Research

Job Market Paper

Willingness to Pay for Electricity Reliability: Evidence from U.S. Generator Sales

Power outages and unreliable electricity supply have potentially high economic costs; however, existing empirical evidence on the magnitude of these costs or the value of electricity reliability is limited. In this paper, I provide some of the first revealed-preference estimates of household willingness to pay to avoid power outages (also referred to as residential value of lost load) using a defensive expenditures approach. Combining this approach with proprietary, store-transaction level sales data for all generators sold at every retail store of a major national home improvement retailer from 2012-2020, I find that a household is willing to pay $1.57/kWh of avoided outage. Given this estimate, I perform various back-of-the-envelope evaluations of potential utility investments in improved reliability, the outage-related costs of hurricanes, and total household willingness to pay to avoid average annual outages, which I calculate to be greater than $1.2 billion per year.

Publications

Distributional Benefits of Rooftop Solar Capacity. Accepted, Journal of the Association of Environmental and Resource Economists. With Travis Dauwalter. [Final draft version]

This paper explores the distribution of environmental benefits created by rooftop solar capacity in the United States. We find that benefits are increasing with income, indicating regressivity, but that households of color receive greater per capita benefits on average. Moreover, we document minimal efficiency-equity tradeoff: capacity allocations that maximize total environmental benefits are nearly identical to allocations that maximize benefits received by disadvantaged groups. Thus, existing solar capacity foregoes up to $2 billion annually in environmental benefits as well as substantial improvements in distributional outcomes, further suggesting that the suboptimality of existing solar policy cannot be rationalized on equity grounds.

Media/Outreach: Ways & Means Podcast (S8,E2: Getting Strategic with Solar)

Heterogeneous Solar Capacity Benefits, Appropriability, and the Costs of Suboptimal Siting. 2021. Journal of the Association of Environmental and Resource Economists. With Steven E. Sexton, A. Justin Kirkpatrick, and Nicholas Z. Muller. [NBER Working Paper Version]

This paper estimates that pollution damages avoidable by solar capacity vary considerably across zip codes in the United States and that they are uncorrelated with solar subsidy levels in each state. We estimate $1 billion in avoided pollution damages would be gained annually from optimal siting of installed rooftop solar capacity. States are shown to appropriate a minority of these benefits from their solar investments because of interstate electricity and air pollution flows. This paper further measures the energy value of solar capacity across the U.S. and finds that rooftop solar does not relieve grid congestion.

Media/Outreach: NBER Digest, Duke Energy Initiative Blog, Duke Sanford School of Public Policy Blog

Working Papers

Using Carbon Taxes to Meet an Emissions Target. Last revised January 2022. NBER Working Paper No. 27781. With Billy Pizer. (Revise and resubmit, Journal of the Association of Environmental and Resource Economists) [NBER Working Paper Version]

Relative to the long literature on using price collars to manage prices in tradable permit markets, work on managing quantities under a pollution tax is more nascent. In this paper, we compare alternative "carbon tax policies to meet an emission target" based on a simple welfare metric which includes flat marginal benefits over 30-year, cumulative emissions reductions with a discrete jump at a particular target. Maximizing this objective requires relatively complex adjustments to mimic a tradable permit system with a price collar. We then consider three simpler "hybrid tax" rules where either the growth or level of the tax adjusts based on observed cumulative emissions. Regardless of the size of the jump in marginal benefits, these hybrid taxes consistently achieve roughly two-thirds of the difference in expected net benefits between an ordinary tax and the price-collar policy, or $18 billion annually based on our best estimate.

Works in Progress

Common Ownership and Innovation in Oil and Gas Drilling

Learning by Contracting, with Steve Sexton