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Fell H.,Colorado School of Mines | Li S.,Cornell University | Paul A.,Center for Climate and Electricity Policy
International Journal of Industrial Organization | Year: 2014

Many electricity demand estimates have been obtained based on the assumption that consumers optimize with respect to known marginal prices, but increasing empirical evidence suggests that consumers are more likely to respond to average prices. Under this assumption, this paper develops a new strategy based on Generalized Method of Moments to estimate household electricity demand. Our demand estimation approach uses publicly available expenditure data and utility-level consumption data from several major U.S. cities, complementing studies that use individual billing data which are richer yet often proprietary. We estimate the price elasticity near - 0.50, which is at the upper end (in magnitude) among the estimates from previous studies. This could have important implications for policy analysis such as those on climate policies that may affect electricity prices. © 2014 Elsevier B.V.

Paul A.,Center for Climate and Electricity Policy | Palmer K.,Center for Climate and Electricity Policy | Woerman M.,Center for Climate and Electricity Policy
Energy Economics | Year: 2013

The electricity sector is responsible for roughly 40% of U.S. carbon dioxide (CO2) emissions, and a reduction in CO2 emissions from electricity generation is an important component of the U.S. strategy to reduce greenhouse gas emissions. Toward that goal, several proposals for a clean energy standard (CES) have been put forth, including one espoused by the Obama administration that calls for 80% clean electricity by 2035 phased in from current levels of roughly 40%. This paper looks at the effects of such a policy on CO2 emissions from the electricity sector, the mix of technologies used to supply electricity, electricity prices, and regional flows of clean energy credits. The CES leads to a 30% reduction in cumulative CO2 emissions between 2013 and 2035 and results in dramatic reductions in generation from conventional coal. The policy also results in fairly modest increases on national electricity prices, but this masks a wide variety of effects across regions. © 2012.

Burtraw D.,Resources for the Future | Palmer K.,Resources for the Future | Palmer K.,Center for Climate and Electricity Policy | Paul A.,Resources for the Future | And 2 more authors.
Electricity Journal | Year: 2012

A simulation model of the U.S. electricity market to examine the impact of natural gas prices and future electricity demand growth on the electricity industry suggests that recent downward adjustments in natural gas prices and electricity demand projections have a substantially larger impact on electricity prices and generation mix than do the new EPA regulations. © 2012 Elsevier Inc.

Fell H.,Colorado School of Mines | Fell H.,Center for Climate and Electricity Policy | Burtraw D.,Resources for the Future | Morgenstern R.D.,Resources for the Future | Palmer K.L.,Resources for the Future
Journal of Environmental Economics and Management | Year: 2012

We use a stochastic dynamic framework to compare price collars (price ceilings and floors) in a cap-and-trade system with uncertainty in the level of baseline emissions and costs. We consider soft collars, which provide limited volume of additional emission allowances (a reserve) at the price ceiling, and hard collars, which provide an unlimited supply of additional allowances, thereby preventing allowance prices from exceeding the price ceiling. Conversely, allowances are removed from the market if prices fall to the floor. We find that increasing the size of the reserve strictly lowers expected net present values of compliance costs; however, there is a diminishing effect as the allowance reserve is expanded. Most of the expected cost savings are achieved with a modest reserve. Consequently, a rather limited soft price collar could provide considerable assurance about cost while preventing the possibility that emissions could spiral out of control. © 2011 Elsevier Inc.

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