Becker Friedman Institute
for Research in Economics
The University of Chicago

Research. Insights. Impact. Advancing the Legacy of Chicago Economics.

L94: Electric Utilities

Measuring the Welfare Effects of Residential Energy Efficiency Programs

Hunt Allcott, Michael Greenstone

This paper sets out a framework to evaluate the welfare impacts of residential energy efficiency programs in the presence of imperfect information, behavioral biases, and externalities, and then estimates key parameters using a 100,000-household field experiment. Several results run counter to conventional wisdom: we find no evidence of informational or behavioral failures thought to reduce program participation; there are large unobserved benefits and costs that traditional evaluations miss; and realized energy savings are only 58 percent of predictions.