Graduate Student Affiliates on the Job Market
December 8, 2023
Meet our Energy Institute Graduate Student Affiliates, Jesse Buchsbaum and Leila Safavi, and learn about their job market papers.
Jesse Buchsbaum has research interests in energy and environmental economics, applied microeconomics, and industrial organization with particular focus on consumer behavior, electricity markets, and the impacts of regulation. His research seeks to advance our understanding of economics and the impacts of policy by applying the tools of economics to important, policy-relevant questions. One strand of his research studies consumer demand in utility customer settings, with current projects on the long-run responses of residential electricity consumers, electricity bill affordability, and bill understanding for residential water customers. A second strand of research studies the impacts, effectiveness, and spillovers of regulation, with current projects on the unintended effects of policy changes in wholesale electricity markets, leakage and evasion from local heavy duty vehicle regulation, and using machine learning to improve regulatory targeting.
Understanding how electricity demand responds to electricity prices is critical as policymakers, regulators, grid planners, and private stakeholders consider the impacts of price changes and other policy changes. Past work has shown that residential electricity consumers do not respond to price changes, but these analyses typically only look at a short period of time after a price change. Jesse’ job market paper compares households who face consistently different prices for over 30 years and shows that consumers are highly responsive in the long run, with elasticities that are sixteen times larger in the long run than in the short run. The paper explores the mechanisms driving these differences, including how consumers respond to temperature, adoption of rooftop solar and energy efficiency, and how electricity usage changes over time for newly built homes. The paper also explores the connection between household income and price changes. It shows that low-income households are more responsive to price variation in the long run, but less responsive in the short run. These results demonstrate that consumers may be far more responsive to electricity prices in the long run than economists previously believed, and suggest that price-based policies, such as carbon taxes, may have substantial impacts on residential electricity consumption and emissions over time.
Leila Safavi is an energy and environmental economist with interests in industrial organization and law and economics. Her research combines applied econometrics with a novel data collection to study the impact of policy on firm behavior. One line of research examines the extent to which legal institutions, such as regulatory agencies and courts, shape firms’ responses to environmental policy. Her projects study the impact of regulatory review on investment in fossil fuel infrastructure and the effect of liability rules on contracting and market structure in the hazardous waste industry. Another line of research focuses on transmission expansion and renewable energy policy. Projects in this vein study the impact of market integration between regional transmission organizations on allocative efficiency in electricity markets, as well as the responsiveness of transmission investment to arbitrage opportunities for natural gas.
When an upstream input supplier and a downstream regulated utility share a common profit interest, utilities can boost joint profits by paying their affiliated input suppliers more for the input and passing on the costs to captive ratepayers. Leila’s job market paper studies whether gas and electric utilities pass on inflated costs to consumers by over-contracting with affiliated suppliers for a critical input: interstate natural gas pipeline capacity. Analyzing data on pipeline contracts between 2010 and 2021, her paper finds that regulators are not well equipped to prevent cost inflation in this setting. While utilities do not pay higher prices to affiliated pipelines on each unit of capacity, they do inflate costs by reserving too much capacity. This excessive demand leads affiliated pipeline companies to overbuild new capacity for their utility buyers by 28-33 percentage points, creating 2.4 billion dollars in excessive costs for ratepayers.