Spotlights
357 - Energy Behavior Modification: The Failure and Arrogance of Centrally Planned Energy-Efficiency Programs

August 21, 2008

Key facts:

• Energy-efficiency programs generally have many of the same problems as Duke Energy’s heavily criticized Save-A-Watt program.



• Energy-efficiency programs force consumers to pay an extra hidden tax on their utility bills to subsidize financial incentives for the purchase of energy-efficient goods and services.



• In simple terms, energy-efficiency program proponents do not think consumers invest in energy efficiency as much as they should (as defined by proponents) due to their unrealistic expectations regarding the rate of return that can be achieved from energy-efficiency investments.



• Proponents ignore the innumerable reasons why consumers may choose not to buy, for example, a more expensive, more efficient appliance that would eventually save them money. These reasons could include such things as the quality of the appliance, opportunity costs, and risk.



• The problems with energy-efficiency programs also are numerous and include:
  
  — Energy-efficiency gains come at the expense of overall economic efficiency. Consumers pay for the energy-efficiency investments that businesses have previously rejected as being an inefficient waste of resources.
  
  — There is no way to know what kind of gains in energy efficiency there would have been absent the incentives.
  
  — The effectiveness of these programs is a guessing game.
  
  — The programs create a disincentive for individuals and businesses to invest in energy efficiency on their own.
  
  — The programs steer individuals into buying goods and services that are less efficient that what would have been purchased.
  
  — The poor are unlikely to be able to take advantage of incentives yet they are forced to pay for the subsidies used by the wealthy.



• The legislature has a simple choice next year: Get rid of the failed and arrogant policy of centrally planning the purchase of home appliances and other energy-efficient investments, or do nothing and continue believing that North Carolinians are ignorant.

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