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Supply Curves for Conserved Electricity
Anthony Paul, Karen L. Palmer, Matthew Woerman
RFF Discussion Paper 11-11 | April 2011
RESEARCH TOPICS:
Abstract
In this paper, we introduce a new top-down approach to modeling the effects of publicly financed energy-efficiency programs on electricity consumption and carbon dioxide emissions. The approach draws on a partial-adjustment econometric model of electricity demand and represents the results of a reverse auction for electricty savings from different levels of public investment. The model is calibrated to recent estimates of the cost-effectiveness of rate payer–funded efficiency programs at reducing electricity consumption. The results suggest that supply curves for conserved electricity are upward sloping, convex, and dependent on policy design and electricity prices. Under the scenarios modeled, electricity savings of between 1 and 3 percent are achievable at a marginal cost of $50 per megawatt hour (MWh) and a corresponding average cost of $25–$35/MWh.
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