Evaluation of resource impact factors versus social cost estimates in determining building energy performance standard levels

Abstract

SUMMARYThe development of standards governing the designed energy consumption of buildings has been sought by Congress to increase energy conservation. In determining what degree of energy conservation is desirable, efficiency and equity issues must be considered. Development of a performance standard that constrains design energy consumption to an economically efficient level requires identification of the least cost means of producing the desired building space conditioning characteristics. Accurate valuation of space conditioning inputs and outputs is also crucial to achieving economic efficiency in resource allocation.There is some evidence that market prices of fuels used for building space conditioning and lighting have been less than the actual social cost of these fuels, and therefore energy system designs have been chosen that make inefficient use of resources. The RIF x RUF multiplier concept, proposed by ASHRAE to fill the need for a factor by which to estimate the true cost of fuels, is evaluated and found lacking. Instead, estimates of social marginal cost are found to be the best means for incorporating the total cost of fuels in decisions determining design energy consumption for building space conditioning. This conclusion is supported by discussions of the historical patterns of fuel price distortion, identification of factors that influence the social costs of fuels, and estimates of the levels of social costs for conventional fuels.The social, environmental and economic effects of fuel consumption may be incorporated into building design decisions most comprehensively through the use of a life cycle cost methodology in which fuel prices are represented by estimates of marginal social cost incurred per end use Btu. It is recommended that if feasible, a marginal social cost estimate that accounts for fuel production efficiencies be used in determining minimum life cycle costs for building space conditioning. Since the expense of developing social cost estimates for nonmarket components of social cost is not justified by the findings of the review of the literature related to price distortion, the use of the marginal cost of new fuel supplies is recommended as a proxy. Whether iii market or social cost is used, the cost estimate should be derived for states or smaller regions, because of the extent of variation in fuel supply costs. iv SUMMARY FIGURES TABLES

Estimation of the social costs of natural gas

“…While there are minor damages to water and land resources as a result of natural gas production processes, most of the emissions affect air quality. Table 16 shows emissions estimates per million Btu of gas input to each (a) See appendix of Nieves et al (1979) for an annotated list of the studies reviewed. .70 x 10-4 8.5 x 10-5 4.9 x 10-4 1.84 x 10-2 NO x 5.3 x 10-3 3.76 x 10-3 5.68 x 10-4 2.06 x 10-1 1.39 x 10-2 2.44 x 10-2 2.44 x 10-2 4.85 x 10-2 SOx 1.9x1O-5 2.84 x 10-6 1.02 x 10-3 5.52 x 10-Hydrocarbons 5.54 x 10-1 1.26 x 10-3 1.89 x 10-4 1.39 x 10-3 7.78 x 10-CO 1.26x10-5 1.89 x 10-6 8.46 x 10-3 1.94 x 10-Aldehydes 3.14 x 10-4 4.72 x 10-5 2.26 x 10-4 9.68 x 10- Source: Meres (a) Estimates are unlikely to be off by more than fifty percent.…”

“…In a recent examination of fuel markets, prices and nonmarket costs (Nieves et al 1979), evidence was found of market failure resulting in fuel prices that do not reflect the total social costs of the resources consumed. The pricing of energy at less than its marginal social cost leads to choices of building energy systems which result in higher annual levels of fuel consumption than would occur if all of the relevant resources were accurately or proportionally inaccurately priced.…”