“Pragmatism is uncomfortable away from facts.” - William James, Pragmatism
Years of hard work collecting and analyzing an enormous set of facts about energy efficiency paid off as the Department of Energy’s Oak Ridge National Lab rolled out a synthesis of 36 studies of the Weatherization Assistance Program (WAP) this week that showed it saved families an average of almost $300 annually in energy costs while reducing carbon pollution by 2.2 million metric tons.
WAP was established nearly 40 years ago at a time when we were hyper-aware of energy issues in the wake of the Arab oil embargo (see this nifty video about its history). Since its inception, the program has weatherized more than 7.4 million single-family homes and apartment buildings. Typical weatherization measures include caulking, insulating attics or walls and repairing ducts, improving the comfort of a home and easing the energy costs that burden low-income families. This important program warrants examination to ensure effectiveness, although sadly a few months ago a narrower non-peer-reviewed working paper by three economists based on a much smaller data set for one program was highly publicized in spite of its limitations as colleagues and I wrote about here, here and here.
While it has a good track record, WAP faced a practical challenge during a three-year period of additional funding driven by the American Recovery and Reinvestment Act (ARRA). This law, which as reporter Michael Grunwald has written deserves a tremendous amount of credit for its prescient investments in clean and efficient energy programs, boosted WAP funding sevenfold. Actually, despite it being much-maligned as a wasteful “stimulus bill,” this law and its implementation were pretty serious advances in effective and transparent government.
Nonetheless, this increased investment would be a challenge for any program. Oak Ridge’s pragmatic – and peer-reviewed – study design tackles that head-on, actually relying on two sets of analyses, one pre-ARRA and one of the ARRA-era. You can read the summary documents for this huge body of work here (also see here for a description of early-release findings by my colleague Peter Miller):
For your convenience here are some highlights:
- The retrospective look covered one program year (2008; ARRA was enacted in 2009) while the Recovery Act covered PY 2010. Total homes weatherized in the former - 97,965; in the latter - 340,158. That’s quite a jump!
- The average cost to weatherize each home also jumped, from $4,695 to $6,812. This includes funding leveraged by DOE’s investment. Pre-ARRA, about 48 percent per household was non-DOE money, whereas it was only about 13 percent during ARRA. This is exactly what policymakers intended. ARRA was meant to pump much-needed investment into these programs at a time when others (e.g., municipalities and states) experienced catastrophic revenue, and therefore, budget drops.
- The aggregated present value of these investments was $340 million in 2008 and $1.1 billion in 2010. On an individual household level that’s $4,243 in 2008 and $3,190 in 2010. By DOE’s extremely conservative yardstick of “savings-to-investment ratio” or SIR, 2008 hits 1.4 while 2010 hits 0.9. If the ratio for this test is less than one, it means the costs exceed the benefits. However, this SIR test leaves out much more than it includes.
- In fact, squinting at savings and costs based on energy use alone reminds me of Oscar Wilde’s saying about cynics (often said about economists as well, no surprise) - they know the price of everything and the value of nothing. The Oak Ridge analysts find that household-level health and safety benefits can be quantified at $13,550 in 2008 and $13,167 in 2010, eclipsing direct energy benefits. And I think we consumers - especially those on lower incomes who can ill afford education- and productivity-damaging incidents such as asthma attacks and absences from work - really value health and safety.
- The same goes for jobs created by WAP (8,500 in 2008 and 28,000 in 2010) and carbon emission reductions as well (2,246,000 metric tons in 2008 and 7,382,000 metric tons in 2010). Also, as DOE notes in a footnote, the SIR assessment includes non-DOE spending that “are often used for higher cost energy measures.”
- Last but not least, it’s important to pull the lens back and take in the big picture: This short-term injection of public money into the system was meant to keep the economy from plunging into another Great Depression, and its role in doing that should arguably also be kept in mind when accounting for benefits. Economists and narrow tests like SIR all-too-often fixate on costs to the detriment of a host of benefits that the rest of us in society value highly.
The report is frank about the challenges ARRA itself posed to implementers, such as state housing finance agencies and their contractors, which reduced cost-effectiveness. Davis-Bacon Act provisions binding ARRA funding and oversight by the feds drove up administrative and operating costs because it required more paperwork and procedural steps. Also upping the program’s expenses was the need to rapidly increase and train a workforce.
There are a lot of other interesting findings in this synthesis of studies, including what appears to be a consistent underinvestment in apartment building upgrades. In 2008, 23 percent of households touched by the program were in that category (five-plus homes per building), and in 2010 it was 20 percent. As I’ve written about before, about 35 percent of households live in multifamily structures including apartment buildings which implies that a larger percentage of WAP interventions should focus on such buildings.
This underscores the importance of our national Energy Efficiency for All partnership between NRDC’s Urban Solutions Program and other groups, as well as the work of state housing finance agencies, electric and gas utilities, and public officials to improve our apartment building stock too. Many thanks to Oak Ridge for providing such a fact-filled look back, which by providing ample evidence of effectiveness as well as practical ideas for improvement helps clear the way for many more energy-efficiency investments ahead.