Do Energy Efficiency Investments Deliver at the Right Time?

Judson P. Boomhower and Lucas Davis

No 23097, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: D40 Q41 (search for similar items in EconPapers)
Date: 2017-01
New Economics Papers: this item is included in nep-ene and nep-reg
Note: EEE
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Citations: View citations in EconPapers (4)

Published as Judson Boomhower & Lucas Davis, 2020. "Do Energy Efficiency Investments Deliver at the Right Time?," American Economic Journal: Applied Economics, vol 12(1), pages 115-139.

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