Economic evaluation of investment in electricity conservation

The paper presents an economic study of the potential for energy conservation in Israel. We analyze energy conservation policies targeted at the household sector, focusing on the economic feasibility of scrapping old household electrical appliances, and considering the effect of such policies at both the household and the macro-economic level. The results of our analysis show that the appliance that provides the most potential conservation is the air conditioner (used for both heating and cooling). A scrapping program for old air conditioners passes a cost benefit analysis (CBA) even when external benefits are excluded from the calculation. When external benefits are included, scrapping programs for both washing machines and dishwashers pass the test as well. According to our findings, the annual economic benefit of a program involving the scrapping of 100,000 air conditioners, 45,000 washing machines and 15,000 dishwashers per annum over 10 years ranges from 246 million New Israeli Shekels (NIS) in the first year of implementation to 693 million in the tenth year. Most of the savings are derived from the scrapping of air conditioners.