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In order to estimate the demand for electricity, I decided to instrument for monthly electricity consumption in a geographic area with the number of heating and cooling days. My thinking is that during the hot periods the supply of electricity increases as the utilities ramp up production. Is it is a bad choice of instrument? If so, why?

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Consecutive days of high temperatures are a better measure. This is because of thermal mass which builds up over multiple days of high temperatures. This is more for peak demand however still relevant if you are referring to consumption over the month.

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  • $\begingroup$ I need a convincing argument for why it is a bad choice of instrument. $\endgroup$ – OGC Apr 14 '15 at 19:18

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