Soutenance de thèse : Lucas Vivier

Abstract

Recognizing the multiple benefits of energy efficiency policies in the residential sector – GHG emission reductions, fuel poverty alleviation, health improvement – Western governments have implemented myriad policies in recent years – mostly incentive-based (carbon taxes, subsidies, white certificate obligations, low-interest rate loans) and increasingly regulatory (mandatory renovation, ban on certain heating fuels). In practice, however, these policies have had deceptive effects. Participation rates have been lower than anticipated and, when realized, investment is found to have little impact on energy savings. This gap between expectations and realizations calls for a better account of the key frictions impeding energy efficiency investment in policy assessments.

In this thesis, I build a modeling framework that permits socio-economic assessment of a range of residential energy efficiency policies implemented in economies subject to market failures and behavioral anomalies. In doing so, I bridge a gap between building stock models, which contain rich technological detail but lack key market and behavioral mechanisms, and microeconomic models, which typically consider frictions one at a time, in a stylized way.

Specifically, I propose four improvements on the existing literature: a refinement of the depiction of residential energy efficiency technologies, accounting for complementarities between insulation levels and heating system performance; an explicit account of key barriers to energy savings, including rebound effects, non-energy costs, present bias, myopic expectation of energy prices, credit constraints, landlord-tenant dilemma and coordination problems in multi-family housing; an extended welfare assessment framework factoring in thermal comfort, fuel bill alleviation, health benefits, non-energy attributes and the opportunity cost of public funds; and a stronger integration between energy demand and supply in the residential sector, instrumental in capturing all margins of decarbonization. These improvements are applied to two different models – Res-IRF, an energy-economy model of energy demand in the French residential sector, and Message-ix Buildings, a building stock model that I have applied to the EU residential sector.

Taken together, these improvements allow me to generate the following insights. First, achieving carbon neutrality requires ambitious policies to promote heat pumps in most European countries (France in particular), alongside the full decarbonization of the electricity system. I demonstrate that adopting heat pumps shifts gas use from heating to electricity generation, which from a whole-system perspective is a more efficient use of low-carbon biogas, only available in short supply. While regulatory measures underperform incentive-based instruments from a simple microeconomic perspective, they are crucial for meeting carbon neutrality, especially under uncertainty. Second, I find that the CO2 externality is actually dominated by health, rental, and multi-family frictions in the ranking of justifications for energy efficiency policies. This finding underscores the importance of targeted subsidies for home insulation to address specific frictions while alleviating energy poverty. Finally, our assessment shows that the policies currently implemented in France only close about half of the energy efficiency gap in space heating, pointing to the need for better targeting.

My work begins with the observation that state-of-the-art bottom-up models for the residential sector typically provide a comprehensive description of the building stock, but only a succinct account of household behavior. When considered, barriers to energy efficiency investment, still mainly rely on implicit discount rates, which fails to capture their diversity. In Chapter 1, I improve on this situation by building an original microsimulation framework that combines a high level of technological detail regarding building envelopes and heating systems with a multitude of frictions in energy efficiency investments. This combination in turn allows me to evaluate energy policies with a high level of detail. After validating the model against past policy trends, the policy package currently implemented in France closes about half of the energy efficiency gap related to space heating, about two thirds related to energy savings and one third related to welfare. However, I show that the welfare gap is commensurate with current spending on subsidies, which call for a better alignment of subsidies with distortions to make them more efficient. In Chapter 2, I apply this extended modeling framework to the whole EU to assess the impact of the new Green Deal on the residential sector. In particular, I show that implementation of the EU Emissions Trading System 2, combined with energy supply deep decarbonization, falls short of climate targets and requires ambitious subsidies for heat pumps in most countries. Implementing a large `Renovation wave’ is not a cost-effective strategy at the EU level and would require large increases in public spending. Combining carbon tax and heat-pump subsidies with well-targeted subsidies for home insulation could alleviate potential strain on the electricity system and reduce energy poverty, while supporting residential sector decarbonization.

Albeit necessary, improvements in the modeling of energy demand will only generate limited insights about decarbonization as long as the interplay with energy supply is not properly taken into account. Indeed, state-of-the-art assessments of climate policy tend to focus on endogenous energy demand while keeping energy supply exogenous (or vice versa). When supply and demand are jointly considered, assessments still rely on simplified policy modeling and thus only offer limited insight into the design of climate policies. In chapter 3, I contribute to linking Res-IRF to EOLES, a bottom-up energy system model tailored for France. Running the joint framework confirms the Res-IRF-generated insight that achieving carbon neutrality most cost-effectively requires a balanced approach between improving energy performance, transitioning to low-carbon heating systems, and decarbonizing heating fuels. The framework reveals that total system costs can be underestimated by up to 15\% in engineering studies by failure to realistically model energy-efficiency policies. Finally, in Chapter 4, I apply the same framework to assess the implementation of a ban on gas boiler. I find that heat pump adoption shifts gas use from heating demand to electricity generation, which is a more efficient use of low-carbon biogas from a whole-system perspective. Heat pump adoption therefore provides a hedge against short supply of low-carbon gas. I additionally find that widespread heat pump adoption is more effectively achieved through a ban on new gas boilers than through incentives under uncertainty. I therefore shed a more positive light on the ban.

In an effort to follow best practice, all modeling tools developed in this thesis have been released open-source and designed with a modular architecture that makes them easy to update and adapt to other economies. These developments have been used by French authorities in their own assessment of the household sector’s contribution to the country’s updated low-carbon strategy (Stratégie Nationale Bas-Carbone).