Quantitative Analysis of the Principal-Agent Problem in Commercial Buildings in the U.S.: Focus on Central Space Heating and Cooling

We investigate the existence of the principal-agent (PA) problem in non-government, non-mall commercial buildings in the U.S. in 2003. The analysis concentrates on space heating and cooling energy consumed by centrally installed equipment in order to verify whether a market failure caused by the PA problem might have prevented the installation of energy-efficient devices in nonowner-occupied buildings (efficiency problem) and/or the efficient operation of space-conditioning equipment in these buildings (usage problem). Commercial Buildings Energy Consumption Survey (CBECS) 2003 data for single-owner, single-tenant and multi-tenant occupied buildings were used for conducting this evaluation. These are the building subsets with the appropriate conditions for assessing both the efficiency and the usage problems. Together, these three building types represent 51.9 percent of the total floor space of all buildings with space heating and 59.4 percent of the total end-use energy consumption of such buildings; similarly, for space cooling, they represent 52.7 percent of floor space and 51.6 percent of energy consumption. Our statistical analysis shows that there is a usage PA problem. In space heating it applies only to buildings with a small floor area (<_50,000 sq. ft.). We estimate that in 2003 it accounts for additional site energy consumption of 12.3 (+ 10.5 ) TBtu (primary energy consumption of 14.6 [+- 12.4] TBtu), corresponding to 24.0 percent (+- 20.5 percent) of space heating and 10.2 percent (+- 8.7 percent) of total site energy consumed in those buildings. In space cooling, however, the analysis shows that the PA market failure affects the complete set of studied buildings. We estimate that it accounts for a higher site energy consumption of 8.3 (+-4.0) TBtu (primary energy consumption of 25.5 [+- 12.2] TBtu), which corresponds to 26.5 percent (+- 12.7 percent) of space cooling and 2.7 percent (+- 1.3 percent) of total site energy consumed in those buildings.