Attachment D
Key Findings of 1999 RAND Study and 2005 Gard Analytics Study

In 1999, the Rand Corporation conducted a study of the DOE’s appliance program at the request of the Office of Science and Technology Policy and the Department's Office of Energy Efficiency and Renewable Energy. The study resulted in a report (Ortiz and Bernstein, 1999) that investigated certain consequences of measuring energy use at either the site or the source. The results of Rand’s comparison of site versus source energy consumption are as follows:

  1. Analysis does not support the claim that site-based measurement used to promulgate minimum efficiency standards for water heaters favors electric units over natural gas units.

  2. There is no statistical difference in the market share of electricity between states with source-based residential energy codes or codes that are fuel specific as a group and states with site-based residential energy codes as a group. The claim that the measurements of energy used to comply with residential energy codes adversely influences the broader market for natural gas and electricity is unsupported.

  3. There is preliminary evidence that states that use source-based energy codes or codes that are fuel specific, as a group, are more efficient with respect to energy use per capita than other states.

Another study, commissioned by the American Gas Foundation, resulted in a report by GARD Analytics (2005). That report had four major findings:

  1. Real Energy1 analysis is the best method for measuring energy efficiency and the impact of energy consumption on the environment. While Energy Cost analysis at times can be an acceptable alternative, regional pricing variations and non-cost based utility pricing structure impair the accuracy of this approach.

  2. Most federal energy efficiency policies use Site Energy as their criteria. As a result, many federal energy efficiency policies actually encourage the use of less efficient appliances. Not only does this result in higher total energy consumption, it increases total pollution. The activities associated with providing energy to the customer, particularly electricity generation and transportation, often emit substantial amounts of CO2 and other gasses associated with global warming.

  3. Modifying a number of current and proposed efficiency policies that utilize Site Energy criteria to incorporate Real Energy efficiency approach could cause market shift away from less overall efficient technologies. This is particularly true if policies promoted more efficient electric and gas technologies compared to electric resistance applications. At a minimum, these energy policies could utilize a combination of approaches, similar to the Federal Energy Management Program (FEMP) policy for analyzing government energy efficiency projects. FEMP requires government agencies to choose the lowest life cycle cost option while reducing Site Energy use per square foot, and any increases in Site Energy can be offset by decreases in Real Energy.

  4. Numerous barriers impede federal policy use of Real Energy efficiency standards. Political and legal barriers pose the greatest challenges to changing policies. Market and technical barriers could be more easily overcome with sufficient education and resources.

1

The AGA reference defined “real energy” as site energy plus all upstream energy consumption. This definition corresponds closely to the committee’s definition of full-fuel-cycle energy.



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Attachment D Key Findings of 1999 RAND Study and 2005 Gard Analytics Study In 1999, the Rand Corporation conducted a study of the DOE’s appliance program at the request of the Office of Science and Technology Policy and the Department's Office of Energy Efficiency and Renewable Energy. The study resulted in a report (Ortiz and Bernstein, 1999) that investigated certain consequences of measuring energy use at either the site or the source. The results of Rand’s comparison of site versus source energy consumption are as follows: 1. Analysis does not support the claim that site-based measurement used to promulgate minimum efficiency standards for water heaters favors electric units over natural gas units. 2. There is no statistical difference in the market share of electricity between states with source- based residential energy codes or codes that are fuel specific as a group and states with site- based residential energy codes as a group. The claim that the measurements of energy used to comply with residential energy codes adversely influences the broader market for natural gas and electricity is unsupported. 3. There is preliminary evidence that states that use source-based energy codes or codes that are fuel specific, as a group, are more efficient with respect to energy use per capita than other states. Another study, commissioned by the American Gas Foundation, resulted in a report by GARD Analytics (2005). That report had four major findings: Real Energy1 analysis is the best method for measuring energy efficiency and the impact of 1. energy consumption on the environment. While Energy Cost analysis at times can be an acceptable alternative, regional pricing variations and non-cost based utility pricing structure impair the accuracy of this approach. 2. Most federal energy efficiency policies use Site Energy as their criteria. As a result, many federal energy efficiency policies actually encourage the use of less efficient appliances. Not only does this result in higher total energy consumption, it increases total pollution. The activities associated with providing energy to the customer, particularly electricity generation and transportation, often emit substantial amounts of CO2 and other gasses associated with global warming. 3. Modifying a number of current and proposed efficiency policies that utilize Site Energy criteria to incorporate Real Energy efficiency approach could cause market shift away from less overall efficient technologies. This is particularly true if policies promoted more efficient electric and gas technologies compared to electric resistance applications. At a minimum, these energy policies could utilize a combination of approaches, similar to the Federal Energy Management Program (FEMP) policy for analyzing government energy efficiency projects. FEMP requires government agencies to choose the lowest life cycle cost option while reducing Site Energy use per square foot, and any increases in Site Energy can be offset by decreases in Real Energy. 4. Numerous barriers impede federal policy use of Real Energy efficiency standards. Political and legal barriers pose the greatest challenges to changing policies. Market and technical barriers could be more easily overcome with sufficient education and resources. 1 The AGA reference defined “real energy” as site energy plus all upstream energy consumption. This definition corresponds closely to the committee’s definition of full-fuel-cycle energy. 19

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REFERENCES GARD Analytics. 2005. Public Policy and Real Energy Efficiency: Assessing the effects of federal policy on energy consumption and the environment. Prepared for the American Gas Foundation. Ortiz, D.S., and M.A. Bernstein. 1999. Measures of Residential Energy Consumption and Their Relationships to DOE Policy. Report No. MR 1105.0-DOE. Rand Science and Technology Policy Institute, Santa Monica, Calif. November. 20