California has long been a leading indicator of national energy-efficiency trends. The state passed minimum efficiency standards for refrigerators in 1976, 11 years before the federal government adopted similar standards. And, the recent Corporate Average Fuel Economy standards are based on legislation passed in California several years earlier.
In November 2012, California voters passed Proposition 39, which closed a corporate tax loophole, and is expected to generate approximately $1 billion annually in additional revenue for the state. The proposition devotes half of the revenues to reducing the amount public schools spend on energy, largely through energy-efficiency retrofits.
There are several notable features of Proposition 39. For one, it’s directing a huge amount of money to a specific sector. To put the nearly $500 million in perspective, it’s about half of what CA is currently spending on ALL utility-funded energy efficiency programs (ranging from low-interest financing to light bulb subsidies to complex industrial programs) and about 1/13th of what utilities nationwide spend on energy efficiency. And, the majority of the funds are going to public K-12 schools schools. (89% of $428 million in the first year will be allocated to Local Educational Agencies).
I am particularly interested in the opportunity Proposition 39 provides to learn about energy efficiency. When I was in elementary school, my teacher introduced the idea of scientific experimentation by giving everyone in the class bean seeds. Some kids put their bean seeds in the closet without light, some of us immersed them in water instead of dirt, and the teacher kept aside a couple seeds planted to the package directions – in a cup with a bit of soil, left by a sunny window. The idea was to hold constant as many factors as possible (bean seeds from the same package, started growing on the same day) to isolate the effects of different “treatments.” How does putting the bean seed in the closet impact how fast it grows? The shade of green the stock is when it emerges?
Well, the energy efficiency world has just been given 9,000+ bean seeds and will have an unprecedented opportunity to learn a great deal about energy-efficiency retrofits. These 9,000+ school buildings are all engaged in nearly the same activities, subject to nearly the same trends in education, clustered in similar neighborhoods and towns, with measurable differences in climate. But, some schools will receive funding to do extensive, “deep” retrofits and, particularly in the early years of the program, some schools will get no Proposition 39 funding.
This provides a tremendous opportunity to learn more about the impact of energy-efficiency measures. How does energy use change at the first set of schools given Proposition 39 funds compared to schools that do not do energy efficiency retrofits? Do student outcomes change at the schools improving their energy efficiency? How much do different energy-efficiency measures drive savings? If some schools upgrade their lighting, while others upgrade their HVAC and lighting, how much more energy does the second type of schools save? Do savings increase if the district has a dedicated energy manager?
Together with my colleagues at The E2e Project, I have been following Proposition 39, which is now being implemented by the California Energy Commission. We are encouraging the Commission to take steps to ensure the program creates as many opportunities to learn about energy efficiency as possible.
Our recommendations are simple:
1. Collect detailed data on energy usage from all schools, not just the ones where the retrofits will take place. It’s important to have data on the schools that don’t get retrofits as they can serve as benchmarks to help estimate how much energy the retrofitted schools would have used absent the measures.
One simple approach to measuring the impact of energy-efficiency programs is to do a “before-and-after comparison,” which in this case would compare how much energy a school uses after the retrofits to before. This approach could potentially be very misleading for Proposition 39 since a number of other factors are changing at CA schools – the economy is (hopefully) improving, the schools are getting additional funding from other sources, etc. If these changes help the schools run more programs or buy more computers, the before-and-after comparison might even suggest that energy usage rose after Proposition 39-funded retrofits.
2. Encourage the districts to reveal as much information as possible about the processes they are using to prioritize schools for retrofits. This will help identify schools that will serve as good benchmarks for the schools receiving Proposition 39 funds.
Selecting a benchmark school is not easy. For example, consider two elementary schools in different parts of California with similar climates. They have nearly the same number of students and teachers and have the same facilities. If only one of these schools were upgraded, it might seem that the other would provide a good point of comparison. However, suppose that the other school had its HVAC system replaced right before Proposition 39 funding was distributed, while the retrofitted school had an aging system about to fail. A naive comparison between these schools might find that the Proposition 39-funded HVAC system did not reduce energy expenditures because the comparison school saw a similar decrease with its own new system. With detailed information about the districts’ selection process, though, analysts can select benchmark schools that are more comparable.
While California’s K-12 schools are primarily engaged in the important activity of educating the under-18’s, they can also serve as a valuable laboratory for energy efficiency learning. I encourage policymakers to take advantage of this tremendous opportunity.
Catherine Wolfram is Associate Dean for Academic Affairs and the Cora Jane Flood Professor of Business Administration at the Haas School of Business, University of California, Berkeley. She is the Program Director of the National Bureau of Economic Research's Environment and Energy Economics Program, Faculty Director of The E2e Project, a research organization focused on energy efficiency and a research affiliate at the Energy Institute at Haas. She is also an affiliated faculty member of in the Agriculture and Resource Economics department and the Energy and Resources Group at Berkeley.
Wolfram has published extensively on the economics of energy markets. Her work has analyzed rural electrification programs in the developing world, energy efficiency programs in the US, the effects of environmental regulation on energy markets and the impact of privatization and restructuring in the US and UK. She is currently implementing several randomized controlled trials to evaluate energy programs in the U.S., Ghana, and Kenya.
She received a PhD in Economics from MIT in 1996 and an AB from Harvard in 1989. Before joining the faculty at UC Berkeley, she was an Assistant Professor of Economics at Harvard.