At the Energy Institute lunch table, we talk about energy efficiency almost daily. If you buy that 12 mpg SUV you better have a good reason for it. This is the first of a few posts discussing personal energy efficiency investments and what I have learned from them about my (somewhat) neoclassical self.
It’s the classic tale of a young academic. We went from lousy graduate school housing to a hip apartment in an even cooler city while working the 90 hour weeks required to get a shot at tenure. You don’t have time to fix things. You rent. Then you get tenure and soon after have a kid. You quickly leave the dirty city (read anything written by Matt Neidell for compelling reasons why) and buy a house in the suburbs. We chose what our contractor described as a “leaky bucket of a house” built in the late 1940s. It is about as energy efficient as Lieutenant Bullitt’s 1968 Fastback.
I soothed my conscience by replacing all 16 of the single paned windows in the house with triple paned windows. This had the significant side benefit of essentially ruling out the distressing possibility of having our toddler’s pudgy hands crushed when the aging upper window pane falls down. The cost: ~13,000 dollars (before tax credits which is the right way to calculate this from a social point of view). Benefits: No detectable energy savings in our bills. Even if these windows did away with 15% of our energy costs, the payback period would be north of 24 years. However, the quiet nights and elimination of risk of squashed toddler hands: priceless.
In economics, there is something called the energy efficiency gap. In a nutshell, people and firms fail to make net present value optimal investments. They are leaving $20 bills on the ground (or better: in their walls, windows, appliances and cars). As my former employer McKinsey argues, these negative cost investment opportunities are plentiful and we are not making them. After my windows experience I was skeptical.
I called in the pros. I ordered a building performance test. This is not one of your friendly 45 minute visits by some graduate students. This was two guys, who showed up with a truck full of gear at 6 am and spent all day analyzing our home. Thermal images at 6 am from the outside. A blower door was installed to lower the pressure in the house and see where cold air comes in. Thermal images of all walls were taken. They even looked for criteria pollutants creeping out of our appliances. Cost: Almost $1,000. Benefit: A superb and shiny report, which told me about what I could do. Total cost of all suggested improvements: ~ $70,000. On top of the windows.
What did I do? I did what I do when my Dr. tells me to lose 10 pounds. I promised my future self that I would be 100 kWh/month “lighter” in a few years and did nothing.
About six months ago, after having returned from a wonderful sabbatical in the promised land of energy efficiency (Germany), I got a letter in the mail from Opower sponsored by PG&E (my utility). They told me that we were ranked 81st in terms of energy consumption out of 100 comparable homes in our neighborhood (1st being most efficient and 100th being the worst). How could that be? I thought I was a green transplant into our relatively conservative neighborhood! This could not stand.
Two days later, I had single handedly ripped out a second oven and removed the beverage refrigerator. Two weeks later I had converted all of our recessed lighting with LED recessed lighting and all non-visible lightbulbs with the freaky looking LED lights. Cost: $500. Benefit: Over the lifetime of the lightbulbs (dividing the advertised savings by 2): $1100.
We are now six months into my obsession. We have improved and and we are now ranked 58th in our comparison group. Not great, but better.
As I am an econometrician who likes to learn from random representative samples, I would not urge you to extrapolate based on the experience of one environmental economist. But I learned that I respond to “peer pressure”. To use the weight loss analogy – I will ignore my Dr’s advice, but I will not show up at the beach 10 pounds heavy. So I will continue to search for negawatts in our house. DVR. Your days are numbered.
Maximilian Auffhammer is the George Pardee Professor of International Sustainable Development at the University of California Berkeley. His fields of expertise are environmental and energy economics, with a specific focus on the impacts and regulation of climate change and air pollution.