nep-reg New Economics Papers
on Regulation
Issue of 2013‒06‒24
eleven papers chosen by
Natalia Fabra
Universidad Carlos III de Madrid

  1. Renewable Energy Policies for the Electricity, Transportation, and Agricultural Sectors: Complements or Substitutes By Oliver, Anthony; Khanna, Madhu
  2. Estimating Production Inefficiency of Alternative Cost-Sharing Arrangements: A Case Study in Groundwater Pumping Decisions By Sesmero, Juan; Schoengold, Karina
  3. Structural Estimation of Demand for Irrigation Water Under Strategic Behavior By Sesmero, Juan; Schoengold, Karina
  4. Custom-made healthcare – An experimental investigation By Claudia Keser; Claude Montmarquette; Martin Schmidt; Cornelius Schnitzler
  5. Uncertainty in Renewable Energy Policy: How do Renewable Energy Credit markets and Production Tax Credits affect decisions to invest in renewable energy? By Eryilmaz, Derya; Homans, Frances
  6. Structural Breaks, Price and Income Elasticity, and Forecast of the Monthly Italian Electricity Demand By Dicembrino , Claudio; Trovato, Giovanni
  7. Evaluating the Cost-Effectiveness of Rebate Programs for Residential Energy-Efficiency Retrofits By Maher, Joe
  8. Adoption of Residential Solar Power Under Uncertainty: Implications for Renewable Energy Incentives By Bauner, Christoph; Crago, Christine
  9. Powering up developing countries through integration ? By Auriol, Emmanuelle; Biancini, Sara
  10. Effectiveness of Policies and Strategies to Increase the Capacity Utilisation of Intermittent Renewable Power Plants By David Benatia; Nick Johnstone; Ivan Haščič
  11. Water Banks, Markets, and Prior Appropriation: A Comparison of Water Allocation Instruments in the Eastern Snake River Plain By Ghosh, Sanchari; Cobourn, Kelly; Elbakidze, Levan

  1. By: Oliver, Anthony; Khanna, Madhu
    Abstract: Renewable Portfolio Standards (RPSs) have been enacted in 29 states in the US, in part to encourage an increase in the amount of electricity generated from renewable sources. Biomass can be utilized in a dedicated bio-power plant to generate electricity, co-fired with coal at an existing power plant, or used to produce cellulosic ethanol that also yields co-product electricity. Considering these options along with a detailed national model of agricultural biomass production allows for the simulation of the effect of existing policies on electricity based biomass demand. Using a multi-period, multi-market, price endogenous model of the U.S. agricultural, electricity, and transportation sectors, the effect of existing state-level RPS is evaluated along with the implications for the agriculture sector. It is found that RPSs increase generation from both biomass and wind-based electricity generation, while decreasing the amount of generation from natural gas, and coal. Due to the co-product electricity generation a greater amount of electricity is generated from biomass under the RFS & RPS scenario than the RPS scenario even though biomass prices are higher.
    Keywords: Environmental Economics and Policy, Resource /Energy Economics and Policy,
    Date: 2013
  2. By: Sesmero, Juan; Schoengold, Karina
    Abstract: In Mexico, farmers only pay the cost of electricity used to pump groundwater from wells for groundwater consumption and also receive electricity subsidy from government. It causes the fact that farmers consume groundwater under the situation that private marginal cost is lower than social marginal cost. Furthermore, in Mexico, different wells function under different institutional arrangements. Some wells are privately owned while others are shared by multiple farmers. In some shared wells, farmers pay for their own electricity consumption but in other shared wells farmers distribute total electricity cost based on a pre-specified rule. Both the jointly ownership and pre-specified payment rule may cause further distortion of groundwater pumping cost. By estimating the frontier demand function and technical efficiency of groundwater, we calculate the own-price elasticity of groundwater and test the effect of joint ownership and pre-specified electricity payment rule on the groundwater use efficiency. It is found that the groundwater has a negative and large (-0.5) own-price elasticity and that the number of farmers owning one well and the pre-specified payment rules do not affect the efficiency level significantly. The elimination of electricity subsidy may be the most effective policy to alleviate groundwater depletion in Mexico.
    Keywords: groundwater, elasticity, specific input technical efficiency, ownership externality, payment externality, Environmental Economics and Policy, Resource /Energy Economics and Policy,
    Date: 2013
  3. By: Sesmero, Juan; Schoengold, Karina
    Abstract: Government subsidies on electricity used for pumping groundwater by agricultural irrigators has long been suspected to be an important reason for overexploitation of aquifers in Mexico. We hypothesize that institutional arrangements that exacerbate non-excludability of groundwater also matter. We develop and estimate a model that accommodates strategic interactions among agricultural irrigators operating under distortive institutional arrangements. Results suggest that institutional arrangements are more important than electricity subsidies in explaining over extraction. Results also reveal that cost sharing of electricity by farmers may cause behavioral conjectures to change from negative (closer to Bertrand conjectures) to positive (closer to collusive conjectures). A new source of externalities is identified in Mexico’s institutional context (cost-share externalities) and found to be negatively linked to strategic externalities.
