Communications on energy

Some question exists, however, as to the part the major oil companies will play in the futures trading drama. With the exception of British Pet- roleum, which was active in setting up the International Petroleum Exchange in London, many of the larger com- panies are still passive. A reason for this might be that the management of these companies are aware that a very large increase in hedging may not be possible without substantial price movements on futures markets, and such price movements often offend

politicians, the media, the general public and other market participants. The only defence against exaggerated price movements would seem to be a quantum increase in the speculative base of this market, to include the introduction of new contracts, such as the 'new' contract for crude oil. Both major consumers of oil and oil pro- ducts and the smaller sellers desire the protection that viable hedging facili- ties can offer, and if an upturn in world economic growth once again initiates an upward spiral in oil prices,

it will be to everyone's advantage if these facilities are available.

Ferdinand E. Banks The University of Uppsala, Sweden

and Melbourne University Australia

Ferdinand E. Banks, The Political Eco- nomy of Oil, (second printing), D.C. Heath and Company, Lexington, MA, 1982, and Gower, London, 1982. Ferdinand E. Banks, Resources and Ener- gy: An Economic Analysis, D.C. Heath and Company, Lexington, MA, 1983.

Measuring energy savings- problems

The contribution of government energy conservation programmes to reducing national energy is an important but largely unresolved issue. This paper discusses estimating the energy-savings impact of US Department of Energy (DOE) conservation programmes. Programme-by-programme estimates of energy savings have been analysed, the results indicating that DOE conserva- tion programmes have reduced US energy use by more than 0.5 quadrillion British thermal units (quads) annually since 1981. Limitations in the available evaluative information, however, preclude reaching unambiguous conclusions.

Keywords: Energy savings; Conservation programmes; Measurement

Energy-use trends during the past decade were dramatically different from those during the 1950s and 1960s. While energy use increased steadily at an average rate of 3.7% per year before 1973, it has behaved erra- tically since then and energy use in 1981 was slightly be low the 1973 level, l

The major purpose of this article is to examine explicitly the energy saving impact of the conservation program- mes of the US Department of Energy (DOE). DOE programmes were chosen because they constitute a large part of the overall government con- servation effort. No attempt was made, however, to discern the energy saving impact of all government pro- grammes.

Because the overall energy saving due to DOE conservation program- rues is an empirical question, data are required to address it adequately. Unfortunately, the necessary data are deficient and this paper discusses the

results of an attempt to collect and develop programme-by-programme estimates of energy saving.

Review of evaluations of DOE conservation programmes

The findings of a review of evaluation studies of DOE conservation prog- rammes will now be discussed. 2 The goal was to obtain comparable esti- mates of energy savings due to each programme, which could then be sum- med to derive an estimate of the total energy savings attributable to DOE activities.

The results of attempts to assemble evaluations for each programme re- vealed that many gaps exist in the evaluative information necessary to develop comparable savings estimates for all DOE conservation program- rues. These gaps usually occurred be- cause systematic evaluations were not considered necessary or appropriate, programmes were new and impact

evaluation was premature, energy sav- ings were not measured in the evalua- tion undertaken, or energy savings were not expected until well into the future. Thus, to the extent that the programmes for which evaluative in- formation on energy savings is un- available have also produced energy savings, this approach underestimates overall DOE savings.

In those cases where evaluative information is available, however, methodological limitations in deriving savings estimates call into question the validity of the results. Before summar- izing the programme estimates these limitations will be discussed.

Methodological limitations

To a large extent, evaluations of federal conservat ion programmes have not employed research designs to control for or rule out alternative explanations for observed energy sav- ings. Because alternative explanations such as increased fuel prices may account for some of the change in consumption, failure to take them into account will result in savings being incorrectly attributed to the program- me. This situation is further compli- cated by the fact that few mechanisms presently exist for gathering informa- tion on energy consumption, and all factors that may influence energy use, in a direct, manageable and inexpen- sive manner. While fuel bills offer a relatively straightforward means of measuring consumption in the single- family residential sector, other end- use sectors are not as homogeneous. Most evaluations, therefore, relied on indirect means of estimating energy

104 ENERGY POLICY March 1984

saving, which can produce unreliable or invalid results.

In general, this indirect approach is based on developing a functional algorithm that describes how a pro- gramme achieves its energy savings. The algorithm is summarized as an algebraic calculation, and data are then substituted in the equation to derive an energy saving estimate. These functions are usually in the form of number of units served times an estimate of energy savings per unit.

