Do Energy Efficiency Investments Deliver at the Right Time?

53 Pages Posted: 30 Jan 2017

See all articles by Judson Boomhower

Judson Boomhower

Stanford University

Lucas W. Davis

University of California, Berkeley - Haas School of Business; National Bureau of Economic Research (NBER)

Date Written: January 2017

Abstract

Electricity cannot be cost-effectively stored even for short periods of time. Consequently, wholesale electricity prices vary widely across hours of the day with peak prices frequently exceeding off-peak prices by a factor of ten or more. Most analyses of energy-efficiency policies ignore this variation, focusing on total energy savings without regard to when those savings occur. In this paper we demonstrate the importance of this distinction using novel evidence from a rebate program for air conditioners in Southern California. We estimate electricity savings using hourly smart-meter data and show that savings tend to occur during hours when the value of electricity is high. This significantly increases the overall value of the program, especially once we account for the large capacity payments received by generators to guarantee their availability in high-demand hours. We then compare this estimated savings profile with engineering-based estimates for this program as well as a variety of alternative energy-efficiency investments. The results illustrate a surprisingly large amount of variation in economic value across investments.

Suggested Citation

Boomhower, Judson and Davis, Lucas W., Do Energy Efficiency Investments Deliver at the Right Time? (January 2017). NBER Working Paper No. w23097, Available at SSRN: https://ssrn.com/abstract=2907900

Judson Boomhower (Contact Author)

Stanford University ( email )

Stanford, CA 94305
United States

Lucas W. Davis

University of California, Berkeley - Haas School of Business ( email )

545 Student Services Building, #1900
2220 Piedmont Avenue
Berkeley, CA 94720
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
7
Abstract Views
148
PlumX Metrics