facilities to use a single meter to measure the difference between the total generation and consumption

of electricity by allowing the meter to turn both forward and backward. Customers effectively receive retail

prices for the excess electricity they generate. When combined with time of use pricing, this can result in

an attractive value proposition for photovoltaics and other on site power production. In states that do not

have net metering, a second meter must be installed to measure the electricity flowing back to the host

utility, and the utility purchases the power at a rate much lower than the retail price which is a disin 

centive to the development of distributed generation.

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Insufficient and imperfect information can also hamper energy efficiency. Information about energy 

efficient options is often incomplete, unavailable, expensive, and difficult to obtain. When knowledge

about the energy features of products and their economics is insufficient, investments in energy efficien 

cy are unlikely. This insufficient knowledge is compounded by uncertainties associated with energy price

fluctuations and risks related to irreversible investments, both of which lead to high hurdle rates (i.e., the

expected rate of return on a potential investment that is required by the investor) and a slow pace of

technology diffusion.

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While information for most goods and services is imperfect, it is particularly difficult to learn

about the performance and costs of energy efficient technologies and practices, because the benefits are

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often not directly observable. For example, households receive a monthly electricity bill that provides no

breakdown of individual end uses, making it difficult to assess the benefits of efficient appliances and

other products. The complexity of design, construction, and operation of buildings makes it difficult, in

fact, to characterize the extent that any particular building is energy efficient. What looks like apathy

about energy use may more accurately reflect confusion, uncertainty, and lack of time to explore more

efficient alternatives.

Even while recognizing the importance of life cycle calculations, consumers often encounter

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decision making complexities, and end up falling back on simpler first cost rules of thumb. While some

energy efficient products can compete on a first cost basis, many of them cannot. Properly trading off

energy savings versus higher purchase prices involves comparing the time discounted value of the energy

savings with the present cost of the equipment a calculation that can be difficult for purchasers to

understand and compute, even assuming one knew future energy costs. This is one of the reasons

22

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Towards a Climate Friendly  

Built Environment