It takes two to tank our carbon emissions: An empirical estimation of consumer and producer response to electricity prices.

Electricity is a cornerstone in the transition to a low-carbon future, because of solar and wind generation and increased electrification of transportation and heating. This empirical and theoretical research proposal aims to improve our understanding of the behavior of electricity producers and consumers in a low-carbon electricity market, using reduced-form analyses of wholesale electricity prices, structural modeling of generation investment decisions, and credible inference of consumer behavior from a large-scale natural experiment on dynamic retail pricing. First, I present a novel, unifying approach to systematically estimate the effect of solar and wind generation on the wholesale electricity price profile across regions and over time. Second, I develop a structural dynamic econometric model, leveraging the emerging operations research literature on inverse optimization, to predict the long-run effect of renewable generation. Last, I provide credible estimates of the effects of three novel dynamic electricity pricing designs on the electricity demand profile of consumers. This research aims to combine academically ambitious fundamental research with policy-relevant contributions.