Periodic Reporting for period 2 - CHEETAH (Changing Energy Efficiency Technology Adoption in Households)
Reporting period: 2018-06-01 to 2019-11-30
There is a need to develop more socially and behaviourally realistic energy demand models that incorporate insights from social science theories of decision-making, behaviour and diffusion. Choice models are a suitable method to elicit individual preferences for technology characteristics and responses to policies, and to analyse how these preferences and responses vary by household characteristics and individual attitudes. Thus, integrating results from choice experiments into energy-economic models is expected to improve the modelling of technology adoption and policy effectiveness. Against this background, CHEETAH provides empirical evidence on household response to energy efficiency policies and factors driving adoption of energy-efficient technologies, allowing specifically for heterogeneity across households and technologies. CHEETAH considers the effects of established policies such as energy labelling as well as of new policies such as energy performance tenders or energy saving obligations. CHEETAH employs a wide range of methodologies, including an EU-wide representative survey involving stated preferences discrete choice experiments, state-of-the-art econometric analysis, and innovative linking of energy and macro-economic models. In addition, CHEETAH involves specific activities to engage in a dialogue with stakeholders, policy-makers, and researchers. In sum, CHEETAH provides evidenced-based guidance for policy making, improved modelling of energy-efficiency technology adoption, and a significant contribution to the academic literature.
Conceptual approach
Methodologically, the project follows a three-step approach, consisting of a very large household/consumer survey (micro-level), followed by bottom-up modelling on the meso- and macro-levels. The survey was conducted in the form of discrete choice experiments (DCEs) and covered 18,000 subjects in eight Member States deemed to be representative for the EU as a whole .For the modelling at the meso-level, both an agent-based model (EMLab-Consumer) as well as two energy demand models covering appliances (FORECAST) and buildings (Invert/EE-lab) were applied. For the modelling at the macro-level, the macro-economic model ASTRA was used.
Main results
At the micro level – individual households – the policy implications are derived from the empirically observed decision making behaviour in demographically representative Discrete Choice Experiments (DCEs) in eight EU countries. The survey results allow the research team to derive overarching policy implications such as the importance of building trust, the importance of transparent policy-making and an open discourse to foster understanding of direct and indirect long-term costs and benefits. Furthermore, the importance of enabling consumers to make informed decisions by increasing energy literacy as well as by providing relevant information (such as monetary savings) in an accessible manner became apparent.
At the meso-level – the energy system – the modelling results have to be distinguished between electrical appliances and buildings. For appliances, the results show that the current design of the EU Ecodesign and Labelling requirements delivers distinct energy savings by the year 2030. These savings can be boosted further by tightening the mandatory minimum energy performance requirements associated with the Ecodesign Directive. However, this induces substantial additional costs to households, at least in the short term. Rebates, disbursed particularly to low-income households, can mitigate some of the financial burden imposed through stricter regulation. In addition, policy effectiveness depends on the degree of compliance with ecodesign requirements in retail sales. For buildings, the modelling results clearly indicate that significant energy savings in the residential heating sector can be achieved only through ambitious building refurbishment. The adoption of thermostats/heat control devices can help reduce the energy consumption, with the projected impact however being modest. The modelling results indicate that particularly low-income households may not be able to raise the investments required for deep refurbishments. This may lead to a significant drop in refurbishment rates in the long term. Thus, enhanced financial support for low income households across member states should be taken into consideration. Furthermore, in order to trigger refurbishment activities in rented apartment buildings, the landlord-tenant’s dilemma still needs to be addressed.
At the macro-level – the economy as a whole – the CHEETAH results show that the investments in residential energy efficiency are projected to have at least modest positive economic impacts for the EU. A combination of energy savings and rebates is able to compensate for negative consumption impulses resulting from investment expenditures. This leads to a slightly positive effect on overall consumption in the EU. Different income groups are affected in slightly different ways by the energy efficiency measures considered and the ensuing macroeconomic dynamics. However, it appears unnecessary to introduce allocative measures on top of (partially) targeted rebates, since macroeconomic dynamics counteract regressive tendencies. But it is very important to look at the long-term dynamic impacts that would arise after investments are paid off. And last but not least energy efficiency policies also make a contribution to the new European Green Deal by significantly reducing residential GHG emissions without negative impacts on the labour market.