    Keywords: Resource /Energy Economics and Policy,
    Date: 2013
  4. By: Claudia Keser; Claude Montmarquette; Martin Schmidt; Cornelius Schnitzler
    Abstract: In this paper, we investigate in a controlled laboratory experiment physician behavior in the case of payment heterogeneity. In the experiment, each physician provides medical care to patients whose treatments are paid for either under fee-for-service (FFS) or capitation (CAP). We observe that physicians customize care in response to the payment system. A FFS patient receives considerably more medical care than the corresponding CAP patient with the same illness and treatment preference. Physicians over-serve FFS patients and under-serve CAP patients. After a CAP payment reduction in the experiment we observe neither a quantity reduction under CAP nor a spillover into the treatment of FFS patients. <P>
    Keywords: Experimental Economics, Physician Reimbursement, Capitation, FFS, Customization, Fee Regulation,
    JEL: I12 I18
    Date: 2013–06–01
  5. By: Eryilmaz, Derya; Homans, Frances
    Abstract: This paper examines the impacts of uncertainties in the US renewable energy policy on the investment decisions of renewable electricity producers. We develop a dynamic optimization model to understand how investment in wind energy depends on market and policy uncertainties in renewable energy markets. These uncertainties include the stochastic prices in the market for Renewable Electricity Credits (RECs) and the federal government's uncertain decision about continuation of Production Tax Credit (PTC) program. Results contribute to our understanding of the impact of the REC market and policy decisions on the profitability threshold required for investors to commit to renewable energy investments. Uncertainty about the renewable energy policy raises the threshold to invest in renewable energy. This paper also examines the relationship between two important renewable energy policies and their impacts on these investments. This paper has the potential to significantly contribute to the existing renewable energy development debate because the RECs prices are introduced explicitly as a random factor in a model of investment in renewable energy.
    Keywords: Environmental Economics and Policy, Resource /Energy Economics and Policy,
    Date: 2013–05–31
  6. By: Dicembrino , Claudio; Trovato, Giovanni
    Abstract: Insights about electricity demand dynamics is fundamental for investment capacity, optimal energy policies, and a balanced electricity system. This paper presents an empirical analysis of the monthly Italian electricity demand since January 2001 to June 2012. In the first section we conduct the analysis of structural breaks in the electricity demand finding that the series has two structural breaks in August 2002 and August 2004 as market liberalization effects on consumption. In the second part of the paper we estimate demand price elasticities both for residential and industrial sector. As expected from the electricity economics literature concerning elasticities estimates, we find that the long run price and income elasticities are more price elastic than the short run both in industrial and residential consumption. In the third and last section, we compare two different forecasting models: the Hidden Markov Models (HMM) and the Holt Winters (H-W) seasonal smoothing method. Considering the Mean Absolute Percentage Error (MAPE), the HMM approach seems to show a superiority in forecasting the monthly electricity demand compared to the H-W methodology.
    Keywords: Electricity Demand, Price and Income Elasticity, Hidden Markov Models, Holt-Winters Seasonal Filter Smoothing
    JEL: C53 Q41 Q47 R21
    Date: 2013–06–14
  7. By: Maher, Joe
    Keywords: Demand and Price Analysis, Environmental Economics and Policy, Resource /Energy Economics and Policy,
    Date: 2013
  8. By: Bauner, Christoph; Crago, Christine
    Abstract: Many incentives at the state and federal level exist for household adoption of re- newable energy like solar photovoltaic (PV) panels. Although incentives make solar panels an attractive investment from a net present value perspective, the adoption rate is low, suggesting that households are either irrational or apply an abnormally high discount rate. Alternatively, households could be recognizing the benet (option value) of waiting to reduce uncertainty in net benets associated with investing in solar PV. We use the option value framework to examine the decision by households to invest in solar PV and quantify the option value multiplier and adoption rate over time for solar PV investments. We nd that the option value multiplier is 1.8, which implies that the net present value of benets from solar PV needs to be almost double the investment cost for investment to occur. Simulated adoption rates show that the adoption rate under the option value decision rule is signi cantly lower than that following a decision rule based on NPV, and is more consistent with the observed adoption rate of solar PV. Current policies that support the solar PV market are crucial to households' adoption decision. Our simulations show that without tax credits and rebates, the median time to adoption increases by 110% compared to the baseline.
