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The Silver Lining of Price Spikes: How Electricity Price Spikes Can Help Overcome the Energy Efficiency Gap

Author

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  • Mauritzen, Johannes

    (Norwegian School of Economics)

Abstract

Studies have shown that many consumers and businesses fail to invest in energy efficiency improvements despite seemingly ample financial incentives to do so – the so called energy efficiency gap or paradox. Attempts to explain this gap often focus on searching costs, information frictions and behavioral factors. Using data on Norwegian electricity prices and Google searches for heat pumps, I suggest that the inherently spikey nature of many electricity markets has a strong and significant positive effect on searching for information on energy efficiency goods. Because consumers pay for electricity based on at least monthly averages of the wholesale price, I can identify the informational and behavioral effect by decomposing prices into smoothed and deviation components using a novel method of measuring spikiness, comparing the actual price series with a range of deviations from Loess smoothed series.

Suggested Citation

  • Mauritzen, Johannes, 2014. "The Silver Lining of Price Spikes: How Electricity Price Spikes Can Help Overcome the Energy Efficiency Gap," Working Paper Series 1048, Research Institute of Industrial Economics.
    • Handle: RePEc:hhs:iuiwop:1048
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    More about this item

    Keywords

    Energy efficiency; Deregulated electricity markets; Price spikes; Informational frictions;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices

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