Quality Defects in Building Energy Efficiency: Moral Hazard or Lack of Training?

We examine whether quality defects — an understudied explanation for the energy performance gap in building retrofits — result from hidden actions or skills shortage. Using data from 1,587 post-retrofit audits, we find a high prevalence of defects — 7 per project on average. However, we find little evidence of hidden actions, since neither the frequency nor the severity of defects increase when they can be classified as hard, as opposed to easy, to verify. These results suggest that, despite their high prevalence, quality defects are for a large part non-intentional. More emphasis should therefore be placed on training policies alongside monitoring & verification. Our analysis fills an important gap in the literature by documenting the missing link between the informational context in which retrofit actions are taken and their effectiveness.