ABSTRACT

This paper examines the marginal welfare gain of adopting higher energy efficiency after another efficiency measure has already been installed. For example, how does installing stringent thermal insulation influence energy efficiency investment decisions thereafter? A mathematical model that embeds a welfare-maximizing household in a building energy model is employed. Four archetypical households across Saudi Arabia and two electricity pricing schemes are chosen for this illustration. The households exhibit diverse socioeconomic attributes and live in regions with varying physical characteristics. Key findings include: Investing in more stringent thermal insulation after already installing more efficient air conditioners reduce welfare, but not necessarily vice versa. Under both electricity pricing schemes, welfare is lowered when households reduce infiltration after installing more stringent thermal insulation. Comparatively, welfare gains are made for all other preexisting efficiency cases. In western Saudi Arabia, variability in welfare between marginal investment decisions are low relative to those in other regions.