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Energy Efficiency in Mexico
Veronica Irastorza
Center for Environmental Public Policy
Goldman School of Public Policy
CEGA Evidence to Action UC Berkeley April 2013
According to the IEA about 70% of the potential CO2 abatement in 2020 comes from energy efficiency
Source: International Energy Agency, World Energy Outlook, 2011
Developing countries are key
Also according to IEA, most of the growth in energy demand is expected from developing countries.
Growth in energy consumption in non-OECD countries 85% vs 18% in OECD countries.
To support a global population of 9.5 billion in 2050 with average standard of living equivalent to the current US lifestyle would require 16 times the current use (Brown et at, Jan 2011)
Structure of the Mexican Energy Sector
Energy Regulatory Commission
(CRE)
National Energy Efficiency Usage Commission
National Hydrocarbons Commission
National Commission for
Nuclear Security and Safeguards
National Oil Company
Mexican Petroleum Institute
Electricity Research Institute
Nuclear Research Institute
National Regulatory Commissions
State-owned companies (operators)
Research Institutes
National Power Company
Ministry of Energy
IEPs
Electricity
Electricity generation 2011 (GWh)
Generation: 291,673 GWh
Fossil, 81%
Geothermal, 2%
Nuclear, 3%
Wind, 1%
Hydro, 13%
Others, 19%
Source: SENER with CRE, CFE and ANES data.
Installed generation capacity 2011 (MW)
Non-fossil, 15,061 Fossil,
46,607
25% of the installed capacity is from non-fosil fuels
Capacity: 61,770 MW
Energy Efficiency
Mexico has been moving towards EE through aggressive programs and standards.
The challenge in Mexico (and many countries) is to end poverty and keep the energy demand low
There are limited resources that need to be used in the most efficient way
To prioritize EE support, the Mexican government used a CO2 abatement cost curve
Mexico’s Abatement Cost Curve, 2030
50% 60% 40% 70% 80% 90% 100% 0% 10% 20% 30%
-20
-10
-70
-60
-50
-40
-30
20
30
0
10
Abatement Potential
(%)
Lighting
CHP
Appliances
Vehicle efficiency
Heaters and A/C Solar water heaters
Efficiency in public transportation
Cost USD/MWh
Industrial engines
Water pumps
New buildings
Source: SENER (McKinsey and Co.)
Incandescent Light bulb replacement program “Luz Sustentable”
Country Population (millions)
Time Period Substituted lamps
Uganda 33.4 2006 800 thousand
Cuba 11.5 2006-2007 9 millons
Spain 40.5 2009-2010 9.4 millons
Mexico 112 2011-2012 45.8 millions
Incandescent Light bulb replacement program “Luz Sustentable”
Each participant saved $120 USD on their electricity bill.
The government saved $850,000 USD on avoided subsidies
Environmental benefits avoided GHG emissions equivalent to take out 600,000 cars.
Type Sales prohibited by
100 watts and up December 2011
75 watts December 2012
40 y 60 watts December 2013
EE Standard for Lightbulbs
This standard phased out inefficient lightbulbs:
Appliance replacement program “Cambia a tu viejo”
1,884,062 old appliances replaced as of Dec 31, 2012.
Mr. Lucas Davis will discuss this program
Energy Subsidies
While doing important EE efforts, the Mexican government gives subsidies to electricity, gasoline and LP Gas.
Not the best energy pricing signals!
• In 2008, energy subsidies were 10 times more than the cost of Oportunidades and, in 2010, 4 times the cost of all the poverty programs together.
• Gasoline: More than 16,000 million
dollars in subsidies in 2012.
• Electric Subsidies to households: 7,000 million dollars in 2011
Regressive subsidies
0%
5%
10%
15%
20%
25%
30%
I II III IV V VI VII VIII IX X
Source: CIDE
Distribution of energy subsidies by decile
• Residential electricity rates cover only 43% of the cost on average (2011). Agricultural rates cover only 31%
Mexico is not alone
Subsidies for petroleum products, electricity, natural gas and coal reached $480 billion in 2011 (0.7% of global GDP) (IMF, Jan 2013)
Source: International Energy Agency, World Energy Outlook, 2011
What does Mexico need to do?
Transparent and targeted subsidies.
Keep investing on energy efficiency, but
Strengthen the evaluations on energy efficiency programs and standards to get the most bank for the buck
Muchas gracias
Veronica Irastorza
Visiting Scholar
Center for Environmental Public Policy
Goldman School of Public Policy
Motivation Participation Energy Savings Discussion
Behavioral Response to an ApplianceReplacement Program in Mexico
Lucas Davis
Haas School of Business, UC Berkeley
Energy Institute at Haas
CEGA
April 25, 2013
Davis (UC Berkeley) CEGA Evidence to Action April 25, 2013 1 / 19
Motivation Participation Energy Savings Discussion
Introduction
Total energy consumption worldwide is forecast to increase 54% by 2030 (EIA, 2012).
Most of this growth is forecast to occur in developing countries.
