Should policy-makers allocate funding to vehicle electrification or end-use energy efficiency as a strategy for climate change mitigation and energy reductions? Rethinking electric utilities efficiency programs

In order to reduce greenhouse gas emissions in the United States by an order of magnitude, a portfolio of mitigation strategies is needed. Currently, many utilities pursue energy efficiency programs. We study a case where utilities could choose whether to allocate their energy efficiency budget to either end-use efficiency or vehicle electrification as a means to reduce CO₂ emissions. We build a decision space that displays the conditions under which utilities should pursue either strategy. To build such decision space, assumptions are needed on how consumers respond to electric vehicle incentives, and what would be the baseline vehicle selected by consumers if no incentives were in place. Since these two aspects are highly uncertain, we treat them parametrically: if consumers are replacing a conventional vehicle with a PHEV, utility incentive programs to induce PHEV adoption appear to be cost-effective for a wide range of efficiency program costs and grid emissions factors. - Highlights: • We compare subsidies for CO₂ cuts with electric efficiency and plug-in hybrid vehicles. • Our model focuses PHEVs with a 20 km range and residential electric efficiency. • The subsidy choice depends on technical, economic, and regulatory factors. • These include grid emissions factor, size of subsidy, and efficiency program costs. • PHEV grants of $800-1000/vehicle make sense in most U.S. states without decoupling