Forecasting the cost of energy conservation in the residential sector: 1980-2000

Abstract

This paper attempts to analyse and forecast the cost of energy conservation in the residential sector to the year 2000. It postulates that costs of conservation will increase as investors in conservation progress from the least cost conservation technologies, such as attic insulation and storm doors and windows, to heat pumps and solar water heaters. The methodology is that of regression equations and the data are costs of twenty types of capital stocks and the associated quantities of energy conserved. The regression equations of annualised cost on annualised quantities of conservation had a good fit and statistically significant coefficients so that the costs were increasing with increased conservation. The elasticity of cost with respect to conservation was 2·13 so that an increase in conservation by 1 per cent will increase its cost by more than 2 per cent. The cost-effectiveness of conservation was determined by comparing the cost of conservation per million Btu with the cost of purchasing an equivalent quantity of energy. It was concluded that energy conservation was cost-effective because the cost was only $0·84 per million Btu compared with the cost of purchasing energy, which was from two to eight times for natural gas to electricity.