This is a Free article. You will receive access to the full text.

Vintage Capital, Technology Adoption and Electricity Demand-Side Management

Free Article

Demand-side Management (DSM) programs by electricity utilities report substantial energy savings that often receive little support from empirical studies. We argue that this discrepancy results from an inherently static view of technology adoption by utilities when estimating future energy savings. We illustrate this through a simple model of technology adoption, in which households operate different vintages of appliances and have heterogenous forecasts about the rate of future technological progress. An "energy efficiency gap" arises when households under-estimate the true rate of technological progress. We parameterize the model using data on refrigerators and show that a DSM program that subsidizes adoption of energy-efficient refrigerators yields small energy saving that, in most cases, do not justify the cost of the subsidy.

Download Executive Summary Download PDF

Energy Specializations: Energy Efficiency –  Policy Issues; Electricity – Policy and Regulation; Electricity – R&D and Emerging Technologies

JEL Codes: Q41: Energy: Demand and Supply; Prices, Q43: Energy and the Macroeconomy, D11: Consumer Economics: Theory, D12: Consumer Economics: Empirical Analysis

Keywords: Demand-side management, vintage capital, technology adoption

DOI: 10.5547/01956574.39.2.wcai

References: Reference information is available for this article. Join IAEE, log in, or purchase the article to view reference data.

Published in Volume 39, Number 2 of the bi-monthly journal of the IAEE's Energy Economics Education Foundation.


© 2023 International Association for Energy Economics | Privacy Policy | Return Policy