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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
                          LCCi , f 
       PRi , f 
                     LCCi ,h 
                        h i

                                        LCCi , f  CINVi , f  CENER f  ICi , f

Barriers to energy efficiency                 Tentative representation in Res-IRF
(non-exhaustive list)                         (parameterized according to expert elicitation)
Market       Uncertainty                      Myopic expectation                                CENER
barriers     Hidden costs                     Fixed intangible costs                            a . IC
             Heterogeneity                    Heterogeneity parameter                           ν
Market       Split incentives                 Heterogeneous discount rates (7%...50%)           CENER
failures     Information externalities        Decreasing intangible costs                       (1-a) IC
             Innovation externalities         Learning-by-doing functions                       CINV
                                                                                                           5
Efficiency, ‘Sufficiency’ and the
             rebound effect
Unrestrictive behavior




                                                                            Data: EDF R&D (see Cayre et al., 2011, ECEEE Proceedings)
 LE/A

                  B

                      C
  Sufficiency




                           D


                                                     Restrictive behavior
                                    E   F             G



                Energy efficiency           Energy price



                                                                                                                                        6
Dynamics in the
reference scenario
Endogenous retrofitting dynamics
Adoption spillovers prevail (self-reinforcing)   ‘Natural’ exhaustion prevails




                  65%                                          90%




                                                                            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
Policy simulation
Income tax credits 2009-2020
•   Subsidy of 30% of investment cost
•   Capped at €8,000 per dwelling


Zero rate loans 2009-2020
•    Subsidy equal to the interests of a 10-year loan at 4%
•    Base capped at €30,000 per dwelling



2010                       2020                       2030                      2040              2050

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




                       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
                                                                                                         11
Ineffectiveness of the policy packages assessed




                                             €200/tCO2
                                             in 2010

National Target -38%


                                                         12
Policy impacts on existing dwellings in
                2050




                                          13
Why in the end, tax outperforms


                             Rebound




                             Sufficiency




                                       14
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
                                                                  16

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

  • 1. Res-IRF, modeling the savings potential in the French residential sector Louis-Gaëtan Giraudet, Céline Guivarch and Philippe Quirion CIRED (www.centre-cired.fr)
  • 2. Outline Res-IRF: Residential module of Imaclim-R France 1. Model description 2. Dynamics in the reference scenario 3. Policy simulations 2
  • 4. 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
  • 5. Res-IRF: microeconomic features LCCi , f  PRi , f   LCCi ,h  h i LCCi , f  CINVi , f  CENER f  ICi , f Barriers to energy efficiency Tentative representation in Res-IRF (non-exhaustive list) (parameterized according to expert elicitation) Market Uncertainty Myopic expectation CENER barriers Hidden costs Fixed intangible costs a . IC Heterogeneity Heterogeneity parameter ν Market Split incentives Heterogeneous discount rates (7%...50%) CENER failures Information externalities Decreasing intangible costs (1-a) IC Innovation externalities Learning-by-doing functions CINV 5
  • 6. Efficiency, ‘Sufficiency’ and the rebound effect Unrestrictive behavior Data: EDF R&D (see Cayre et al., 2011, ECEEE Proceedings) LE/A B C Sufficiency D Restrictive behavior E F G Energy efficiency Energy price 6
  • 8. Endogenous retrofitting dynamics Adoption spillovers prevail (self-reinforcing) ‘Natural’ exhaustion prevails 65% 90% 8
  • 9. 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
  • 11. Policy simulation Income tax credits 2009-2020 • Subsidy of 30% of investment cost • Capped at €8,000 per dwelling Zero rate loans 2009-2020 • Subsidy equal to the interests of a 10-year loan at 4% • Base capped at €30,000 per dwelling 2010 2020 2030 2040 2050 Carbon tax • €32/tCO2 in 2010 • Increasing by 5.8% pa until 2030, 4% afterwards 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 11
  • 12. Ineffectiveness of the policy packages assessed €200/tCO2 in 2010 National Target -38% 12
  • 13. Policy impacts on existing dwellings in 2050 13
  • 14. Why in the end, tax outperforms Rebound Sufficiency 14
  • 15. 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
  • 16. 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 16