Energy Efficiency in Mexico · Energy Efficiency in Mexico Veronica Irastorza Center for...

Energy Efficiency in Mexico

Veronica Irastorza

Center for Environmental Public Policy

Goldman School of Public Policy

CEGA Evidence to Action UC Berkeley April 2013

According to the IEA about 70% of the potential CO2 abatement in 2020 comes from energy efficiency

Source: International Energy Agency, World Energy Outlook, 2011

Developing countries are key

Also according to IEA, most of the growth in energy demand is expected from developing countries.

Growth in energy consumption in non-OECD countries 85% vs 18% in OECD countries.

To support a global population of 9.5 billion in 2050 with average standard of living equivalent to the current US lifestyle would require 16 times the current use (Brown et at, Jan 2011)

Structure of the Mexican Energy Sector

Energy Regulatory Commission

(CRE)

National Energy Efficiency Usage Commission

National Hydrocarbons Commission

National Commission for

Nuclear Security and Safeguards

National Oil Company

Mexican Petroleum Institute

Electricity Research Institute

Nuclear Research Institute

National Regulatory Commissions

State-owned companies (operators)

Research Institutes

National Power Company

Ministry of Energy

IEPs

http://vmwl1.iie.org.mx/sitioIIE/sitio/redireccionar.php?opcion=38

Electricity

Electricity generation 2011 (GWh)

Generation: 291,673 GWh

Fossil, 81%

Geothermal, 2%

Nuclear, 3%

Wind, 1%

Hydro, 13%

Others, 19%

Source: SENER with CRE, CFE and ANES data.

Installed generation capacity 2011 (MW)

Non-fossil, 15,061 Fossil,

46,607

25% of the installed capacity is from non-fosil fuels

Capacity: 61,770 MW

Energy Efficiency

Mexico has been moving towards EE through aggressive programs and standards.

The challenge in Mexico (and many countries) is to end poverty and keep the energy demand low

There are limited resources that need to be used in the most efficient way

To prioritize EE support, the Mexican government used a CO2 abatement cost curve

Mexico’s Abatement Cost Curve, 2030

50% 60% 40% 70% 80% 90% 100% 0% 10% 20% 30%

-20

-10

-70

-60

-50

-40

-30

20

30

0

10

Abatement Potential

(%)

Lighting

CHP

Appliances

Vehicle efficiency

Heaters and A/C Solar water heaters

Efficiency in public transportation

Cost USD/MWh

Industrial engines

Water pumps

New buildings

Source: SENER (McKinsey and Co.)

Incandescent Light bulb replacement program “Luz Sustentable”

Country Population (millions)

Time Period Substituted lamps

Uganda 33.4 2006 800 thousand

Cuba 11.5 2006-2007 9 millons

Spain 40.5 2009-2010 9.4 millons

Mexico 112 2011-2012 45.8 millions

Incandescent Light bulb replacement program “Luz Sustentable”

Each participant saved $120 USD on their electricity bill.

The government saved $850,000 USD on avoided subsidies

Environmental benefits avoided GHG emissions equivalent to take out 600,000 cars.

Type Sales prohibited by

100 watts and up December 2011

75 watts December 2012

40 y 60 watts December 2013

EE Standard for Lightbulbs

This standard phased out inefficient lightbulbs:

Appliance replacement program “Cambia a tu viejo”

1,884,062 old appliances replaced as of Dec 31, 2012.

Mr. Lucas Davis will discuss this program

Energy Subsidies

While doing important EE efforts, the Mexican government gives subsidies to electricity, gasoline and LP Gas.

Not the best energy pricing signals!

• In 2008, energy subsidies were 10 times more than the cost of Oportunidades and, in 2010, 4 times the cost of all the poverty programs together.

• Gasoline: More than 16,000 million

dollars in subsidies in 2012.

• Electric Subsidies to households: 7,000 million dollars in 2011

Regressive subsidies

0%

5%

10%

15%

20%

25%

30%

I II III IV V VI VII VIII IX X

Source: CIDE

Distribution of energy subsidies by decile

• Residential electricity rates cover only 43% of the cost on average (2011). Agricultural rates cover only 31%

Mexico is not alone

Subsidies for petroleum products, electricity, natural gas and coal reached $480 billion in 2011 (0.7% of global GDP) (IMF, Jan 2013)

Source: International Energy Agency, World Energy Outlook, 2011

What does Mexico need to do?

Transparent and targeted subsidies.

Keep investing on energy efficiency, but

Strengthen the evaluations on energy efficiency programs and standards to get the most bank for the buck

Muchas gracias

Veronica Irastorza

Visiting Scholar

Center for Environmental Public Policy

Goldman School of Public Policy

[email protected]

Motivation Participation Energy Savings Discussion

Behavioral Response to an ApplianceReplacement Program in Mexico

Lucas Davis

Haas School of Business, UC Berkeley

Energy Institute at Haas

CEGA

April 25, 2013

Davis (UC Berkeley) CEGA Evidence to Action April 25, 2013 1 / 19


Introduction

Total energy consumption worldwide is forecast to increase 54% by 2030 (EIA, 2012).

Most of this growth is forecast to occur in developing countries.

Meeting this increase in demand will be an immense challenge.

Most economists would like to see a carbon tax, or cap-and-trade program.

Although there has been some progress, most emissions remain unpriced.

Instead, what is receiving much attention is energy-efficiency.



