This piece was co-authored by Erica Myers is an assistant professor at the University of Illinois.
Energy efficiency programs promise to be a “win-win”: by reducing energy consumption, they lower households’ electricity bills and greenhouse gas emissions at the same time. That’s why when lawmakers are allocating spending with an eye to both the pocketbook and the climate, energy efficiency is always a go-to—filled with what appears to be low-hanging fruit. It’s therefore no surprise that energy efficiency is an important part of the Biden administration’s efforts to boost affordable and sustainable housing through the infrastructure plan.
During the last economic downturn, then-Vice President Biden helped to inject millions into energy efficiency. Funding for the nation’s flagship energy efficiency policy—the Weatherization Assistance Program, which provides funding for changes like furnace replacements, attic and wall insulation, weather stripping, and more—shot up from $450 million in 2009 to nearly $5 billion in the 2011-2012 program year. Yet, studies by both economists and engineers have found that energy savings from the program consistently fall short of expectations. And, this weatherization program is not an outlier. Studies of various U.S. efficiency programs, ranging from K-12 schools in California (a study by one of us) to households in Illinois, Michigan, and Wisconsin, found actual savings were between 38 and 63 percent of expected savings.
But we shouldn’t abandon energy efficiency. Instead, we need to improve these programs. This means figuring out what works and what doesn’t, and targeting funding accordingly. The first step is understanding the challenge. Why do energy efficiency programs underdeliver? One of us dug into the details of the Illinois Weatherization Assistance Program and found that 41 percent of the performance gap comes from optimistic projections of the savings. These projections are based purely on engineering equations, and don’t do enough to take differences between homes and inhabitant behavior into account. For example, they do not incorporate information on a home’s historical energy use. This is problematic because these projections are used to decide which energy efficiency upgrades to install.
There are three ways to make sure our energy efficiency programs deliver on their promises. First, we need to use ongoing, retrospective analysis in order to spend dollars more effectively. Rather than relying on projections alone to guide policy, we should measure the performance of actual energy efficiency upgrades “in the wild.” One approach for this would be to test effectiveness through randomized experiments—the gold standard of empirical research, recently used to demonstrate that COVID-19 vaccines are safe and effective.
Second, energy efficiency programs should choose what to install based on real-world energy data and realized program performance. With seven years of data from Illinois households, one of us showed that using the data that is already available to policymakers can help us figure out “win-win” investments. Targeting funds based on past program performance and household-specific energy use data could increase the cost-effectiveness of energy efficiency investments by 21 percent.
Finally, energy efficiency investments need to be properly installed. As programs rapidly expanded with the 2009 Recovery Act, many workers who had limited experience were brought in to meet demand. Studies show that contractors can make or break cost-effectiveness. Fortunately, the Department of Energy recognized this and added the Quality Work Plan to the Weatherization Assistance Program to make sure upgrades are properly installed. But we can do more, like ensuring workers get proper training and are paid based on performance.
This is not the moment to give up on energy efficiency programs. But it is also not the time to ignore that there is significant room for improvement. As the Biden administration makes substantial investments into our energy future, we have an opportunity to improve policies which impact hundreds of thousands of Americans. The administration should build evaluations into the energy efficiency programs, target investments based on past savings, and train and incentivize contractors according to their performance. Straightforward improvements like these can ensure that energy efficiency lives up to its promises and delivers a win for both our wallets and the climate.