ACEEE 2004 Summer Study

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2004 ACEEE Summer Study on Energy Efficiency in Buildings

PowerPlay — The Energy Efficiency Game

No Surprise: PowerPlay Reveals Winners and Losers in the Energy Markets

August 26, 2004

PACIFIC GROVE, CALIFORNIA

Participants in this year's ACEEE Summer Study on Energy Efficiency got a real-time glimpse into the dynamics of future electricity markets. The decisions they made as part of a computer-facilitated gaming exercise provided insights into how markets and technology choices might shape future electricity prices, demand, and environmental impacts.

Almost 60 participants split into eleven groups representing a diverse set of households, technology producers and utilities. They invested, negotiated, pressured — and even bribed a little — through 15 years of market interactions. Their decisions shaped technology investments and energy purchases on both the demand and supply side. The eleven groups had to maximize profits and aspects of consumer satisfaction like environmental quality in constantly updated market conditions that were determined by the players' own actions.

After 15 years of hectic interactions and decisions, the world changed in the following ways:

The cooperative pursuit of efficiency by consumers and manufacturers of efficient equipment drove utility and electric generator profits down while the overall profits for high-end, energy efficient product lines increased. The summer study participants probably betrayed their bias by the overwhelming drive to increase efficiency regardless of their supposed group interests. This behavior also created significant volatility in the market.
While electricity prices steadily increased, there was a five-year lag before electricity demand began to drop. Despite the lower demand for electricity, carbon emissions remained roughly unchanged as the utilities lost revenues on renewable resources and had to substitute more fossil fuel technologies in the generation mix.
One of the three Low-Income Household groups lost big time while the remaining five households (two low-income and three high income) either stayed the same or actually increased their overall well-being.

PowerPlay, the computer-facilitated game through which the groups exchanged information, was developed at the University of Maryland, College Park, with support by the US EPA and International Energy Agency (IEA). While providing participants in PowerPlay the real-life experience of making decisions about energy efficiency, the game also offers insights to researchers on how firm and household decisions change under changing technological and market conditions. "This is a new and different way of understanding dynamic price elasticities that will inform energy modeling and policy making" says John 'Skip" Laitner of EPA. Alan Meier of IEA adds: "This was an exceptional opportunity to grasp the underlying reasons for strange market dynamics, and all their ripple effects, in energy efficiency markets."

For more information, please contact University of Maryland Professor Matthias Ruth.

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