nep-ene New Economics Papers
on Energy Economics
Issue of 2005‒02‒27
four papers chosen by
Roger Fouquet
Imperial College, UK

  1. Diversity and Security in UK Electricity Generation: The Influence of Low Carbon Objectives By Michael Grubb; Lucy Butler; Graham Sinden
  2. An Intraday Empirical Analysis of Electricity Price Behaviour By Eckhard Platen; Jason West; Wolfgang Breymann
  3. A ‘putty-practically-clay’ vintage model with R&D driven biases in energy-saving technical change By Zon,Adriaan,van; Lontzek,Thomas
  4. Dynamic Efficiency of Emission Trading Markets: An Experimental Study By Andreas Nicklisch; Leon Zucchini

  1. By: Michael Grubb; Lucy Butler; Graham Sinden
    Abstract: We explore the relationship between low carbon objectives and the strategic security of electricity in the context of the UK Electricity System. We consider diversity of fuel source mix to represent one dimension of security - robustness against interruptions of any one source - and apply two different diversity indices to the range of electricity system scenarios produced by the UK government and independent researchers. Using data on wind generation we also consider whether a second dimension of security - the reliability of generation availability - is compromised by intermittency of renewable generation. Our results show that low carbon objectives are uniformly associated with greater long-term diversity in UK electricity. We discuss reasons for this result, explore sensitivities, and briefly discuss possible policy instruments associated with diversity and their limitations.
    Keywords: Diversity, Security, Low Carbon, Wind Generation, Electricity
    JEL: Q40 Q42
    Date: 2005–02
  2. By: Eckhard Platen (School of Finance and Economics, University of Technology, Sydney); Jason West; Wolfgang Breymann
    Abstract: This paper proposes an approach to the intraday analysis of the dynamics of electricity prices. The Growth Optimal Portfolio (GOP) is used as a reference unit in a continuous financial electricity price model. A diversified global portfolio in the form of a market capitalisation weighted index aproximates the GOP. The GOP, measured in units of electricity, is normalised and then modeled as a time transformed square root process of dimension four. The dynamics of the resulting process is empirically verified. Intraday spot electricity prices from the US and Australian markets are used for this analysis. The empirical findings identify a simple but realistic model for examining the volatile behaviours of electricity prices. The proposed model reflects the historical price evolution reasonably well by using a only a few robust but readily observable parameters. The evolution of the tranformed times is modeled via a rapidly evolving market activity. A periodic, ergodic process with deterministic volatility is used to model market activity.
    Keywords: intraday analysis; electricity price model; growth optimal portfolio; market activity
    JEL: G10 G13
    Date: 2004–11–01
  3. By: Zon,Adriaan,van; Lontzek,Thomas (MERIT)
    Abstract: This paper deals with the problem of tackling the adverse effect of output growth on environmental quality. For this purpose we use an intermediate sector that builds ‘putty-practically-clay’ capital consisting of an energy-raw capital amalgam used for final goods production. The putty-practically-clay model is a strongly simplified version of a full putty-clay model, that mimics all the relevant behaviour of a full putty-clay model, but that does not entail the administrative hassle of a full putty-clay vintage model. In addition to this, we introduce an R&D sector that develops renewable- and conventional energy-based technologies. The allocation of R&D activities over these two uses of R&D gives rise to an induced bias in technical change very much as in Kennedy (1964). In the context of our model, this implies that technological progress is primarily driven by the desire to counteract the upward pressure on production cost implied by a continuing price increase of conventional energy resources. Hotelling’s rule suggests that this price rise is unavoidable in the face of the ongoing depletion of conventional energy reserves. By means of some illustrative model simulations we study the effects of energy policy on the dynamics of the model for alternative policy options aimed at achieving GHG emission reductions. We identify the conditions under which energy policy might partly backfire and present some non-standard policy implications.
    Keywords: macroeconomics ;
    Date: 2005
  4. By: Andreas Nicklisch; Leon Zucchini
    Abstract: This study investigates the dynamic efficiency of an emission regulation regime where companies competitively pay for emission licences. We embed the emission licence market in a Cournot model where the price of emission licences is subject to strategic tradeoff between licences and abatement technologies. Unlike the standard Cournot model, agents have two action parameters, quantities bought on the licence market and investments into abatement technology. We want to investigate the implications of this market design on the strategic behavior regarding companies' incentives to invest in those technologies. Data from a series of laboratory experiments supports the theoretical predictions for subjects' investment into abatement technology. With respect to the adaptation process of individual quantities for licences we find that a majority of subjects adjusts on the market by imitation while a minority entertains a trial and error notion.
    Keywords: Cournot market, emission regulation, experimental economics, dynamic efficiency, learning
    JEL: Q52 Q53 Q55

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