Evaluating the Returns to Residential Energy Efficiency in Baltimore
Hunt Allcott and Michael Greenstone
E2e Faculty Director Michael Greenstone and Faculty Affiliate Hunt Allcott are studying the returns to residential energy efficiency investments in a randomized control trial in Baltimore. This project continues a line of research in Michigan and Wisconsin exploring weatherization participation and welfare impacts. Under an energy efficiency program offered by Baltimore Gas and Electric, households can receive a home energy audit, in which a contractor evaluates areas for improvement in the home and suggests measures to install. Households can then choose any number of suggested measures, and receive rebates on the cost of the efficiency upgrades.
Previous E2e research documented the low participation rates often seen in residential energy efficiency programs. Allcott and Greenstone hope to add further evidence to the explanation for these low take-up rates. One hypothesis is that homeowners are unaware of the benefits of energy efficiency, such as lower energy bills, greater comfort in the home, or reduced environmental pollution. Another explanation is that there are large unobserved costs to the homeowner participating in an energy efficiency program, such as the time spent participating or the inconvenience of hosting a contractor.
These hypotheses will be tested through a set of experimental rebate offers and informational incentives given to a subset of the 400,000 household sample. Rebates and information about the program are given through mailing letters, phone calls, and emails, encouraging customers to participate in audits and investments. The costs and energy savings attributed to participation will be used to estimate the returns to efficiency upgrades. Realized energy savings will be compared with the predicted energy savings used by the program.
Allcott and Greenstone have recently suggested means for improving energy efficiency subsidies, and they aim to add to this set of policy findings with results from Baltimore.