Methodologically, the project follows a three-step approach, consisting of a very large household/consumer survey (micro-level), followed by bottom-up modelling on the meso- and macro-levels. The survey was conducted in the form of discrete choice experiments (DCEs) and covered 18,000 subjects in eight Member States deemed to be representative for the EU as a whole .For the modelling at the meso-level, both an agent-based model (EMLab-Consumer) as well as two energy demand models covering appliances (FORECAST) and buildings (Invert/EE-lab) were applied. For the modelling at the macro-level, the macro-economic model ASTRA was used.
Main results
At the micro level – individual households – the policy implications are derived from the empirically observed decision making behaviour in demographically representative Discrete Choice Experiments (DCEs) in eight EU countries. The survey results allow the research team to derive overarching policy implications such as the importance of building trust, the importance of transparent policy-making and an open discourse to foster understanding of direct and indirect long-term costs and benefits. Furthermore, the importance of enabling consumers to make informed decisions by increasing energy literacy as well as by providing relevant information (such as monetary savings) in an accessible manner became apparent.
At the meso-level – the energy system – the modelling results have to be distinguished between electrical appliances and buildings. For appliances, the results show that the current design of the EU Ecodesign and Labelling requirements delivers distinct energy savings by the year 2030. These savings can be boosted further by tightening the mandatory minimum energy performance requirements associated with the Ecodesign Directive. However, this induces substantial additional costs to households, at least in the short term. Rebates, disbursed particularly to low-income households, can mitigate some of the financial burden imposed through stricter regulation. In addition, policy effectiveness depends on the degree of compliance with ecodesign requirements in retail sales. For buildings, the modelling results clearly indicate that significant energy savings in the residential heating sector can be achieved only through ambitious building refurbishment. The adoption of thermostats/heat control devices can help reduce the energy consumption, with the projected impact however being modest. The modelling results indicate that particularly low-income households may not be able to raise the investments required for deep refurbishments. This may lead to a significant drop in refurbishment rates in the long term. Thus, enhanced financial support for low income households across member states should be taken into consideration. Furthermore, in order to trigger refurbishment activities in rented apartment buildings, the landlord-tenant’s dilemma still needs to be addressed.
At the macro-level – the economy as a whole – the CHEETAH results show that the investments in residential energy efficiency are projected to have at least modest positive economic impacts for the EU. A combination of energy savings and rebates is able to compensate for negative consumption impulses resulting from investment expenditures. This leads to a slightly positive effect on overall consumption in the EU. Different income groups are affected in slightly different ways by the energy efficiency measures considered and the ensuing macroeconomic dynamics. However, it appears unnecessary to introduce allocative measures on top of (partially) targeted rebates, since macroeconomic dynamics counteract regressive tendencies. But it is very important to look at the long-term dynamic impacts that would arise after investments are paid off. And last but not least energy efficiency policies also make a contribution to the new European Green Deal by significantly reducing residential GHG emissions without negative impacts on the labour market.
The CHEETAH project had the objectives of providing evidence-based input to energy efficiency policy-making by investigating the role of policy in household energy efficiency decision-making through a survey based empirical analysis on the micro-level and a modelling approach. The empirical data also served to improve the representation of decision-making processes of private households in the models at the meso-level.The demographically representative Discrete Choice Experiments (DCEs) in eight EU countries delivered a huge database on the empirically observed decision making behaviour concerning energy efficiency investment and households’ response to energy efficiency policies. By directly implementing the results from the Discrete Choice Experiments in the energy demand and ABM models, major enhancements could be made to the models. These improvements in the models will also apply to future scenarios and further improve the validity of the models. The results also emphasize that the here taken approach of a multi-country analysis which accounts for different types of households is crucial in order to get a more detailed understanding of the adoption as well as the acceptability of energy efficiency policies in European households. This in turn allows to design policies in a more fitting and efficient manner, thereby also avoiding unintended side effects. These findings from CHEETAH will also be important in the longer term for the future design of energy efficiency policy in the EU and its Member States in the context of implementing the European Green Deal.