The extent to which this approach will yield an accurate estimate of energy saving is conditional on the validity of the assumed function sum- marizing energy saving behaviour (in particular, how much impact should be attributed to programme activities) and the reliability and validity of the data measuring the variables. The limitations of this approach can be seen in the case of the savings esti- mated for the State Energy Conserva- tion Program (SECP). 3

Estimated savings Of particular concern regarding the SECP estimate are the estimated sav- ings due to thermal efficiency stan- dards, which account for approximate- ly 66% of the estimated savings. The standard algorithm for estimating sav- ings is a function of the annual square footage of new building construction multiplied by an estimate of energy saved per square foot, times the num- ber of years the thermal efficiency code has been in effect. Separate estimates are made for each of nine building types and summed for a total savings estimate.

Recent work suggests that this algorithm may attribute too much of the estimated savings to the SECP. 4 Critical examination of each compo- nent of this algorithm reveals a num- ber of flaws which could contribute to an overestimate of savings. For exam- ple, building construction rates were based on 1973 data, producing esti- mated rates considerably higher than are actually occurring. Further, this algorithm ignores the influence of factors other than the code. These other factors include code-compliance rates, the effect of local codes, con-

struction lag time, and changes in the price of energy. Thus, there is some doubt about how much energy savings should be attributed to the SECP, and the actual savings could be less than reported in the evaluation. 5

A critical examination of the avail- able energy saving estimates indicates

Communica t ions on energy

that the validity of each estimate is impaired to a varying degree by both methodological and data deficiencies. 6 These limitations force the cautious reader to view the savings estimates with a degree of scepticism. This is not to say that the estimates lack all credibility, but rather that there is a

Table 1. Energy savings due to Department of Energy energy conservation programmes.

Start E n e r g y Estimated annual year s a v i n g s savings in 1981

Programme (FY) objective (qued) Building and community systems Building systems 1974 Long-term ATI-a b TCP 1974 Short-term 0.015 c Appliance standards 1975 Long-term FEMP 1975 Short-term 0.060 Residential commercial retrofit 1979 Short-term d RCS 1979 Short-term d Community systems 1974 Long-term 0.005 Small business 1974 Short-term 0.012 Energy impact assistance 1978 b

Urban waste 1974 Short-term 0.047

Industrial 1974 Short- and 0.015 long-term

Transportation Vehicle propulsion 1978 Long-term EHV 1976 b TSU 1975 Short-term Alternative fuels utilization 1978 b

Multisector ECUT 1974 Long-term ERIP 1974 Long-term AT 1977 Long-term

State and local programmes EES 1977 Short-term SECP 1977 Short-term WAP 1978 Short-term Institutional buildings 1978 Short-term

Electric energy systems System architecture and integration 1970 Long-term Power delivery 1970 Long-term Generation and storage analysis 1970 Long-term

Energy storage Electrochemical 1974 Long-term Physical and chemical 1974 Long-term

Total

0.021 11

0.002 12

0.088 13 0.255 3 0.018 14 0.018 e 15

0.556

Reference

7 and 8

9

7 7

9

10

aAbbreviations used in this table are as follows: AT Appropriate Technology AI - I Applied Technology Transfer ECUT Energy Conversion and Utilization Technologies EES Energy Extension Service EHV Electric and Hybrid Vehicles ERIP Energy-Related Inventions Program FEMP Federal Energy Management Program RCS Residential Conservation Service SECP State Energy Conservation Program TCP Technology and Consumer Products TSU Transportation System Utilization WAP Weatherization Assistance Program

bSome programmes were not intended to save energy. Applied Technology Transfer, for example, provides economic, administrative and technical support to other BCS prograrnmes. CTotal reflects energy savings attributed to the Low Cost/No Cost programme and Operation Powerplay. dEven though the programme has short-term objectives, it has yet to be implemented nationwide. Pilot efforts have been initiated at such locations as the Tennessee Valley Authority, but are not reported here. eRepresents the results of an evaluation of seven states.

E N E R G Y P O L I C Y March 1 9 8 4 105

Communications on energy~Book reviews

wide range of confidence that can be placed in the reliability and validity of the estimate.

Energy savings estimates Using the type of evidence outlined above, Table 1 presents programme- by-programme estimates of energy savings. Based on the available eval- uation information, DOE conserva- tion programmes have been responsi- ble for an annual savings of more than 0.5 quads of energy since 1981. This number does not r ep re sen t the cumulative total energy savings sum- med over time, but rather reflects the annual savings in 1981 resulting from the accumulation of DOE program activities and effects over time.

This result should be interpreted with caution. The limitations discus- sed above can lead to biased and imprecise estimates.

