The Energy Rebound Effect

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Contributed by Canuche Terranella:

Peter and Kristi live in a 1915 un-insulated Craftsman house.  In the first months in their new home they kept their thermostat at 68 degrees.  In December, with their first energy bill, they learned this behavior costs $350/month. Oh the financial pain!

Energy efficiency improvements are motivated by pain.  Energy pain comes in two varieties: financial and comfort.  Most energy models are based on customers like Peter and Kristi making energy improvements to reduce wallet pain.  As soon as they’ve insulated their home they will continue to keep their thermostats at 68 degrees but consume less energy.  These models point to great reductions in energy demand based on customers with financial pain installing cost effective weatherization and insulation measures.  If utility companies can use rebates and incentives to encourage customers like Peter and Kristi to invest in improvements to their homes it will be as good as investing in new power generation equipment to keep up with demand.   The assumption is that the pain of high utility bills will motivate investment in energy efficiency improvements and decrease energy demand.

Another possibility, however, is that their twins, frugal Keith and Patsy, might choose to put off the efficiency improvements and instead turn the thermostat down to 50 degrees and put on a hat and scarf for dinner.  This choice shifts the pain from financial to temperature discomfort, a challenge for the traditional energy models.  When utilities predict savings from improvements to homes incentivized by rebates they don’t usually predict what happens when Keith and Patsy finally make energy improvements and take off their sweaters.

After saving for a year frugal Keith and Patsy install attic insulation and weatherize their home. Now they can turn the thermostat up to 68 degrees.  Their energy bills are a much more reasonable $100/ month but they are consuming more energy than they were when the thermostat was at 50 degrees.

This results in what building scientists call the rebound effect. The rebound effect describes the difference between the actual society wide energy savings after energy efficiency improvements are made and energy savings as predicted in the lab models. Sometimes the rebound effect can be so large as to even result in an increase in energy used across the society. The UK Energy Research Center studied this effect and pointed to human behavior as the key component of the rebound effect. While seemingly counterintuitive, the examples above make the point clearly for residential customers.

The commercial impact is even more striking. If a local bike manufacturer invests in a new, more efficient, welding process and can therefore produce bike frames more profitably, then it will likely build more bikes. More bikes mean greater electricity use and a net increase in demand to the utility.

Does this mean we as a society should stop investing in energy efficiency? I’d say no.   The bike manufacturer is now making more bikes every month for less energy per unit. More bike production means more economic activity for the region.  Peter and Kristi have a higher quality of life in their home and are likely more productive members of society as a result. The utility company increased the efficiency of the energy used in both cases. Overall the demand for energy may be higher but the benefit to society per unit energy used is improved. Incentive decisions must measure society benefit in addition to energy savings to decide which new efficiency programs to fund.

G2B Homes makes smart efficiency improvements to homes to help families find the sweet spot where energy savings and comfort create lower operating costs and a higher quality of life.