Benoit Allibe - PhD student at CIRED – EDF R&D Marie-Hélène Laurent, Dominique Osso - EDF R&D

1. Residential demand for space heating :‘realistic’ modelling principles and implications for national energy policies Benoit Allibe - PhD student at CIRED – EDF R&D Marie-Hélène Laurent, Dominique Osso - EDF R&D contact: benoit.allibe@edf.fr

2. Energy consumption in the residential sector Overview of current consumption and dynamic of residential end-uses (source: ODYSEE, 2008) • Focus on the dynamic of residential space heating energy consumption 3ème séminaire des doctorants ECLEER – 23-24 septembre 2010

3. Two main types of models Overview of models : • (Rivers & Jaccard, 2006) • Focus on the improvement of the behavioural realism of bottom-up modelling of residential SH • - short-term behaviour : daily use of space heating • - long-term behaviour : investment in energy efficient technologies 3ème séminaire des doctorants ECLEER – 23-24 septembre 2010

4. Between engineering and economics • Technological options for energy demand reduction are well-known and easy to model by thermal simulation • Basic physical phenomenon  physicallimits of energy-efficiency are known • BUT : households daily behaviour isnormative in most engineering models • Space heating is one of the most price elastic end-uses (Reiss & White, 2005) • Space heating has one of the highest rebound effects among end-uses (Sorrell et al., 2009) • Space-heating energy consumption depends on household income (Santin et al. 2009) • The use of socio-economic variables on top of engineering calculations seems to be a meaningful way of modelling the residential space heating consumption (Aydinalp-Koksal & Ugursal, 2008) 3ème séminaire des doctorants ECLEER – 23-24 septembre 2010

5. Behavioural realism : space heating daily use (1) engineering model price income efficiency Income share dedicated to technical SH consumption 3ème séminaire des doctorants ECLEER – 23-24 septembre 2010

6. Behavioural realism : space heating daily use (2) • Intensity of use on the pre-1988 French dwelling stock : panel data (1998-2005) Income share dedicated to normative space heating • Daily behaviours are heterogeneous but not randomly distributed dependant variable • Strong overestimation of energy efficiency savings in the case of high service price combined with low income 3ème séminaire des doctorants ECLEER – 23-24 septembre 2010

7. Behavioural realism : investment in EE technologies (1) • Basic investment modelling : • Life Cycle Cost (LCC) minimization with engineering calculations and low discount rate (<5%) • ‘Energy efficiency gap’ • LCC minimization with high implicit discount rates (>10%) reflecting : • - Economic barriers : hidden costs, limited access to capital, risk aversion, heterogeneity… • - Market failures : imperfect and asymmetric information, split incentives… • - Behavioural imperfections : bounded rationality, culture… • - Engineering miscalculations : normative use of technologies, bad installation of technologies… • Theory of the diffusion of innovations (Rogers, 2003) • relative advantage : financial, comfort, environmental friendliness, independence • compatibility : with technical infrastructure + habits and routines • trialability • complexity • observability technologies are not only characterized by their cost and efficiency 3ème séminaire des doctorants ECLEER – 23-24 septembre 2010

8. The impact of a subsidy depends on the market heterogeneity Behavioural realism : investment in EE technologies (2) • How to model that? Translation with LCC + explicit heterogeneity parameter (v) ‘Utility approach’ Example: 3ème séminaire des doctorants ECLEER – 23-24 septembre 2010

9. Bottom-up simulation of market heterogeneity • Sources of heterogeneity in the life cycle cost calculations LCC = CC + βOCOC + ej heterogeneity of households preferences ??? heterogeneity of existing infrastructure performance and use (segmentation) discount rate = f(income) 3ème séminaire des doctorants ECLEER – 23-24 septembre 2010

10. An unexplored source of heterogeneity in bottom-up simulation models: equipment prices • Observations on energy efficient technologies in France (EDF R&D) : • ranges from 0.3 to 1 depending on the EE technologies • Lowest values for heating systems, highest for insulation • Prices distribution model, for a given performance : number of estimates price 3ème séminaire des doctorants ECLEER – 23-24 septembre 2010

11. Our simulation model • 1000 unique dwellings (EDF R&D survey, 2009) • Engineering model: French Energy Performance Certificate • Demographic model of dwellings elements • Refurbishment market model: 3 performance level for each dwelling element • Random pick of a price in the price distribution for each performance option when refurbishment occurs • LCC minimization

12. Impact of technology prices heterogeneity : simulation • Sensitivity analysis: impact of on market shares (‘no subsidy’ scenario) 3ème séminaire des doctorants ECLEER – 23-24 septembre 2010

13. Impact of technology prices heterogeneity • From the household’s point of view: lack of visibility about the cost-effectiveness of EE technologies, blurred price signal for EE investments • From the public (or utility) point of view: impact on the cost of saved energy when the subsidy is a percentage of equipment price (e.g. tax credit in France) • Ratio between the cost of subsidy for the 25% most expensive (Q4) and the 25% less expensive equipments (Q1) at a given performance level 3ème séminaire des doctorants ECLEER – 23-24 septembre 2010

14. Conclusion • The lack of ‘daily’ behavioural realism in engineering bottom-up simulation can strongly underestimate the necessary efforts to reach ambitious national targets • The impact of economic incentives depends on the market heterogeneity and on the relative importance of capital and energy costs compared to qualitative variables (e.g. comfort) • Refurbishment price heterogeneity can be very important and it raises questions about: • the meaningfulness of a percentage subsidy without ‘per technology’ upper limit ? • the need for public information about energy efficient refurbishment prices ? • the presence of price discrimination ? • In such an heterogeneous market, standard of minimum performance level for each kind of dwelling refurbishment regarding space heating seems to be the only way to avoid low quality and irreversible (for many decades!) refurbishments to be made contact: benoit.allibe@edf.fr 3ème séminaire des doctorants ECLEER – 23-24 septembre 2010

15. Example: impact of operating cost heterogeneity (Cayla, 2009) 3ème séminaire des doctorants ECLEER – 23-24 septembre 2010