The residential refurbishment market far away from economic rationality: application of marginal abatement cost to the French white certificate

Panel: 8. Monitoring and evaluation: building confidence and enhancing practices

This is a peer-reviewed paper.

Authors:
Jean-Ren. Brunetière, EDF-R&D, France
Dominique Osso, Chaire Economie du climat – IR5, France
Xiaofen Xu, Chaire Economie du climat – IR5, France
Marie-Hélène Laurent, EDF-R&D, France

Abstract

The initial idea of the French White Certificate (WC) scheme, which entered into force in 2006, was to rely on a tradable WC on the basis of market development leading to save energy at the lowest cost. However, the WC market lacks of liquidity and the majority of the trading is done over-the-counter . Thus the question of the energy savings cost arise, especially to better understand where are the “low hanging fruits” and the highest ones.

Given the dominance of the residential building sector in the scheme, we confine our study to the energy refurbishment market for residential buildings in this paper.

An economic model, based on standardized operations’ monotonic functions of abatement costs is designed to estimate the distribution of energy saving costs (€ per saved kWh). At the opposite of what is usually available in the literature, the costs are described using log-normal distributions, and not mean values, to take into account the scattering of retrofitting prices for the same operation. So we can take in account for each type of action the mean and marginal costs of refurbishment. This more realistic approach gives results that are significantly different from using mean values.

Two approaches are developed: following an economic rationality or simulating the current market (i.e. the refurbishment actions occurring in 2012) to compare the investment undertaken by the household and what should have been done according to a pure economic viewpoint. Moreover, the economic ranking of retrofitting actions could be done as well as the coverage level of the overall market.

Our results help us to quantify the gap between a pure economic analysis and the reality of the retrofitting market by comparing the cost of WC in both cases. Part of the gap is linked to the structure of this market mixing constrained and self-willed actions as well as non-energy benefits (in terms of comfort, safety, aesthetics, etc.).

Such analysis gives us clues to understand the WC scheme evolution within the retrofit market from energy cost/benefit rationality to the customer’s multidimensional perspective (i.e. including non-energy benefits and constraints).