The McKinsey Curve

Source: McKinsey and Company, “Pathways to a Low-Carbon Economy”, 2010



The McKinsey Curve for Mexico

Exhibit 4. National carbon abatement cost curve for MexicoGHG abatement cost curve for Mexico in 2030

S t id

Degraded forest reforestation

HDV* diesel package 4

Increased electric public transport

GHG abatement cost curve for Mexico in 2030Cost, US$/t CO2e

80

60

100

Grassland

Increased and more efficient b s transport

Agronomy practices

Smart grid

On shore wind

Forest management

Solar CSP

Off shore wind

p g

CCS in oil and gas

Cogeneration in oil and gas

L dfill

Cropland nutrient management

LDV* gasoline package 2

Other industry Biofuels 1st

Solar PV

Biofuels 2nd generation

40

-20

20

40

45050 500 550400350

0

2502001501000 300

Livestock –

Recycling waste

Geothermal

Grassland management

Organic soils restoration

bus transport

Oil to gas New build

ffi i

Landfill gas electricity generation

industrygeneration

Small hydro

Abatement

-80

-60

-40

-120

-100

LDV* gasoline package 4LDV* gasoline package 3

Landfill gas direct use

Livestock –antimethanogen vaccine

Tillage and residue management

Reduced deforestation

restoration Oil to gas shift in power

Nuclear

Pastureland afforestation

efficiency package, residential

Reduced flaring in oil and gas

Abatementpotential,Mt CO2e/year

-180

-160

-140

New build lighting controls, commercial

LEDs

Electronics, residential

Appliances, residentialWastewater treatment

21

LEDs

* LDVs = light duty vehicles; HDVs = heavy duty vehiclesNote: The cost estimate for the light-colored bars is approximate

Source: McKinsey GHG abatement cost curve v2.0; McKinsey analysis

Source: McKinsey and Company, “Low-Carbon Growth: A Potential Path for Mexico”, 2009



Program Details

Nationwide program March 2009 - December 2012

1.5 million refrigerators and air-conditioners replaced

Old appliances had to be 10+ years old

New appliance must exceed 2002 standard by 5%

Direct cash subsidies of $30, $110, or $170



Dataset Page 1 of 1

2/21/2013http://www.westernfreepress.com/wp-content/uploads/2012/07/Electric-Meter.jpg

Household-level electric billing records

Two-year panel from May 2009 through April 2011

Bimonthly billing information for 26 million households

Program data about recipients of energy-efficiency subsidies

About 1 million participants

Includes date of replacement, appliance type, subsidy amount



Participation Behavior

How does participation change with subsidy amounts?

Our Research Approach

Regression Discontinuity (RD)

Compare behavior just on either side of eligibility thresholds.

Observationally-equivalent households offered different subsidy amounts.



Figure 2: The DiscontinuityAir Conditioners, 500 kWh

Subsidy falls from $170to $110 at 500 kWh

0.2

5.5

.75

1

Fra

ctio

n of

par

ticip

ants

who

rec

eive

d $1

70 s

ubsi

dy

400 450 500 550 600

Average Historical Electricity Consumption (kWh)

Source: Boomhower and Davis (2013).



Figure 3: Could Households Manipulate Eligibility?Air Conditioners

Subsidy falls from$170 to $110



05

1015

Num

ber

of H

ouse

hold

s (0

00)

400 500 600 700 800 900 1000 1100





Figure 4: Program Participation, Air Conditioners

Minimumto participate

Subsidy fallsfrom $170

to $110 Subsidy fallsfrom $110to $30


to $0

0.5

11.

52

2.5

Per

cent

age

of H

ouse

hold

s P

artic

ipat

ing

0 250 500 750 1000





Figure 4: Program Participation, Refrigerators

Minimumto participate


to $110

Subsidy fallsfrom $110to $30

Subsidy fallsfrom $30to $0

0.5

11.

52

2.5

Per

cent

age

of H

ouse

hold

s P

artic

ipat

ing

0 50 100 150 200 250 300





Energy Savings

How much energy did participants save?

How could the programs have been designed to save more?

Our Research Approach

Compare electricity consumption before and after appliance replacement.

Incorporate control groups matched to participants based on location.



Engineering Estimates of Savings

Source: World Bank, “Low-Carbon Development for Mexico’, 2009



31

FIGURE 3 The Effect of Refrigerator Replacement on Household Electricity Consumption

Note: This figure plots estimated coefficients and 95th percentile confidence intervals describing monthly electricity consumption before and after refrigerator replacement. Time is normalized relative to the delivery month of the appliance (t=0) and the excluded category is t=-1. Observations from before t=-12 and after t=12 are dropped. The sample includes 858,962 households who received new refrigerators through C4C between March 2009 and May 2011 and an equal number of non-participating comparison households matched to treatment households using location and pre-treatment consumption. The regression includes household and county by month-of-sample fixed effects. Standard errors are clustered by county.

−15

−10

−5

05

Kilo

wat

t Hou

rs P

er M

onth

−12 −10 −8 −6 −4 −2 0 2 4 6 8 10 12Months Before and After Replacement

Source: Davis, Fuchs, and Gertler (2012)



Source: Davis, Fuchs, and Gertler (2012).



Interpretation

What is going on?

Households increased utilization of air-conditioners.

New appliances tended to be larger and have more features.

Old appliances tended to be close to the minimum age threshold.



Summary

These studies provide some of the most direct evidence to date on EE subsidies.

Participation

Most households would have participated even with much lower subsidy amounts.

So smaller subsidies would have been considerably more cost-effective.

Energy Savings

Refrigerator replacement saves considerably less energy than expected.

Air-conditioner replacement appears to actually increase energy consumption.



Urgent Need for More Research

We should be performing analyses like this of all EE programs.

What about energy-efficient lighting, and other rapidly improving technologies?

What about other forms of deployment (e.g. standards versus subsidies)?

High-quality microdata is critical.

These data must be collected and made publicly available.

“In god we trust, everyone else bring data.”



Thank You!

Comments Welcome

[email protected]


Energy Efficiency in Mexico · Energy Efficiency in Mexico Veronica Irastorza Center for...

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