Projects Funded for Louis Preonas
Estimating the Effect of Agricultural Pumping Efficiency Upgrades on Farmers’ Electricity Consumption, Water Consumption, Crop Production, and Profits
Catherine D. Wolfram, Fiona Burlig, Louis Preonas, and Matthew Woerman
Specific Objectives of the Project
This project has three related objectives: (1) to evaluate the gains from agricultural energy efficiency upgrades, by causally estimating the effect of irrigation pump replacements on farmers’ electricity and water usage; (2) to measure how farmers reoptimize both energy and water consumption, by causally estimating the effect of pump replacements on crop yields; and (3) to analyze the benefits and costs of irrigation pump replacements as energy efficiency investments, by monetizing the crop yields effects using crop prices and comparing to the upfront investment costs.
Project Report/Summary of Results
We find that California farmers have surprisingly elastic demand for electricity (for groundwater pumping) and groundwater. Using detailed customer-level electricity data from Pacific Gas and Electric, combined with individual pump efficiency audits, we are able to credibly estimate these demand elasticities for a sample of over 11,000 agricultural groundwater pumps. Our estimates are robust to multiple identification strategies, and farmers’ groundwater consumption responds similarly to two types of pumping cost shocks: changes in electricity price, and changes in groundwater depth. In ongoing work, we are investigating two candidate mechanisms explaining our finding of elastic groundwater demand in the short run: (i) substitution to surface water, and (ii) crop switching or fallowing. We are also continuing to evaluate agricultural energy efficiency upgrades, which will allow us to estimate longer-run elasticities of demand for groundwater. We plan to conduct a farm survey in late 2019, in order to more fully characterize how farmers reoptimize their production processes due to both short- and long-run changes in groundwater pumping costs.