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FIGURE 2.1 Sample of an electricity efficiency supply curve showing the relative costs of various efficiency options and how those costs compare to electricity rates and costs of a new supply option (a hydropower dam).

FIGURE 2.1 Sample of an electricity efficiency supply curve showing the relative costs of various efficiency options and how those costs compare to electricity rates and costs of a new supply option (a hydropower dam).

actions below the cost of a new hydropower dam would be socially profitable compared to building the dam. Jaccard described it as basically the same methodological thinking that leads to carrying the supply curve approach from a focus only on energy efficiency to a focus on greenhouse gas abatement. Efficiency cost curves were popular 30 years ago, and greenhouse gas abatement cost curves have been around for at least 20 years. But Jaccard noted that leading energy-economy modelers have moved away from the supply curve approach, arguing that the curves mislead about costs and are unhelpful with policy. Jaccard believes that is probably too strong a statement and, as someone who comes from both an economics and a technology engineering background, he expressed his belief that there is useful information in such curves and in developing hybrid approaches, while still remaining cognizant of the issues with these curves.

Jaccard focused on several issues he sees as problematic with such supply curves. The first is that the construction of cost curves implies that each action is completely independent of every other action, for example, that installing efficient light bulbs is independent of making building shells more efficient. It also assumes that market conditions are homogeneous such that the cost of deploying the first 20 percent of the technology is the same as the cost of deploying the last 20 percent. Finally, the curves assume that a new technology is a perfect substitute and that the quality of service and the risks of adopting a new technology are identical to those associated with the technology being replaced. Responses to these issues have involved modelers constructing integrated models that have energy supply and demand working simultaneously and tracking within the models different vintages of equipment stocks. Such models can also portray the heterogeneous character of market responses and estimate the behavioral parameters that explicitly or implicitly incorporate nonfinancial values such as preferences related to technology attributes. He noted that models that are technologically richer or more explicit about technologies are more often called hybrid models, and these models have algorithms that simulate how people, firms, and households choose technologies. Jaccard argued that, although these models and their parameters are highly uncertain, research on technology deployment tends to focus on them because of the general awareness of the limitations of simple supply curve approaches.

The final point in Jaccard’s talk concerned the relevance of traditional supply curves for policy and what can be done to improve their use. He stated that the implicit message from traditional cost curves is that it seems



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