The Weatherization Assistance Program

The gap between the projected “most-efficient investments” and “observed investments” in energy efficiency is referred to as the “energy efficiency gap”. It’s a big puzzle: these investments have a high rate of return, so why are consumers leaving money on the table? And if society ought to account for the negative externalities that private individuals ignore, one would think society perceives an even higher rate of return from energy efficiency than consumers, creating a case for public investment in energy efficiency.

(We haven’t really discussed externalities in this class yet, but hopefully you all remember the concept from microecon. If not, do a quick google or ask a classmate.)

The Federal Weatherization Assistance Program is a large residential energy assistance program in the US. The program installed energy efficiency upgrades in low-income consumers’ homes. Though it wasn’t framed this way when it was created in 1976, some describe the WAP and programs like it as “closing the energy efficiency gap”. Our goal today is to discuss the program and learn things about economically efficient environmental investments. This prompt is to help guide your discussion.

For your discussions, you’re to draw on anything/everything we’ve covered in this class so far (and things you may know from outside this class). Below are some questions and quotes which may help frame your discussion. After about 30-40 minutes of discussion in breakout rooms we’ll come back to the main room and discuss as a class.

Discussion questions

  1. What were the specific findings from the Fowlie et al. WAP study?

  2. What were some of the mechanisms that might have led to those results?

  3. How do you reconcile the engineering estimates of projected cost savings with the economic estimates of realized cost savings?
    1. Which of those estimates do you think is more likely to be nationally representative (“externally valid”)?
    2. Do you think the Fowlie et al. study is an improvement over existing engineering approaches to measuring the economic efficiency of weatherization investments? How so?
    3. Are there methodological aspects (assumptions, approaches, etc.) of the Fowlie et al. study you disagree with? What are they and why do you disagree?
  4. What do the results from the Fowlie et al. WAP study say about the economic efficiency of weatherization investments?
    1. The social rate of return on weatherization investments is estimated to be below the private rate of return. What does this mean? How can this be the case if energy efficiency investments reduce negative externalities?