Res-IRF, modeling the savings potential in the French residential sector

Louis-Gaëtan Giraudet,

Céline Guivarch and Philippe Quirion

CIRED (www.centre-cired.fr)

Outline

Res-IRF: Residential module of Imaclim-R France

1. Model description

2. Dynamics in the reference scenario

3. Policy simulations

2

Model description

Res-IRF: technological features

• Energy consumption covered – Space heating (2/3 of French household demand)

– Electricity, natural gas & fuel oil (+ wood in new version)

• Energy efficiency improvements (including fuel switch) – New constructions (standard/low energy/passive)

– Retrofitting of existing dwellings

G F E D C B A

G

F

E

D

C

B

A 4

Res-IRF: microeconomic features

,

,

,

i f

i f

i h

h i

LCCPR

LCC

, , ,i f i f f i fLCC CINV CENER IC

Barriers to energy efficiency (non-exhaustive list)

Tentative representation in Res-IRF (parameterized according to expert elicitation)

Market barriers

Uncertainty Myopic expectation CENER

Hidden costs Fixed intangible costs a . IC

Heterogeneity Heterogeneity parameter ν

Market failures

Split incentives Heterogeneous discount rates (7%...50%) CENER

Information externalities Decreasing intangible costs (1-a) IC

Innovation externalities Learning-by-doing functions CINV

5

LE/A

B

C

D

E F G

Efficiency, ‘Sufficiency’ and the rebound effect

Data

: ED

F R

&D

(se

e C

ayre

et a

l., 20

11

, EC

EE

E P

roce

ed

ing

s)

Energy efficiency Energy price

Unrestrictive behavior

Restrictive behavior

Suff

icie

ncy

6

Dynamics in the reference scenario

Endogenous retrofitting dynamics

65% 90%

Adoption spillovers prevail (self-reinforcing) ‘Natural’ exhaustion prevails

8

Potential for energy conservation in existing dwellings

Reference savings: -37%

« Sufficiency » gap: -10%

« Private efficiency » gap: -4%

« Social efficiency » gap: -8%

NB: subject to slightly increasing energy price (~0.5% p.a.) 9

Policy simulations

Retrofitting obligation for each occupancy change • Dwellings rated below class C must upgrade to minimum class C • Incremental implementation, from class G in 2016…to class D in 2028

Income tax credits 2009-2020

• Subsidy of 30% of investment cost

• Capped at €8,000 per dwelling

Policy simulation

2010 2020 2030 2040 2050

Zero rate loans 2009-2020

• Subsidy equal to the interests of a 10-year loan at 4%

• Base capped at €30,000 per dwelling

Carbon tax • €32/tCO2 in 2010 • Increasing by 5.8% pa until 2030, 4% afterwards

11

Ineffectiveness of the policy packages assessed

National Target -38%

12

€200/tCO2

in 2010

Policy impacts on existing dwellings in 2050

13

Why in the end, tax outperforms

14

Rebound

Sufficiency

Conclusions

• Policy ranking – Subsidies & regulations increase efficiency, thus adoption

externalities (pro) and the rebound effect (con)

– Tax: low impact on efficiency, but encourages sufficiency

– both necessary

– Despite unrepresented measures (information policies) and technologies (fuel-wood, district heating), French targets hard to meet

• New developments and perspectives – Fuel-wood

– Uncertainty analysis

– Econometric estimation

15

Thanks for your attention

contact: quirion@centre-cired.fr

Giraudet, L.-G., C. Guivarch, P. Quirion, 2011: • Comparing and combining energy saving policies. Will proposed

residential sector policies meet French official targets? Energy Journal, 32(SI1): 213-242

• Exploring the potential for energy conservation in French households through hybrid modelling, Energy Economics, doi:10.1016/j.eneco.2011.07.010

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