Revenue Neutral Electricity Conservation Programs

Abstract

Using monthly account level data for over 27,000 households between 2007 and 2014, this study evaluates a revenue-neutral municipal electricity conservation program. Rebates for the purchase of energy efficient appliances were financed via a small surcharge on high consuming households. The results demonstrate that the program mainly transferred money between residents with almost no effect on electricity consumption. Using variation in the timing of the rebate checks, none of the energy efficiency incentives yielded a statistically or economically meaningful reduction in electricity consumption compared with a counterfactual where no rebate was offered. Using a bunching estimator and exploiting changes in behavior around the high consumption threshold, a small reduction in electricity consumption is attributable to the surcharge, suggesting that prices are better than subsidies at reducing electricity consumption. Overall, the change in behavior attributable to the electricity conservation program is small, supporting recent evidence that many energy efficiency programs underperform in real-world settings.

Keywords: electricity demand, energy conservation, feebate

JEL Classification: H23, Q48, Q58