    Keywords: Environmental Economics and Policy, Resource /Energy Economics and Policy,
    Date: 2013
  9. By: Auriol, Emmanuelle; Biancini, Sara
    Abstract: Power market integration is analyzed in a two-country model with nationally regulated firms and costly public funds. If the generation costs between the two countries are too similar, negative business stealing outweighs efficiency gains so that the subsequent integration welfare decreases in both regions. Integration is welfare enhancing when the cost difference between two regions is large enough. The benefits from export profits increase the total welfare in the exporting country, whereas the importing country benefits from lower prices. In this case, market integration also improves incentives to invest compared to autarky. The investment levels remain inefficient, however, especially for transportation facilities.<BR>Free riding reduces incentives to invest in these public-good components of the network, whereas business stealing tends to decrease the capacity to finance new investment.
    Keywords: Transport Economics Policy&Planning,Economic Theory&Research,Debt Markets,Markets and Market Access,Emerging Markets
    Date: 2013–06–01
  10. By: David Benatia; Nick Johnstone; Ivan Haščič
    Abstract: Intermittent renewable energy sources, such as wind and solar, will become increasingly important in the electricity supply mix if ambitious renewable energy targets are to be met. This paper presents evidence on the effectiveness of different strategies and measures to increase the capacity utilisation of wind and other intermittent renewable energy plants. As countries progress towards more ambitious renewables penetration objectives, it is essential that the installed capacity does not end up idle and the investment ‘wasted’. The analysis is based on data for 31 OECD countries over the period 1990- 2009. Wind speed, dispatchable power, transmission capacity and energy storage are found to have positive and significant impacts on capacity utilisation. For example, if domestic grids are poorly refurbished European countries will have to invest an additional USD 38 billion worth of investment in wind power generating capacity by 2020 in order to meet the EU renewables objectives. Cross-border electricity trade is also found to have a positive impact on wind power plant capacity utilisation, albeit only at the high end of historic levels of penetration. Up to USD 25 billion worth of investment in wind power capacity by 2020 could be avoided – while still meeting the objectives – if electricity trade within the European Union is enhanced.<BR>Les énergies renouvelables intermittentes telles que l’éolien et le solaire doivent occuper une place de plus en plus importante dans le parc électrique pour que les ambitieux objectifs qui les concernent soient atteints. Ce rapport apporte des éléments d’information sur l’efficacité de diverses stratégies et mesures destinées à améliorer le coefficient d’utilisation des centrales exploitant l’énergie éolienne ou d’autres énergies renouvelables intermittentes. À l’heure où les pays tendent vers des objectifs de pénétration des énergies renouvelables plus ambitieux, il importe que la puissance installée ne soit pas inemployée ni les investissements « gaspillés ». L’analyse s’appuie sur des données de 31 pays de l’OCDE entre 1990 et 2009. Elle montre que la vitesse du vent, la puissance « dispatchable », les capacités de transport et le stockage de l’énergie ont un impact positif substantiel sur le coefficient d’utilisation des centrales éoliennes. Par exemple, s’ils ne rénovent pas suffisamment leurs réseaux nationaux, les pays européens devront investir 38 milliards USD de plus dans ces centrales d’ici 2020 pour atteindre les objectifs de l’Union européenne concernant les énergies renouvelables. Les échanges internationaux d’électricité ont également un effet positif sur le coefficient d’utilisation des centrales éoliennes, même si cet effet n’est sensible qu’au-delà du taux de pénétration maximum atteint jusqu’à présent. Si les échanges d’électricité au sein de l’Union européenne étaient renforcés, il serait possible d’économiser jusqu’à 25 milliards USD d’investissement dans la puissance éolienne installée d’ici 2020 – tout en satisfaisant aux objectifs fixés.
    Keywords: renewable energy, wind power, intermittency, grid integration, electricity trade, énergie renouvelable, énergie éolienne, intermittence, intégration au réseau, échanges d’électricité
    JEL: Q4 Q42 Q48
    Date: 2013–05–14
  11. By: Ghosh, Sanchari; Cobourn, Kelly; Elbakidze, Levan
    Abstract: States in the arid U.S. West, where average annual precipitation is below 20 inches, have experienced ongoing water scarcity in part due to prolonged spells of drought. Most western states rely on the doctrine of prior appropriation based on the seniority of rights to allocate water across individuals. Over the past two decades, states have established water supply banks and rental pools to facilitate the transfer of water among users on a season-to-season basis, which, in many cases constitutes a hybrid system that marks a movement towards a market-based system of allocating water but retains many of the features of current water rights institutions. The study delineates the importance of these banks in alleviating short term water scarcities when water use may be curtailed based on priority dates. It finds that under severe drought conditions, water banks may approximate the efficiency gains from a fully efficient water allocation scenario but may not prevent the large scale diversions by senior users.
    Keywords: Land Economics/Use, Resource /Energy Economics and Policy,
    Date: 2013–06

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