Meeting this increase in demand will be an immense challenge.
Most economists would like to see a carbon tax, or cap-and-trade program.
Although there has been some progress, most emissions remain unpriced.
Instead, what is receiving much attention is energy-efficiency.
Davis (UC Berkeley) CEGA Evidence to Action April 25, 2013 2 / 19
Motivation Participation Energy Savings Discussion
The McKinsey Curve
Source: McKinsey and Company, “Pathways to a Low-Carbon Economy”, 2010
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Motivation Participation Energy Savings Discussion
The McKinsey Curve for Mexico
Exhibit 4. National carbon abatement cost curve for MexicoGHG abatement cost curve for Mexico in 2030
S t id
Degraded forest reforestation
HDV* diesel package 4
Increased electric public transport
GHG abatement cost curve for Mexico in 2030Cost, US$/t CO2e
80
60
100
Grassland
Increased and more efficient b s transport
Agronomy practices
Smart grid
On shore wind
Forest management
Solar CSP
Off shore wind
p g
CCS in oil and gas
Cogeneration in oil and gas
L dfill
Cropland nutrient management
LDV* gasoline package 2
Other industry Biofuels 1st
Solar PV
Biofuels 2nd generation
40
-20
20
40
45050 500 550400350
0
2502001501000 300
Livestock –
Recycling waste
Geothermal
Grassland management
Organic soils restoration
bus transport
Oil to gas New build
ffi i
Landfill gas electricity generation
industrygeneration
Small hydro
Abatement
-80
-60
-40
-120
-100
LDV* gasoline package 4LDV* gasoline package 3
Landfill gas direct use
Livestock –antimethanogen vaccine
Tillage and residue management
Reduced deforestation
restoration Oil to gas shift in power
Nuclear
Pastureland afforestation
efficiency package, residential
Reduced flaring in oil and gas
Abatementpotential,Mt CO2e/year
-180
-160
-140
New build lighting controls, commercial
LEDs
Electronics, residential
Appliances, residentialWastewater treatment
21
LEDs
* LDVs = light duty vehicles; HDVs = heavy duty vehiclesNote: The cost estimate for the light-colored bars is approximate
Source: McKinsey GHG abatement cost curve v2.0; McKinsey analysis
Source: McKinsey and Company, “Low-Carbon Growth: A Potential Path for Mexico”, 2009
Davis (UC Berkeley) CEGA Evidence to Action April 25, 2013 4 / 19
Motivation Participation Energy Savings Discussion
Program Details
Nationwide program March 2009 - December 2012
1.5 million refrigerators and air-conditioners replaced
Old appliances had to be 10+ years old
New appliance must exceed 2002 standard by 5%
Direct cash subsidies of $30, $110, or $170
Davis (UC Berkeley) CEGA Evidence to Action April 25, 2013 5 / 19
Motivation Participation Energy Savings Discussion
Dataset Page 1 of 1
2/21/2013http://www.westernfreepress.com/wp-content/uploads/2012/07/Electric-Meter.jpg
Household-level electric billing records
Two-year panel from May 2009 through April 2011
Bimonthly billing information for 26 million households
Program data about recipients of energy-efficiency subsidies
About 1 million participants
Includes date of replacement, appliance type, subsidy amount
Davis (UC Berkeley) CEGA Evidence to Action April 25, 2013 6 / 19
Motivation Participation Energy Savings Discussion
Participation Behavior
How does participation change with subsidy amounts?
Our Research Approach
Regression Discontinuity (RD)
Compare behavior just on either side of eligibility thresholds.
Observationally-equivalent households offered different subsidy amounts.
Davis (UC Berkeley) CEGA Evidence to Action April 25, 2013 7 / 19
Motivation Participation Energy Savings Discussion
Participation Behavior
How does participation change with subsidy amounts?
Our Research Approach
Regression Discontinuity (RD)
Compare behavior just on either side of eligibility thresholds.
Observationally-equivalent households offered different subsidy amounts.
Davis (UC Berkeley) CEGA Evidence to Action April 25, 2013 7 / 19
Motivation Participation Energy Savings Discussion
Participation Behavior
How does participation change with subsidy amounts?
Our Research Approach
Regression Discontinuity (RD)
Compare behavior just on either side of eligibility thresholds.
Observationally-equivalent households offered different subsidy amounts.
Davis (UC Berkeley) CEGA Evidence to Action April 25, 2013 7 / 19
Motivation Participation Energy Savings Discussion
Figure 2: The DiscontinuityAir Conditioners, 500 kWh
Subsidy falls from $170to $110 at 500 kWh
0.2
5.5
.75
1
Fra
ctio
n of
par
ticip
ants
who
rec
eive
d $1
70 s
ubsi
dy
400 450 500 550 600
Average Historical Electricity Consumption (kWh)
Source: Boomhower and Davis (2013).
