Implications of Cost-Effectiveness Screening Practices in a Low Natural Gas Price Environment: Case Study of a Midwestern Residential Energy Upgrade Program—Policy Brief

April 2013

This policy brief describes the challenges that low gas prices pose for the cost effectiveness of energy efficiency programs, using an electric-gas efficiency program and portfolio as an example. We quantify options available to regulators and program administrators who want to evaluate the tradeoffs among multiple policy choices and objectives. We illustrate the implications of applying a range of cost-effectiveness screening options, including different discount rates, levels of test application, various benefit-cost tests, and the inclusion of non-energy resource benefits.

The analysis suggests that both low natural gas prices and the cost-effectiveness screening policies that are prevalent in many states are likely to pose challenges for the viability of residential efficiency upgrade programs that are natural gas saving-only offerings, as well as some programs that target both electricity and natural gas savings opportunities. This suggests difficult choices ahead for regulators and administrators of gas-only and electric-gas programs if several types of gas energy efficiency programs are to remain part of the strategy for achieving state energy savings targets and other public policy objectives. The brief concludes by offering regulators and administrators a range of options to consider in their choices of screening practices.

A webinar on the findings will be presented 2 p.m. Eastern/11 a.m. Pacific on Wednesday, May 8. Register here.

Ian Hoffman