“Decomposing the Wedge Between Projected and Realized Returns in Energy Efficiency Programs”
Peter Christensen, Paul Francisco, Erica Myers, and Mateus Souza (University of Illinois at Urbana-Champaign)
Evaluations of energy efficiency programs reveal that realized savings consistently fall short of projections. We decompose this ‘performance wedge’ using data from the Illinois Home Weatherization Assistance Program (IHWAP) and a machine learning-based event study research design. We find that bias in engineering models can account for up to 41% of the wedge, primarily from overestimated savings in wall insulation. Heterogeneity in workmanship can also account for a large fraction (43%) of the wedge, while the rebound effect can explain only 6%. We find substantial heterogeneity in energy-related benefits from IHWAP projects, suggesting opportunities for better targeting of investments.