Full Title: Economic Impacts of Efficiency Spending in Vermont: Creating an Efficient Economy and Jobs for the Future
Author(s): Steve Bower, Sam Huntington, Tyler Comings, and Walter “TJ” Poor
Publisher(s): Synapse Energy Economics, Inc.
Publication Date: 1/2011
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The success of energy efficiency programs is commonly reported in terms of net benefits and benefit-cost ratios for standard cost-effectiveness tests. While such metrics provide a powerful message, they do not speak to the overall impact of efficiency programs on the economy. Economic impacts of these programs include the effects of additional spending from participating households, increased production from participating businesses, and local business generated from demand for supporting equipment and labor, all mitigated by initial rate impacts of collecting funds to deliver the programs (depending on the funding mechanism). Expressing program impacts in broader economic terms such as gross state product and jobs created allows policy makers to make more informed decisions of where to direct limited public funding.
This paper reviews past analyses of the economic impacts of public efficiency programs, comparing their methodologies and results. We then report on a 2011 analysis of the economic impacts of Vermont’s electric and fossil fuel efficiency programs. The study incorporated a multitude of economic drivers of efficiency programs, including sources and spending of funds (by economic industry), reduced utility bills for those purchasing efficient equipment, rate impacts due to reduced energy demand, and reduced obligations to the New England Independent System Operator. Recent efficiency potential studies and other data were used to develop inputs to the REMI economic model (Regional Economic Models, Inc.) to estimate job creation and the overall impact of efficiency spending on the State’s economy. The paper concludes with recommendations for those considering such economic analyses in the future.