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Motivation Participation Energy Savings Discussion
Figure 3: Could Households Manipulate Eligibility?Air Conditioners
Subsidy falls from$170 to $110
Subsidy falls from$110 to $30
Subsidy falls from$30 to $0
05
1015
Num
ber
of H
ouse
hold
s (0
00)
400 500 600 700 800 900 1000 1100
Average Historical Electricity Consumption (kWh)
Source: Boomhower and Davis (2013).
Davis (UC Berkeley) CEGA Evidence to Action April 25, 2013 9 / 19
Motivation Participation Energy Savings Discussion
Figure 4: Program Participation, Air Conditioners
Minimumto participate
Subsidy fallsfrom $170
to $110 Subsidy fallsfrom $110to $30
Subsidy fallsfrom $30
to $0
0.5
11.
52
2.5
Per
cent
age
of H
ouse
hold
s P
artic
ipat
ing
0 250 500 750 1000
Average Historical Electricity Consumption (kWh)
Source: Boomhower and Davis (2013).
Davis (UC Berkeley) CEGA Evidence to Action April 25, 2013 10 / 19
Motivation Participation Energy Savings Discussion
Figure 4: Program Participation, Refrigerators
Minimumto participate
Subsidy fallsfrom $170
to $110
Subsidy fallsfrom $110to $30
Subsidy fallsfrom $30to $0
0.5
11.
52
2.5
Per
cent
age
of H
ouse
hold
s P
artic
ipat
ing
0 50 100 150 200 250 300
Average Historical Electricity Consumption (kWh)
Source: Boomhower and Davis (2013).
Davis (UC Berkeley) CEGA Evidence to Action April 25, 2013 11 / 19
Motivation Participation Energy Savings Discussion
Energy Savings
How much energy did participants save?
How could the programs have been designed to save more?
Our Research Approach
Compare electricity consumption before and after appliance replacement.
Incorporate control groups matched to participants based on location.
Davis (UC Berkeley) CEGA Evidence to Action April 25, 2013 12 / 19
Motivation Participation Energy Savings Discussion
Energy Savings
How much energy did participants save?
How could the programs have been designed to save more?
Our Research Approach
Compare electricity consumption before and after appliance replacement.
Incorporate control groups matched to participants based on location.
Davis (UC Berkeley) CEGA Evidence to Action April 25, 2013 12 / 19
Motivation Participation Energy Savings Discussion
Energy Savings
How much energy did participants save?
How could the programs have been designed to save more?
Our Research Approach
Compare electricity consumption before and after appliance replacement.
Incorporate control groups matched to participants based on location.
Davis (UC Berkeley) CEGA Evidence to Action April 25, 2013 12 / 19
Motivation Participation Energy Savings Discussion
Engineering Estimates of Savings
Source: World Bank, “Low-Carbon Development for Mexico’, 2009
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Motivation Participation Energy Savings Discussion
31
FIGURE 3 The Effect of Refrigerator Replacement on Household Electricity Consumption
Note: This figure plots estimated coefficients and 95th percentile confidence intervals describing monthly electricity consumption before and after refrigerator replacement. Time is normalized relative to the delivery month of the appliance (t=0) and the excluded category is t=-1. Observations from before t=-12 and after t=12 are dropped. The sample includes 858,962 households who received new refrigerators through C4C between March 2009 and May 2011 and an equal number of non-participating comparison households matched to treatment households using location and pre-treatment consumption. The regression includes household and county by month-of-sample fixed effects. Standard errors are clustered by county.
−15
−10
−5
05
Kilo
wat
t Hou
rs P
er M
onth
−12 −10 −8 −6 −4 −2 0 2 4 6 8 10 12Months Before and After Replacement
Source: Davis, Fuchs, and Gertler (2012)
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Motivation Participation Energy Savings Discussion
Source: Davis, Fuchs, and Gertler (2012).
Davis (UC Berkeley) CEGA Evidence to Action April 25, 2013 15 / 19
Motivation Participation Energy Savings Discussion
Interpretation
What is going on?
Households increased utilization of air-conditioners.
New appliances tended to be larger and have more features.
Old appliances tended to be close to the minimum age threshold.
Davis (UC Berkeley) CEGA Evidence to Action April 25, 2013 16 / 19
Motivation Participation Energy Savings Discussion
Summary
These studies provide some of the most direct evidence to date on EE subsidies.
Participation
Most households would have participated even with much lower subsidy amounts.
So smaller subsidies would have been considerably more cost-effective.
Energy Savings
Refrigerator replacement saves considerably less energy than expected.
Air-conditioner replacement appears to actually increase energy consumption.
Davis (UC Berkeley) CEGA Evidence to Action April 25, 2013 17 / 19
Motivation Participation Energy Savings Discussion
Urgent Need for More Research
We should be performing analyses like this of all EE programs.
What about energy-efficient lighting, and other rapidly improving technologies?
What about other forms of deployment (e.g. standards versus subsidies)?
High-quality microdata is critical.
These data must be collected and made publicly available.
“In god we trust, everyone else bring data.”
Davis (UC Berkeley) CEGA Evidence to Action April 25, 2013 18 / 19
Motivation Participation Energy Savings Discussion
Thank You!
Comments Welcome
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