes to marginal costs or constraints that affect emissions or economics.
KeywordsElectricity and integrated resource planning Supply curve, supply function Utility economics Energy efficiency potential Cost of saved energy
The important contribution of our colleague, Martin Ross, who performed the DIEM modeling using the energy efficiency supply curve and provided strategic advice; Brian Murray and Kyle Bradbury (Duke University) for providing insightful comments on earlier versions of this manuscript; Melissa Edeburn (Duke University) for editing and formatting.
Compliance with ethical standards
Conflict of interest
The authors declare that they have no conflict of interest.
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