Thursday, July 08, 2010

Why is the U.S Department of Energy so Energy Inefficient?

We are supposed to find this article ironic. The Department of Energy doesn't practice what it preaches. While this is amusing, we should ask an old question; "why"?

As I have told you before, I have used the 2003 CBECS micro data, and estimated simple statistical models of a commericial building's electricity consumption per square foot of interior space. Controlling for year built, hours operated, climate zone, how many workers work there, and its intended use --- my focus was to test whether governmental and private sector buildings consume the same amount of electricity. I reject this hypothesis. Government buildings consume roughly 20% more.

My statistical study could not answer "why" but the answer must have something to do with incentives. For profit firms have to pay their bills and this provides some incentive to become "lean and mean" with regards to energy efficiency. In the case of the government, can they simply budget for more money to cover operating expenses? Intuitively, do they have incentive to make their buildings energy efficient? Would the DOE be allowed to keep any "extra saved" $ for a better holidays party? Or would they simply give the money back to the Treasury? If the second case is the truth, then this isn't a good set of incentives for achieving energy efficiency.

One way to test my claim is look across government buildings; so compare the CIA's energy consumption to EPA to DOE to treasury. Is there any "within" variation in the incentives that could be used to study the role that soft budget constraints play in being energy inefficient?

Today's "Day of Shame" for DOE is funny but what do we learn from this one data point?