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The Bias in Price Elasticity Estimates Under Separability Between Electricity and Labor in Studies of Time-of-Use Electricity

Asher Tishler

Year: 1998
Volume: Volume19
Number: Number 2
DOI: 10.5547/ISSN0195-6574-EJ-Vol19-No2-13
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Abstract:
Most time-of-use(TOU) studies of electricity use in the business sector have found little overall response, as measured by price elasticities, to TOU rates. These studies employed the assumption of weak separability between electricity and all other inputs. Here, we use the generalized Leontief cost function to show that when labor is included in the estimation, the electricity price elasticities are larger, in absolute values, than when labor is erroneously excluded. This result is demonstrated with data on electricity and labor for about 400 Israeli business customers. We also show that the omission of labor from the estimation may cause serious underestimation of the net welfare gains that result from changing a flat electricity price to a TOU rate.



Time-of-Use Electricity Pricing and Residential Low-carbon Energy Technology Adoption

Jing Liang, Pengfei Liu, Yueming Qiu, Yi David Wang, and Bo Xing

Year: 2020
Volume: Volume 41
Number: Number 3
DOI: 10.5547/01956574.41.2.jlia
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Abstract:
This paper provides the first empirical evidence on the correlation between Time-Of-Use (TOU) electricity pricing and the adoption of energy efficient appliances and solar panels. We use household-level data in Phoenix, Arizona from an appliance saturation survey of about 16,000 customers conducted by a major electric utility. Our empirical results show that TOU consumers are associated with 27% higher likelihood to install solar panels but not more likely to adopt energy-efficient air conditioning based on the propensity score matching and coarsened exact matching methods. The findings highlight that policy makers could combine TOU and solar panels when implementing educational programs or when giving out financial incentives to consumers. Our results imply that TOU is associated with a similar impact of the incentive offered by $2,070~$10,472 tax credits or rebates on solar adoption.





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