Daylight Time and Energy Evidence from an Australian Experiment

Ryan Kellogg

Presentation October 2007

Department of Economics - University of Washington

Hendrik Wolff

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 oil for 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

Yellow: Regions observing DST as of 2006

Road Map

• Background on the event and graphical results

• Treatment effect estimation

• Testing prior DST simulation models

• Conclusions

Typically 3 states observe DST

Western Australia

Queensland

South Australia

(SA)

Northern Territory

New South Wales (NSW)

Victoria

• Typically: SA, NSW, and VIC observe DST from October to March

VIC

Sydney

In 2000 NSW and VIC are “treated” with 2 months extended DST

Western Australia

Queensland

South Australia

(SA)

Northern Territory

New South Wales (NSW)

Victoria

• Typically: SA, NSW, and VIC observe DST from October to March

• In 2000:

NSW and VIC start DST two months earlier

VIC

Sydney

Policy change was not prompted by intent to conserve energy

Western Australia

Queensland

South Australia

(SA)

Northern Territory

New South Wales (NSW)

Victoria

Cited rationales• Fewer shadows on the

fields improve TV broadcasting

• Shift visitors between stadia in daylight

VIC

Sydney

Policy change was not prompted by intent to conserve energy

Western Australia

Queensland

South Australia

(SA)

Northern Territory

New South Wales (NSW)

Cited rationales• Fewer shadows on the

fields improve TV broadcasting

• Shift visitors between stadia in daylight

VICOlympic events confound NSW:– International tourism– Construction activities Treated state: VIC, Control state: SA

Control State

MelbourneAdelaide

Treated State

Time Line in 2000

August 27: DST starts in

VIC

September 15 – October 1: Sydney Olympics in NSW

October 29: DST starts in

SA

Time Line in 2000

August 27: DST starts in

VIC

September 15 – October 1: Sydney Olympics in NSW

October 29: DST starts in

SA

• 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

VIC: Treatment I VIC: Treatment II

SA (control state)shows no effect of DST extension

Average half hourly electricity demand during the treatment period

VIC (treated state) shows regular load pattern in control years

Average half hourly electricity demand during the treatment period

VIC 2000shows intra-day shift in electricity load

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

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dStandard DID

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)ln( ) - ln( ) idh id idh h idh idh idh idh h idhq q T S Y X W

Half hourly treatment effects of extending DST on electricity use

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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 Hypothesis

Percentage change due to DST

New Zealand

Testing the Electricity Saving Hypothesis

Percentage change due to DST

New Zealand

Canada (Ontario)

Testing the Electricity Saving Hypothesis

Percentage change due to DST

New Zealand USACanada

Testing the Electricity Saving Hypothesis

Percentage change due to DST

New Zealand CaliforniaCanada USA

Testing the Electricity Saving Hypothesis

Percentage change due to DST

New Zealand Australia Canada USA California

Testing the Electricity Saving Hypothesis

Percentage change due to DST

New Zealand

Australia

Canada USA California

Testing the Electricity Saving Hypothesis

Percentage change due to DST

New Zealand

weekdays

Canada USA California

weekends

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

CEC 2001 Simulation

Simulation unable to predict intraday-change in demand

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1999 Actual 1999 Simulated

2001 Actual 2001 Simulated

2000 Actual

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.

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?

Conclusions II

Penetration trends of air conditioning by state

Characteristics of GeneratorsTwo Issues:

- “Is Real Time Pricing Green?: – Impacts of Demand Variance” (Holland & Mansur, 2004)

- Forecasting Error, DST learning

National Electricity Market, Australia

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

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

Selection of the afternoon hours

Equator

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01.01.06 01.04.06 01.07.06 01.10.06 01.01.07 01.04.07 April Jan

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Melbourne

Melbourne

Sleep

Artifical lighting

San Francisco

Melbourne