Supply Curves for Conserved Electricity
Resources for the Future Discussion Paper No. 11-11
25 Pages Posted: 13 Apr 2011
Date Written: April 7, 2011
In this paper, we introduce a new top-down approach to modeling the effects of publicly financed energy-efficiency programs on electricity consumption and carbon dioxide emissions. The approach draws on a partial-adjustment econometric model of electricity demand and represents the results of a reverse auction for electricity savings from different levels of public investment. The model is calibrated to recent estimates of the cost-effectiveness of rate payer–funded efficiency programs at reducing electricity consumption. The results suggest that supply curves for conserved electricity are upward sloping, convex, and dependent on policy design and electricity prices. Under the scenarios modeled, electricity savings of between 1 and 3 percent are achievable at a marginal cost of $50 per megawatt hour (MWh) and a corresponding average cost of $25–$35/MWh.
Keywords: energy efficiency, climate change
JEL Classification: Q41, Q48, Q58
Suggested Citation: Suggested Citation