Daylight Time and Energy Evidence from an Australian Experiment

1. Daylight Time and EnergyEvidence from an Australian Experiment Ryan Kellogg Hendrik Wolff Presentation October 2007 Department of Economics - University of Washington

2. 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

3. 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

5. “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 –

6. “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.

9. Artificial Lighting Sleep

12. 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

13. 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

14. Yellow: Regions observing DST as of 2006

15. Road Map • Background on the event and graphical results • Treatment effect estimation • Testing prior DST simulation models • Conclusions

16. 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

17. 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

18. 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

19. 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

20. Time Line in 2000 August 27: DST starts in VIC October 29: DST starts in SA September 15– October 1: Sydney Olympics in NSW

21. 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

22. SA (control state)shows no effect of DST extension Average half hourly electricity demand during the treatment period

23. Average half hourly electricity demand during the treatment period VIC (treated state) shows regular load pattern in control years

24. VIC 2000shows intra-day shift in electricity load

25. 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

26. “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

27. Standard DID

28. 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)

29. 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.

30. Testing the Electricity Saving HypothesisPercentage change due to DST New Zealand

31. Testing the Electricity Saving HypothesisPercentage change due to DST Canada (Ontario) New Zealand

32. Testing the Electricity Saving HypothesisPercentage change due to DST Canada USA New Zealand

33. Testing the Electricity Saving HypothesisPercentage change due to DST Canada New Zealand USA California

34. Testing the Electricity Saving HypothesisPercentage change due to DST Canada New Zealand USA California Australia

35. Testing the Electricity Saving HypothesisPercentage change due to DST Australia Canada New Zealand USA California

36. Testing the Electricity Saving HypothesisPercentage change due to DST weekends weekdays Canada New Zealand USA California

37. 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”

38. 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

39. CEC 2001 Simulation

40. Simulation unable to predict intraday-change in demand

41. ------- ………… Treatment in Victoria 2000 leads to a price spike MW

42. 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.

43. 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?

44. Penetration trends of air conditioning by state

45. Characteristics of Generators Two Issues: - “Is Real Time Pricing Green?: – Impacts of Demand Variance” (Holland & Mansur, 2004) - Forecasting Error, DST learning

46. National Electricity Market, Australia

47. Settlement of electricity prices in VIC, NSW, QLD and SA

48. Table 2: Summary statistics of data used from 1999 to 2001, 27 August to 27 October

50. Selection of the afternoon hours