Do Energy Efficiency Investments Deliver at the Right Time?

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. (JEL L94, L98, Q41, Q48)

Topics & Concepts