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Daylight Time and Energy Evidence from an Australian Experiment. Ryan Kellogg. Hendrik Wolff. Presentation October 2007 Department of Economics - University of Washington. Daylight Saving Time (DST): A tool for energy conservation?. Several countries debate about DST:
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Daylight Time and EnergyEvidence from an Australian Experiment Ryan Kellogg Hendrik Wolff Presentation October 2007 Department of Economics - University of Washington
Daylight Saving Time (DST):A tool for energy conservation? • Several countries debate about DST: - USA Energy Policy Act of 2005 ”Title I Extends DST by four weeks to reduce energy consumption by the equivalent of 100,000 barrels of oilfor each day of the extension.” - Australia, UK, Japan, Korea and others are considering extending DST to curb GHG emissions
We use a quasi-experiment to assess whether extending DST saves electricity • 2000 Sydney Olympic Games: - two states in Australia began to observe DST two months earlier than usual • Preview of main result: • Contrary to previous DST-literature: Extending DST does not save electricity
“I say it is impossible that people lived so long by the smoky, unwholesome, and enormously expensive light of candles, if we had as much pure light of the sun for nothing.” – Benjamin Franklin, Paris, 1784 –
“I say it is impossible that people lived so long by the smoky, unwholesome, and enormously expensive light of candles, if we had as much pure light of the sun for nothing.” – Benjamin Franklin, Paris, 1784 – Misallocation causes Paris to consume an additional 64 million pounds of tallow and wax annually.
Artificial Lighting Sleep
Prior studies find: extending DST into “March” saves electricity by 0.6%-3.5% Studies are directly used by Governments to decide on DST extensions USA: 1% New Zealand: 3.5% Australia: 1%-3.5% California: 0.6% Ontario, Canada: 2.2% However, studies are based on simulations and extrapolations, rather than empirical evidence
Nixon 1973: Emergency DST Energy Conservation Act • Observational Study finds 1% savings based on ‘73-’75 DST extension in the USA • However… …technology changed …potentially confounded
Road Map • Background on the event and graphical results • Treatment effect estimation • Testing prior DST simulation models • Conclusions
Sydney Typically 3 states observe DST • Typically: SA, NSW, and VIC observe DST from October to March Northern Territory Queensland Western Australia South Australia (SA) New South Wales (NSW) VIC Victoria
Sydney In 2000 NSW and VIC are “treated” with 2 months extended DST • Typically: SA, NSW, and VIC observe DST from October to March • In 2000: • NSW and VIC start DST two months earlier Northern Territory Queensland Western Australia South Australia (SA) New South Wales (NSW) VIC Victoria
Sydney Policy change was not prompted by intent to conserve energy • Cited rationales • Fewer shadows on the fields improve TV broadcasting • Shift visitors between stadia in daylight Northern Territory Queensland Western Australia South Australia (SA) New South Wales (NSW) VIC Victoria
Policy change was not prompted by intent to conserve energy • Cited rationales • Fewer shadows on the fields improve TV broadcasting • Shift visitors between stadia in daylight Northern Territory Queensland Western Australia South Australia (SA) New South Wales (NSW) Control State VIC • Olympic events confound NSW: • International tourism • Construction activities • Treated state: VIC, Control state: SA Adelaide Melbourne Treated State
Time Line in 2000 August 27: DST starts in VIC October 29: DST starts in SA September 15– October 1: Sydney Olympics in NSW
Time Line in 2000 August 27: DST starts in VIC October 29: DST starts in SA VIC: Treatment I VIC: Treatment II September 15– October 1: Sydney Olympics in NSW • The Olympic events present a potential confound in VIC • Increased TV ratings, Carnival events around public mega screens • Drop Olympic period from treatment period in VIC
SA (control state)shows no effect of DST extension Average half hourly electricity demand during the treatment period
Average half hourly electricity demand during the treatment period VIC (treated state) shows regular load pattern in control years
Dataset: 1999-2005 panel of • half hourly electricity demand & wholesale prices • hourly weather • Temperature, Precipitation, Wind, Pressure, Sunshine, Humidity • Day of week, school-vacation, holidays, “transition vacation days” • Employment, Gross-State-Product, population
“Difference in Differences” Mechanics • Control structure is two-fold: (a) spatial across states controls for differences between states (b) temporal over years controls for any shock on the national level
Augment standard DID model by estimating “triple-DID” Treatment Effect Model • Triple-DID control structure is three-fold: (a) Spatial across states (b) temporal over years (c) temporal within days using early afternoon hours k …12:00-14:30 as “within” controls • With triple-DID: we don’t depend on • nearby months and • Seasonal variations • Model robust against shocks affecting the level of any day (demand is function of 1800 variables)
Half hourly treatment effects of extending DST on electricity use The estimated effect of extending DST in VIC, disaggregated by half-hour, with 95% confidence intervals. Standard errors are clustered by day.
Testing the Electricity Saving HypothesisPercentage change due to DST New Zealand
Testing the Electricity Saving HypothesisPercentage change due to DST Canada (Ontario) New Zealand
Testing the Electricity Saving HypothesisPercentage change due to DST Canada USA New Zealand
Testing the Electricity Saving HypothesisPercentage change due to DST Canada New Zealand USA California
Testing the Electricity Saving HypothesisPercentage change due to DST Canada New Zealand USA California Australia
Testing the Electricity Saving HypothesisPercentage change due to DST Australia Canada New Zealand USA California
Testing the Electricity Saving HypothesisPercentage change due to DST weekends weekdays Canada New Zealand USA California
Value of results • First quantitative study to show that DST does not decrease electricity consumption, contradicting prior research • Australia considers extending DST to cut GHG emissions • Can we transfer the results to the U.S.? • San Francisco: latitude & climate similar to Melbourne • Next we examine the “California Simulation model”
California identifies three benefits of extending DST Extended DST… (1) …saves non-renewable resources • Electricity use decrease (2) …increases consumer welfare • Reduction in peak evening demand: price decreases • CA benefits up to $1.3 billion annually (3) …helps to avoid extreme events • Likelihood of blackout decreases
------- ………… Treatment in Victoria 2000 leads to a price spike MW
Conclusions I ...none of the “three benefits” of extended DST could be confirmed. The extension: - does not save electricity - increases prices - increases the critical demand spikes …findings are of policy interest since Australia considers re-introducing the 2000-DST-schedule to curb GHG emissions …results suggest U.S. will not benefit from extending DST …extending DST is not a quick fix for energy conservation.
Conclusions II U.S. Energy Bill of 2005: “If the study does not report adequate savings, Congress should consider to return to the original Daylight Savings Time schedule.” Policy Recommendation: ….Pull out DST legislation from Energy Bills ….Health Benefits? Business?
Characteristics of Generators Two Issues: - “Is Real Time Pricing Green?: – Impacts of Demand Variance” (Holland & Mansur, 2004) - Forecasting Error, DST learning
Table 2: Summary statistics of data used from 1999 to 2001, 27 August to 27 October