Working Paper No. 1048

The Silver Lining of Price Spikes: How Electricity Price Spikes Can Help Overcome the Energy Efficiency Gap

Published: November 28, 2014Keywords: Energy efficiency; Deregulated electricity markets; Price spikes; Informational frictionsJEL-codes: D12; D83; Q41

The Silver Lining of Price Spikes: How Electricity Price Spikes Can Help Overcome the Energy Efficiency Gap Johannes Mauritzen


Studies have shown that many consumers and businesses fail to invest in energy efficiency improvements despite seemingly ample financial incentives to do so – the so called energy efficiency gap or paradox. Attempts to explain this gap often focus on searching costs, information frictions and behavioral factors.

Using data on Norwegian electricity prices and Google searches for heat pumps, I suggest that the inherently spikey nature of many electricity markets has a strong and significant positive effect on searching for information on energy efficiency goods. Because consumers pay for electricity based on at least monthly averages of the wholesale price, I can identify the informational and behavioral effect by decomposing prices into smoothed and deviation components using a novel method of measuring spikiness, comparing the actual price series with a range of deviations from Loess smoothed series.   

Interdisciplinary European Studies

The European Union and the Return of the Nation State

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This book explores the complex and ever-changing relationship between the European Union and its member states. The recent surge in tension in this relationship has been prompted by the actions of some member state governments as they question fundamental EU values and principles and refuse to implement common decisions seemingly on the basis of narrowly defined national interests.

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