Optimizing Simulation for Policy Analysis in a Residential Energy End-Use Model

This paper describes an end-use energy forecasting model for the residential sector. The technology-choice component dynamically optimizes capital and energy inputs to achieve economic efficiency within policy constraints. A policy example contrasts the marginal social costs—from both a private and a social perspective—of a building conservation standard with marginal social costs for investments in electric-power generation alternatives. The standard reduces electric space heat consumption in new houses to approximately one-third of the level predicted under current building codes. The policy analysis assumes that the builder and homeowner bear the full cost and risks of the conservation measure. The standard is shown not to be cost effective relative to power generation alternatives available for the Bonneville Power Administration, a U.S. government power distributor in the Pacific Northwest. However, because the policy is a cost effective social investment, the paper recommends an alternative financing scheme.