ANALYSIS OF THE PRINCIPLE OF ADMINISTRATIVE EFFICIENCY APPLIED TO
Toolkit: The relationship between product efficiency and price...•A core aim of energy efficiency...
Transcript of Toolkit: The relationship between product efficiency and price...•A core aim of energy efficiency...
IEA 2019. All rights reserved.
Toolkit: The relationship between product efficiency and price
Session 6
Kevin Lane, IEA – Pretoria, 15 October 2019
#energyefficientworld
IEA 2019. All rights reserved.
Overview of the appliance and equipment training sessions
0 Introduction and roundtable
1 Planning energy efficiency programmes
2 Selecting products for MEPS and Labelling programmes
3 Assessing efficiency performance and setting MEPS
Special - Regional harmonisation
4 Industry transformation
5 Stakeholder involvement and communication
6 The relationship between product efficiency and price o
7 Modernising energy efficiency through digitalisation o
8 Insights into energy labels o
9 Monitoring, verification and enforcement o
10 Evaluating policies and programmes o
Special - Available resources U4E o
11 Roundtable discussion, review and report back o
Monday 14 October 2019
Tuesday 15 October 2019
Wednesday 16 October 2019
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Scenario
You have been asked to prepare an impact statement for your regulations,
including the effect on product prices.
How would you go about the task of estimating future product prices?
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Why are appliance costs/prices important?
• A core aim of energy efficiency programs is to deliver
cost benefits to consumers
• In principle, any additional costs of more efficient
equipment is offset by lifetime savings in fuel bills
• Consumer Life-cycle cost = Capital cost + lifetime
running costs
• Often used to set performance thresholds, i.e. via
least life-cycle costs
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Consumer life-cycle costs
Average product Energy efficient product
Capital Cost ($) $300 $350
Running cost per annum=150kWh x 0.2$
= $30
=120kWh x 0.2$
= $24
Lifetime (years) 12 12
Total lifetime cost (LC) = 300 + (30 x 12) = 350 + (24 x 12)
LC $660 $638
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Setting MEPS at Least Life-cycle cost
Current efficiency
level Proposed MEPS level
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Impact of product prices on setting MEPS
• If you are setting MEPS based on least life-cycle cost….
• What impact is there if efficient products costs are higher/lower?
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Setting MEPS at Least Life-cycle cost
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What is actually happening to product prices?
• So that is the theory
• Now lets look at what is actually happening……..
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Thailand – Retail price vs capacity (and country manufacture)
0
500
1000
1500
2000
2500
3000
$-
$500
$1,000
$1,500
$2,000
$2,500
$3,000
0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0
Reta
il p
rice
per
12,0
00 B
TU
/h
SEER (W/W)
Retail price normalised by capacity versus SEER, by country of manufacture
Thailand
China
Malaysia
Vietnam
Korea
MEPS ASEAN 2020 3.08 W/W
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Thailand - Retail price vs capacity (and technology)
$-
$200
$400
$600
$800
$1,000
$1,200
2.50 3.50 4.50 5.50 6.50 7.50 8.50
Reta
il p
rice
per
12,0
00 B
TU
/h
SEER (W/W)
Retail price normalised by capacity versus SEER, by type
Inverter - not popular
Fixed - not popular
Inverter - popular
Fixed - popular
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Analysis: Impact of Refrigerator Standards: Energy Consumption in the USA
Source: EIA, 2013
Ratcheting MEPS have has reduce energy consumption of new US refrigerators by 75%
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Analysis: Impact of Refrigerator Standards: Energy Consumption in the USA
Source: ACEEE, 2017. Energy-Saving States of America: How Every State Benefits from National Appliance Standards
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Analysis: Impact of refrigerators standards in Ghana
0
50
100
150
200
250
300
350
0
200
400
600
800
1000
1200
1400
1600
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Annual Energy Use (kWh) PRICE /USD Net Total Vol/Ltrs
Energ
yU
se (
kW
h/yr
)
or
Real Pri
ce
Adju
sted
Volu
me (L
itrs)
Annual Energy Use, Volume and Real Price of Refrigerating Appliances
Source: Kofi Agyarko, IEA EE Global 2018
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Analysis: Impact of Clothes Washer Standards on Annual Energy Consumption in the US
Source: IEA 4E, Achievements of appliance energy efficiency standards and labelling programs - A Global Assessment in 2016
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Examination of MEPS impacts: Cold appliances: % change
-70%
-60%
-50%
-40%
-30%
-20%
-10%
0%
United States Australia (refrig)
Australia
(freezer) UK (refrig) UK (freezer) Japan
Av. Energy Consumption Av. Price
Source: IEA 4E, Achievements of appliance energy efficiency standards and labelling programs - A Global Assessment in 2016
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Examination of MEPS impacts: other appliances: % change
-40%
-35%
-30%
-25%
-20%
-15%
-10%
-5%
0%
United States
(clothes
washers)
Australia
(clothes
washers)
Australia
(clothes dryers)
United States
(a/c) Japan (a/c)
Av. Energy Consumption Av. Price
Source: IEA 4E, Achievements of appliance energy efficiency standards and labelling programs - A Global Assessment in 2016
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What does this tell us?
• No evidence that Standards and Labeling policies have increased real prices to consumers
- Some minor movements, usually explained by other factors
• Generally average real prices for studied products have fallen faster than for other goods in these markets
• No correlation with energy/electricity prices - increasing energy price is a less effective policy, and has inequity issues
• Manufacturers confirm that, given notice, energy efficiency requirements can be absorbed into design process with little or no extra cost
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What does this tell us?
• No correlation between product price and efficiency
• However, sometimes the most efficient products are also the most expensive, because:
• High priced products differentiate through:
- branding
- quality of materials
- design
- energy efficiency is a further indicator of quality
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Implications for policy
• So how does this impact on our policy settings?
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What happened? (increase in purchase cost, expected, actual)
Appliance TypeDOE estimate price
BEFORE
Census prices
AFTER
Refrigerators 56 37
Clothes washers 54 -35
Clothes washers 199 10
Electric water heaters 108 28
Non-electric water heaters 121 34
Central ac 267 207
Room ac 13 -162
Commercial ac 512 -224
Ballasts 6.73 -1.78
Average 148 -12
Median 108 10
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Why did we get it wrong?
• Predictions made prior to regulations based on engineering analysis
• Observed prices may be 5-10 years later
• In the meantime:
- Regulations stimulate growth in the market
- Costs have reduced as the market share has grown
- Some shift to offshore manufacturing
- Companies find innovative solutions
- Technologies rarely predicted
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Price changes over time
0
20
40
60
80
100
120
140P
rod
uct
Pri
ce
Efficient product –new technology
Engineering analysis Retrospective analysis
Assumed price
premium
Observed price
premium
Regulations
Time
Existing
products
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Conclusions
• Current cost-benefit analysis tends to overstate the future costs of efficient appliances
- Politically conservative
• Observations fit ‘learning-by-doing’ model
• Suggests that we have not been optimising policies to reduce energy and CO2
• Policies could be more stringent and still show positive benefits
• Some countries now reduce estimates for future cost impacts
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Resources
• www.iea.org/efficiency
• www.iea-4E.org
IEA 2019. All rights reserved.