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Evaluating Energy Options for Israel: A Case Study

Nissan Levin, Asher Tishler, and Jacob Zahavi

Year: 1986
Volume: Volume 7
Number: Number 1
DOI: 10.5547/ISSN0195-6574-EJ-Vol7-No1-4
View Abstract

Abstract:
More than 98 percent of Israel's primary energy resources are imported, most of it as crude oil, the rest of it as coal, placing the country in a most vulnerable and awkward position. The sharp increases in crude oil prices in 1973 following the Yom Kippur War and in 1979 has increased the country's economic burden, contributing to its increasing deficit in the balance of payments and staggering inflation rate. Perhaps here more than anywhere else, a balanced energy policy is most crucial for security and well-being. Such policy would allow diversification of primary energy resources by using more alternative and renewable resources supplemented by a variety of ways of managing demand and controlling peak-load growth.



The Response of Large Firms to Different Schemes of Time-of-Use Pricing When the Production Function is Quadratic

Asher Tishler

Year: 1989
Volume: Volume 10
Number: Number 2
DOI: 10.5547/ISSN0195-6574-EJ-Vol10-No2-6
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Abstract:
This paper constructs a model of firms' behavior before and after the introduction of time-of-use (TOU) pricing of electricity, encompassing optimal behavior under both flat-rate and time-of-use pricing. The model aims to be consistent, constraining those parameters not affected by time-of-use pricing so that they are the same under both price schemes. However, it also accounts for the new conditions (structure) under which the firm must operate once time-of-use pricing is adopted. The results show that the optimal capital under the flat rate is identical to that under revenue-neutral TOU. Almost all the firm's adjustments take place at the time that the time-of-use pricing is introduced, and only very few additional adjustments take place in the long run. These results contradict the widely-held belief that the firm cannot redistribute its electricity use over the day very quickly but can do so in the long run, once the capital input has adjusted to the new conditions.



Complementarity-Substitution Relationshipsin the Demand for Time-Differentiated Inputs under Time-of-Use Pricing

Asher Tishler

Year: 1991
Volume: Volume 12
Number: Number 3
DOI: 10.5547/ISSN0195-6574-EJ-Vol12-No3-9
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Abstract:
In this paper we incorporate the non-synchronic responses of different inputs to changes in relative factor prices and develop sufficient conditions under which time-differentiated (over the day) electricity inputs are complements or substitutes. Similar sufficient conditions are developed for time-differentiated labour inputs. We also examine the strong and sometimes one-directional, relationships between the distributions over the day of the demands for labour and electricity. These relationships depend, among other factors, on the objective function of the fine (profit maximization, cost minimization) and on the specific time-of-use (TO U) schedules (of labour, electricity, etc.). Our results are also dependent on the assumption that firms can adjust inputs to changes in input prices on an hourly basis; more specifically, the underlying technology is assumed to be given by an hourly production function. Two issues are emphasized in the analysis. First, we show that short-run cost minimization may be an inappropriate procedure for cost-benefit analysis. Second, under the model developed in this paper, the commonly used weak separability assumption (between electricity and other inputs) implies radically different relationships among the time-differentiated inputs under profit maximization and cost minimization.



A Stochastic Model for the Measurement of Electricity Outage Costs

Abraham Grosfeld-Nir and Asher Tishler

Year: 1993
Volume: Volume 14
Number: Number 2
DOI: 10.5547/ISSN0195-6574-EJ-Vol14-No2-8
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Abstract:
The measurement of customer outage costs has recently become an important subject of research for the electric utilities. This paper uses a stochastic dynamic model as the starting point in developing a market-based method for the evaluation of outage costs. Specifically, the model postulates that once an electricity outage occurs, all production activity stops. Full production is resumed once the electricity outage is over. This process repeats itself indefinitely. The business customer maximizes his expected discounted profits (the expected value of the firm), taking into account his limited ability to respond to repeated random electricity outages. The model is applied to 11 industrial branches in Israel. The estimates exhibit a large variation across branches.



The Bias in Price Elasticity Estimates Under Separability Between Electricity and Labor in Studies of Time-of-Use Electricity

Asher Tishler

Year: 1998
Volume: Volume19
Number: Number 2
DOI: 10.5547/ISSN0195-6574-EJ-Vol19-No2-13
View Abstract

Abstract:
Most time-of-use(TOU) studies of electricity use in the business sector have found little overall response, as measured by price elasticities, to TOU rates. These studies employed the assumption of weak separability between electricity and all other inputs. Here, we use the generalized Leontief cost function to show that when labor is included in the estimation, the electricity price elasticities are larger, in absolute values, than when labor is erroneously excluded. This result is demonstrated with data on electricity and labor for about 400 Israeli business customers. We also show that the omission of labor from the estimation may cause serious underestimation of the net welfare gains that result from changing a flat electricity price to a TOU rate.





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