Moving toward energy efficiency

By Katie Gibson
June 8, 2017
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Each year, students in the Master in Public Policy (MPP) program at Harvard Kennedy School (HKS) undertake a project called the Policy Analysis Exercise (PAE) as the capstone of their coursework. During their second year at HKS, MPP students work with a client organization to examine a policy or management issue and develop solutions. They produce a final report offering recommendations to their clients.

Shauna Theel MPP 2017 and Andreas Westgaard MPP 2017, both students in the Business and Government Policy (BGP) concentration, worked with Opower, a part of Oracle Utilities, to analyze state energy efficiency policies. We spoke with both of them about their research and the final product they produced. Theel and Westgaard received the Harvard Environmental Economics Program’s prize for best master’s-student paper addressing a topic related to environmental economics, and the HKS Outstanding PAE Award, given to the top three PAEs annually.
 

Q: How did you choose your PAE topic and client?

Shauna: I was interested in the intersection of behavioral science and energy, and Opower is the top organization in this field. Once I was in contact with them, it became clear that doing an experiment using behavioral science would take too long for the PAE process. So I worked with my client to find a topic where I could use the quantitative methods I had learned at HKS and deepen my knowledge of energy policy.

Andreas: When I came to HKS over a year and a half ago, calling myself an energy expert would have been generous. In my short career, I had gained some exposure to energy policy by working on the federal budget, and I was deeply committed to the environment, but I didn’t have the tools to talk about energy or the environment in an educated manner.

However, during my first semester at HKS, a class I took with Henry Lee on energy policy transformed my curiosity into a passion. That’s a large reason why I wanted to research state energy efficiency policies, and learn more about the tools that states and utilities use to get customers to reduce their energy consumption.

Opower is a pioneer in using cutting-edge behavioral science techniques in the energy space, which is why we wanted to work with them on this project.
 

Q: Can you talk about the process of conducting research and working with Opower to produce your PAE?

Shauna & Andreas: We established a road map early in the process with key deliverables and project milestones to ensure that we were on the same page with our client on the topic and expected final products. While we had a general framework in place, the process was highly iterative and we refined our analysis to incorporate the feedback of our client from weekly check-in calls.

We received invaluable feedback from our client in early March when we presented our preliminary findings in person at Opower’s headquarters. This feedback ultimately made the final report much stronger. 
 

Q: Who was your faculty advisor and how did they provide help and expertise?

Shauna & Andreas: Our faculty adviser was Joseph Aldy, who was a great fit because he has done rigorous economic analyses of energy efficiency policies, and also has real-world experience as an adviser to the Obama administration.

Professor Aldy is a leading expert in the field of energy policy, and his feedback and insights throughout the process really strengthened the rigor of our analysis. He helped us to consider the control variables and methods we should use in our ultimate analysis, and to properly interpret the results. He was also intimately familiar with the existing literature and pointed us to studies that helped us to understand why some policies may be functioning more effectively than others. He set a high bar, and really challenged us to meet it.
 

Q: What were some of your conclusions and/or recommendations to your client?

Shauna & Andreas: We analyzed more than 180 Investor Owned Utilities across 10 years. We found that when states set goals for energy reduction and also make them financially indifferent to how much energy they sell, residential energy consumption is nearly 10 percent lower even controlling for differences across time and states. Based on this finding, we put forward a series of first-best, second-best, and third-best recommendations. We were also careful to account for the political realities across different states in our analysis, and the feasibility of adopting a particular policy in different regions.
 

Q: Can you talk about the partnership aspect of the PAE process?

Shauna: One of the lessons I took from writing our thesis is the importance finding the right work partner: someone who you work well with, who has skills complementary to yours, and someone who has the same level of dedication as you.

Andreas: I would wholeheartedly echo Shauna. If you decided to partner with someone on your thesis, make sure it’s someone you work well with, who can fill in your blind spots, and challenge you to stay committed to the marathon research and writing process.