Do Energy Efficiency Investments Deliver at the Right Time?

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 generators receive to guarantee supply in peak hours. We compare our results for air conditioners with engineering predictions for other energy-efficiency investments, finding substantial variation in economic value across investments and geographic markets. ∗(Boomhower) Department of Economics, University of California, San Diego. Email: [email protected]. (Davis) Haas School of Business, University of California, Berkeley. Email: [email protected]. We are grateful to Hunt Allcott, Severin Borenstein, Jim Bushnell, Andrew Campbell, Steve Cicala, Russell Garwacki, Peter Jacobs, Paul Joskow, and seminar participants at Carnegie Mellon, Indiana University, Lawrence Berkeley National Lab, Paris School of Economics, Resources for the Future, Stanford University, Toulouse School of Economics, UC Berkeley, UC San Diego, UC Santa Cruz, University of Chicago, University of Michigan, and the AERE annual meeting for helpful comments and to Ellen Lin and Matt Woerman for excellent research assistance. We are also grateful to Udi Helman and Josh Eichman for sharing their electricity price forecast data. This research was supported by the California Energy Commission under EPC-14-026. Boomhower thanks the Stanford Institute for Economic Policy Research. The authors do not have any financial relationships that relate to this research.