Conclusions The most appropriate method for estimating the effects of federal con- servation programmes is evaluative case studies of specific programmes. Indeed, it is the only way to accurately attribute energy savings. However, a review of individual programme eva- luations found them generally lacking sufficient scientific rigour to support definitive conclusions.

Certainly, these results fall short of the kind of answer one initially hopes to find. This does not mean the case is closed and there is no point to further investigation. Other avenues of re- search can produce additional in- sights. In particular, individual aggre- gate analyses of the residential, in- dustrial, commercial and transporta- tion sectors should be enlightening.

Jon Soderstrom Energy Division

Oak Ridge National Laboratory Oak Ridge, TN 37830, USA

Research for this work was sponsored by the Office of Conservation and Renewable Energy, US Department of Energy, under Contract W-7405-eng-26 with the Union Carbide Corporation.

~Energy Information Administration, 1980 Annual Report to Congress, Vol 2, DOE/ EIA-0173(80)/2, US Department of Ener- gy, Washington, DC, 1981. 2D.L. Greene, E. Hirst, J. Soderstrom and J. Trimble, Estimating the Total Impact on Energy Consumption of Department of Energy Conservation Programs, ORNL- 5925, Oak Ridge National Laboratory, Oak Ridge, TN, 1982. aPrice-Waterhouse, Study of State Energy Conservation Program 1981 Energy Sav- ings Indicators, Washington, DC, 1982. 4N.E. Collins, N.L. McCold and P. Zus- chneid, Thermal Efficiency Standards and Codes: Part 1, ORNL/CON-101/vl, Oak Ridge National Laboratory, 1982. 50p cit, Ref 3. 60p cit, Ref 2. 7US Department of Energy, Building and Community Systems Program Internal Re- port, Washington, DC, 1982. 8US Department of Energy, The Low Cost~No Cost Energy Conservation Pro- gram in New England: An Evaluation, Washington, DC, 1980.

9US Department of Energy, Sunset Re- view: Supporting Materials (draft), Washington, DC, 1982. 1°US Department of Energy, Industrial Conservation Program internal report, Washington, DC, 1982. I~P. Patterson, Personal communication, Office of Conservation and Renewable Energy, US Department of Energy, June 1981. 12E.j. Soderstrom, L.M. Bronfman and M.L. Rorke, The Energy-Related Inven- tions Program: An Overview of the Evalua- tion, ORNL/CON.92/v3) Oak Ridge National Laboratory, Oak Ridge, TN, 1983. ~3Mark Battle Associates, Inc, Evaluation of the Energy Extension Service Con- servation Program, Washington, DC, 1982. ~4Urban Systems, Evaluation of the Weatherization Assistance Program, Washington, DC, 1981. l~Synectics Group, Status and Perform- ance of the Institutional Conservation Program (draft interim report), Washing- ton, DC, 1981.

Book reviews Energy problems of the LDCs

NATIONAL ENERGY PLANNING AND MANAGEMENT IN DEVELOP- ING COUNTRIES

H. Neu and D. Bain

Reidel, Dordrecht, The Netherlands, 1983, 456 pp, Dfl 140, $61.00

ENERGY IN THE TRANSITION FROM RURAL SUBSISTENCE

M.S. Wionczek, G. Foley and A. van Buren, eds

Westview, Boulder, CO, USA, 1983, 224 pp, £16.50

The energy problems of developing countries took on potentially alarming dimensions with the world oil price rises of the 1970s. That the situation was not intractable for many of them has been adequately demonstrated by numerous studies, notably by World Bank staff, showing that loss of real national income has not been the sole adjustment mechanism. Others, espe- cially those with pervasive structural

and incentive deficiencies, have fared less well, and some have fared dis- astrously.

Neu's and Bain's volume of con- tributions to a conference at Ispra in 1982 makes little or no reference to successful adjustments, lending a somewhat false image to the scale and intensity of the problem. It does, however, contain some useful essays which focus on the 'other energy crisis', namely the dominant use of woodfuel in many developing econo- mies. Rising commercial energy prices simply delay the substitution of wood- fuel by kerosene and LPG. The com- mon property features of forests and woodlands means that wood is under- priced in terms of the market signals to consumers. Many would argue that price-induced substitution is not, in any event, a paradigm of relevance to developing economies.

Gerald Foley produces a very useful overview in his essay which is merci- fully devoid of illusions about the practical prospects for substitutions via alternative small-scale technology. As he notes, 'The catalogue is dismal

106 E N E R G Y P O L I C Y March 1984