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Do Energy Efficiency Investments Deliver at the Right Time?

  • Judson Boomhower
  • Lucas Davis
American Economic Journal: Applied Economics
vol. 12, no. 1, January 2020
(pp. 115-39)
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Abstract

Most analyses of energy efficiency investments ignore that the value of electricity varies widely across hours. We show how much timing matters. Using novel hourly consumption data from an air conditioner rebate program in California, we find that energy savings are concentrated in high-value hours. This significantly increases the value of these investments, especially after we account for the large capacity payments that electricity generators receive to guarantee supply in peak hours. We then use engineering predictions to calculate timing premiums for a wide range of energy efficiency investments, finding substantial variation in economic value across investments.

Citation

Boomhower, Judson, and Lucas Davis. 2020. "Do Energy Efficiency Investments Deliver at the Right Time?" American Economic Journal: Applied Economics, 12 (1): 115-39. DOI: 10.1257/app.20170505

Additional Materials

JEL Classification

  • L94 Electric Utilities
  • L98 Industry Studies: Utilities and Transportation: Government Policy
  • Q41 Energy: Demand and Supply; Prices
  • Q48 Energy: Government Policy
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