nep-reg New Economics Papers
on Regulation
Issue of 2013‒07‒28
eleven papers chosen by
Natalia Fabra
Universidad Carlos III de Madrid

  1. The Effect of Weather Uncertainty on the Financial Risk of Green Electricity Producers under Various Renewable Policies By Nagl, Stephan
  2. Investment Coordination in Network Industries: The Case of Electricity Grid and Electricity By Höffler, Felix; Wambach, Achim
  3. Explaining the Diffusion of Renewable Energy Technology in Developing Countries By Birte Pohl; Peter Mulder
  4. From Green Users to Green Voters By Diego Comin; Johannes Rode
  5. Spatial Dependencies of Wind Power and Interrelations with Spot Price Dynamics By Elberg, Christina; Hagspiel, Simeon
  6. Universal Service Obligation and Loyalty Effects: An Agent-Based Modelling Approach By Bakhtieva, Dilyara; Kiljański, Kamil
  7. The effects of industry structure and yardstick design on strategic behavior with yardstick competition: an experimental study By Mulder, Machiel; Haan, Marco A.; Dijkstra, Peter T.
  8. Truth-telling by Third-party Auditors and the Response of Polluting Firms: Experimental Evidence from India By Esther Duflo; Michael Greenstone; Rohini Pande; Nicholas Ryan
  9. Current and Prospective Costs of Electricity Generation until 2050 By Andreas Schröder; Friedrich Kunz; Jan Meiss; Roman Mendelevitch and Christian von Hirschhausen
  10. Port Competition and Welfare Effect of Strategic Privatization By Czerny, Achim; Höffler, Felix; Mun, Se-il
  11. The dynamics of urban traffic congestion and the price of parking� By Fosgerau, Mogens; de Palma, André

