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Do Energy Efficiency Investments Deliver at the Right Time?

Author

Listed:
  • Judson Boomhower
  • Lucas Davis

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.

Suggested Citation

  • Judson Boomhower & Lucas Davis, 2020. "Do Energy Efficiency Investments Deliver at the Right Time?," American Economic Journal: Applied Economics, American Economic Association, vol. 12(1), pages 115-139, January.
    • Handle: RePEc:aea:aejapp:v:12:y:2020:i:1:p:115-39
    DOI: 10.1257/app.20170505
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    Cited by:

    1. Fu, Zheng & Novan, Kevin & Smith, Aaron, 2024. "Do time-of-use prices deliver energy savings at the right time?," Journal of Environmental Economics and Management, Elsevier, vol. 128(C).
    2. Hammerle, Mara & Burke, Paul J., 2022. "From natural gas to electric appliances: Energy use and emissions implications in Australian homes," Energy Economics, Elsevier, vol. 110(C).
    3. Granderson, Jessica & Fernandes, Samuel & Touzani, Samir & Lee, Chih-Cheng & Crowe, Eliot & Sheridan, Margaret, 2020. "Spatio-temporal impacts of a utility’s efficiency portfolio on the distribution grid," Energy, Elsevier, vol. 212(C).
    4. Chaudhuri, Kausik & Huaccha, Gissell, 2023. "Who bears the energy cost? Local income deprivation and the household energy efficiency gap," Energy Economics, Elsevier, vol. 127(PA).
    5. Hyun, Suk & Taghizadeh-Hesary, Farhad & Shim, Hyoung Suk, 2021. "Modeling solar energy system demand using household-level data in Myanmar," Economic Analysis and Policy, Elsevier, vol. 69(C), pages 629-639.
    6. Gosnell, Greer & McCoy, Daire, 2023. "Market failures and willingness to accept smart meters: Experimental evidence from the UK," Journal of Environmental Economics and Management, Elsevier, vol. 118(C).
    7. Andrew J. Satchwell & Peter A. Cappers & Jeff Deason & Sydney P. Forrester & Natalie Mims Frick & Brian F. Gerke & Mary Ann Piette, 2020. "A Conceptual Framework to Describe Energy Efficiency and Demand Response Interactions," Energies, MDPI, vol. 13(17), pages 1-14, August.
    8. Mats Kröger & Karsten Neuhoff & Sebastian Schwenen, 2025. "Contracts in Crisis: The War in Ukraine and Long-Term Contracts in Energy Markets," Discussion Papers of DIW Berlin 2118, DIW Berlin, German Institute for Economic Research.
    9. Qiu, Yueming & Kahn, Matthew E. & Xing, Bo, 2019. "Quantifying the rebound effects of residential solar panel adoption," Journal of Environmental Economics and Management, Elsevier, vol. 96(C), pages 310-341.
    10. Ekaterina Alekhanova, 2023. "Summertime Sadness: Time Sensitivity of Electricity Savings from a Behavioral Nudge," Carleton Economic Papers 23-01, Carleton University, Department of Economics, revised 11 Nov 2023.
    11. Yao An and Lin Zhang, 2023. "The Thirst for Power: The Impacts of Water Availability on Electricity Generation in China," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2).
    12. Huaccha, Gissell, 2023. "Regional persistence of the energy efficiency gap: Evidence from England and Wales," Energy Economics, Elsevier, vol. 127(PA).
    13. Hancevic, Pedro I. & Sandoval, Hector H., 2022. "Low-income energy efficiency programs and energy consumption," Journal of Environmental Economics and Management, Elsevier, vol. 113(C).
    14. Adler, David & Severnini, Edson, 2023. "Timing matters: Intra-day shifts of economic activity and ambient ozone concentrations," Journal of Public Economics, Elsevier, vol. 223(C).
    15. Massimo Filippini & Lin Zhang, 2019. "Impacts of heat metering and efficiency retrofit policy on residential energy consumption in China," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 21(2), pages 203-216, April.
    16. Bircan, Çağatay & Wirsching, Elisa, 2023. "Daylight saving all year round? Evidence from a national experiment," Energy Economics, Elsevier, vol. 127(PB).
    17. Andrius Kažukauskas & Thomas Broberg & Jūratė Jaraitė, 2021. "Social Comparisons in Real Time: A Field Experiment of Residential Electricity and Water Use," Scandinavian Journal of Economics, Wiley Blackwell, vol. 123(2), pages 558-592, April.
    18. Estévez, Andrés & Tovar Reaños , Miguel, 2024. "Empowering homes? Unravelling the connection between energy efficiency and well-being," Papers WP784, Economic and Social Research Institute (ESRI).
    19. Jing Liang & Yueming Qiu & Bo Xing, 2021. "Social Versus Private Benefits of Energy Efficiency Under Time-of-Use and Increasing Block Pricing," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 78(1), pages 43-75, January.
    20. Fiona Burlig & Christopher Knittel & David Rapson & Mar Reguant & Catherine Wolfram, 2020. "Machine Learning from Schools about Energy Efficiency," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 7(6), pages 1181-1217.
    21. Nehiba, Cody, 2024. "Timing Matters: Estimating within-day variation in the rebound effect," National Center for Environmental Economics-NCEE Working Papers 348907, United States Environmental Protection Agency (EPA).
    22. R. Andrew Butters & Jackson Dorsey & Gautam Gowrisankaran, 2025. "Soaking up the Sun: Battery Investment, Renewable Energy, and Market Equilibrium," Econometrica, Econometric Society, vol. 93(3), pages 891-927, May.
    23. Adler, David & Severnini, Edson, 2020. "Timing Matters: Shifting Economic Activity and Intra-Day Variation in Ambient Ozone Concentrations," IZA Discussion Papers 13428, Institute of Labor Economics (IZA).
    24. Corey Lang & Kevin Nakolan & David Rapson & Reid Taylor, 2024. "Do Bill Shocks Induce Energy Efficiency Investments?," Working Papers 2405, Federal Reserve Bank of Dallas.
    25. Bu, Caiqi & Zhang, Kaixia & Shi, Daqian & Wang, Shuyu, 2022. "Does environmental information disclosure improve energy efficiency?," Energy Policy, Elsevier, vol. 164(C).

    More about this item

    JEL classification:

    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • L98 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Government Policy
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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