This paper studies how electricity price volatility affects the investment dynamics of energy-intensive manufacturers.  I first verify that investment is an important margin on which these manufacturers respond to electricity price changes.  Using exogenous variation caused by changes in the natural gas price, I find that a ten percent increase in electricity prices is associated with a three percent reduction in capital expenditures. I next estimate a dynamic model of manufacturer investment with capital adjustment costs and find that marginal product of capital dispersion falls by four percent in a simulation that approximates the effect of complete electricity market integration.  This suggests that policies that reduce electricity price volatility, such as building transmission to integrate electricity markets, will increase aggregate productivity in energy-intensive manufacturing.  More generally, this paper shows how input price volatility can reduce static efficiency when production inputs are dynamic. [back]