  1. By: Nagl, Stephan (Energiewirtschaftliches Institut an der Universitaet zu Koeln)
    Abstract: In recent years, many countries have implemented policies to incentivize renewable power generation. In this paper, we analyze the variance in profits of renewable-based electricity producers due to weather uncertainty under a `feed-in tariff' policy, a `fixed bonus' incentive and a `renewable quota' obligation. In a first step, we discuss the price effects of fluctuations in the feed-in from renewables and their impact on the risk for green electricity producers. In a second step, we numerically solve the problem by applying a spatial stochastic equilibrium model to the European electricity market. The simulation results allow us to discuss the variance in profits under the different renewable support mechanisms and how different technologies are affected by weather uncertainty. The analysis suggests that wind producers benefit from market integration, whereas producers from biomass and solar plants face a larger variance in profits. Furthermore, the simulation indicates that highly volatile green certificate prices occur when introducing a renewable quota obligation without the option of banking and borrowing. Thus, all renewable producers face a higher variance in profits, as the price effect of weather uncertainty on green certificates overcompensates the negatively correlated fluctuations in production and prices.
    Keywords: RES-E policy; financial risk; mixed complementarity problem
    JEL: C61 L50 Q40
    Date: 2013–06–24
  2. By: Höffler, Felix (Energiewirtschaftliches Institut an der Universitaet zu Koeln); Wambach, Achim (Department of Economics, University of Cologne)
    Abstract: Liberalization of network industries frequently separates the network from the other parts of the industry. This is important in particular for the electricity industry where private firms invest into generation facilities, while net- work investments usually are controlled by regulators. We discuss two regulatory regimes. First, the regulator can only decide on the network extension. Second, she can additionally use a "capacity market" with payments contingent on private generation investment. For the first case, we find that even absent asymmetric information, a lack of regulatory commitment can cause inefficiently high or inefficiently low investments. For the second case, we develop a standard handicap auction which implements the first best under asymmetric information, if there are no shadow costs of public funds. With shadow costs, no simple mechanism can implement the second best outcome.
    Keywords: Regulation; commitment; capacity markets; transmission system investment
    JEL: D44 K23 L51 L94
    Date: 2013–06–24
  3. By: Birte Pohl (GIGA German Institute of Global and Area Studies); Peter Mulder (GIGA German Institute of Global and Area Studies)
    Abstract: In this paper we study the diffusion of non-hydro renewable energy (NHRE) technologies for electricity generation across 108 developing countries between 1980 and 2010. We use two-stage estimation methods to identify the determinants behind the choice of whether or not to adopt NHRE as well as about the amount of electricity to produce from renewable energy sources. We find that NHRE diffusion accelerates with the implementation of economic and regulatory instruments, higher per capita income and schooling levels, and stable, democratic regimes. In contrast, increasing openness and aid, institutional and strategic policy support programs, growth of electricity consumption, and high fossil fuel production appear to delay NHRE diffusion. Furthermore, we find that a diverse energy mix increases the probability of NHRE adoption. Finally, we find weak support for a positive influence of the Kyoto Protocol on NHRE diffusion and no evidence for any influence resulting from financial sector development.
    Keywords: renewable energy technologies, developing countries, electricity, technology diffusion, sample selection
    Date: 2013–03
  4. By: Diego Comin; Johannes Rode
    Abstract: We estimate the effect of the diffusion of photovoltaic (PV) systems on the fraction of votes obtained by the German Green Party. The logistic diffusion of PV systems offers a new identification strategy. We take first differences and instrument adoption rates (i.e. the first difference in the diffusion level) by lagged diffusion levels. The existing rationales for non-linearities in diffusion, and ubiquity of logistic curves ensure that our instrument is orthogonal to variables that directly affect voting patterns. We find that the diffusion of domestic PV systems caused 25 percent of the increment in green votes between 1998 and 2009.
    Date: 2013–07–01
  5. By: Elberg, Christina (Energiewirtschaftliches Institut an der Universitaet zu Koeln); Hagspiel, Simeon (Energiewirtschaftliches Institut an der Universitaet zu Koeln)
    Abstract: Wind power has seen a strong growth over the last decade. Due to its high intermittency, spot prices have become more volatile and exhibit correlated behavior with wind power fed into the system. In this paper, we develop a stochastic simulation model that incorporates the spatial dependencies of wind power and its interrelations with spot prices: We employ a structural supply and demand based model for the electricity spot price that takes into account stochastic production quantities of wind power. Spatial dependencies are modeled with the help of copulas, thus linking the single turbine wind power to the aggregated wind power in a market. The model is applied to the German electricity market where wind power already today makes up a significant share of total power production. Revenue distributions and the market value of different wind power plants are analyzed. We fi nd that the speci fic location of the considered wind turbine, i.e. its spatial dependency with respect to the aggregated wind power in the system, is of high relevance for its market value. Many of the analyzed locations show an upper tail dependence that adversely impacts the market value. This effect becomes more important for increasing levels of wind power penetration.
    Keywords: Market Value; Wind Power; Market Integration; Copula; Structural Supply and Demand Model; Spot Price Model; Monte Carlo Simulation
    JEL: C15 C51 Q41
    Date: 2013–06–24
  6. By: Bakhtieva, Dilyara; Kiljański, Kamil
    Abstract: In network industries, a Universal Service Obligation (USO) is often seen as a burden on an incumbent, which requires compensation for the net cost of such service provision. This paper estimates the effects of consumer loyalty as an intangible benefit of USO in the postal sector. In doing so, the agent-based modelling (ABM) approach is applied, which makes it possible to model the behaviour of boundedly rational consumers and is thus particularly appropriate for taking into account intangibles considerations. The analysis shows that loyalty is crucial to whether the USO uniform pricing constraint results in loss-making or profitability. Under certain conditions and in the presence of a loyalty parameter, uniform pricing gives a USO provider an advantage, when the size of the rural area is sufficiently big and a disadvantage, if its size is too small. This finding is counterintuitive as USO providers in countries with sparsely populated areas are typically expected to incur a significant net cost of USO.
    Keywords: agent-based modelling; liberalisation of the postal markets; postal sector; Universal Service Obligation (USO); USO provider
    JEL: K21
    Date: 2012
  7. By: Mulder, Machiel; Haan, Marco A.; Dijkstra, Peter T. (Groningen University)
    Abstract: We present an experiment on yardstick competition. Experimental firms set cost levels in each period and can communicate with each other in an attempt to increase the regulated price. We find that when market shares are heterogeneous, collusion is least frequent and prices are lowest. The number of players on a market also infuences prices, but to a lesser extent. Comparing across yardsticks, the discriminatory yardstick yields the lowest prices, while a best-practice yardstick yields the highest prices.
    Date: 2013
  8. By: Esther Duflo; Michael Greenstone; Rohini Pande; Nicholas Ryan
    Abstract: In many regulated markets, private, third-party auditors are chosen and paid by the firms that they audit, potentially creating a conflict of interest. This paper reports on a two-year field experiment in the Indian state of Gujarat that sought to curb such a conflict by altering the market structure for environmental audits of industrial plants to incentivize accurate reporting. There are three main results. First, the status quo system was largely corrupted, with auditors systematically reporting plant emissions just below the standard, although true emissions were typically higher. Second, the treatment caused auditors to report more truthfully and very significantly lowered the fraction of plants that were falsely reported as compliant with pollution standards. Third, treatment plants, in turn, reduced their pollution emissions. The results suggest reformed incentives for third-party auditors can improve their reporting and make regulation more effective.
    JEL: L51 M42 O13 Q56
    Date: 2013–07
  9. By: Andreas Schröder; Friedrich Kunz; Jan Meiss; Roman Mendelevitch and Christian von Hirschhausen
    Date: 2013
  10. By: Czerny, Achim ((WHU - Otto Beisheim School of Management)); Höffler, Felix (Energiewirtschaftliches Institut an der Universitaet zu Koeln); Mun, Se-il (Kyoto University)
    Abstract: Private operation of port facilities is becoming increasingly common worldwide and many governments consider the privatization of public ports as a policy option. We investigate the effect of port privatization in a setting with two ports located in different countries, serving their home market but also competing for transshipment traffic from a third region. Each government chooses whether to privatize its port or to keep port operations public. We show that there exist equilibria in which the two governments choose privatization. In these equilibria, national welfare is higher relative to a situation where both ports are public. Since port charges are strategic complements, privatization can act as a valuable precommitment tool for the two governments and allows for a better exploitation of the third region. However, from the perspective of maximizing the joint national welfare of both port countries, there is an inefficiently low incentive to privatize. It is also shown that a country with a smaller home market has a larger incentive to choose private port operation.
    Keywords: Infrastructure competition; privatization; strategic delegation
    JEL: L11 L90 L98
    Date: 2013–01–24
  11. By: Fosgerau, Mogens; de Palma, André
    Abstract: We consider commuting in a congested urban area. While an efficient time-varying toll may eliminate queuing, a toll may not be politically feasible. We study the benefit of a substitute: a parking fee at the workplace. An optimal time-varying parking fee is charged at zero rate when there is queuing and eliminates queuing when the rate is non-zero. Within certain limits, inability to charge some drivers for parking does not reduce the potential welfare gain. Drivers who cannot be charged travel when there is queuing. In some cases, interaction between morning and evening commutes can be exploited to remove queueing completely.
    Keywords: parking; dynamic; congestion; urban; traffic
    JEL: D0 R4
    Date: 2013

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