nep-reg New Economics Papers
on Regulation
Issue of 2013‒11‒02
eight papers chosen by
Natalia Fabra
Universidad Carlos III de Madrid

  1. Which is a Better Second Best Policy, the Feed-in Tariff Scheme or the Renewable Portfolio Standard Scheme? (Japanese) By HIBIKI Akira; KURAKAWA Yukihide
  2. Free Riding, Upsizing, and Energy Efficiency Incentives in Maryland Homes By Anna Alberini; Will Gans; Charles Towe
  3. Energy Efficiency in Market versus Planned Economies: Evidence from Transition Countries By Rabindra Nepal; Tooraj Jamasb
  4. Fred Schweppe meets Marcel Boiteux and Antoine-Augustin Cournot: transmission constraints and strategic underinvestment in electric power generation By Léautier, Thomas-Olivier
  5. An Integrated Assessment of Super & Smart Grids By Elena Claire Ricci
  6. Real-time Pricing in Power Markets: Who Gains? By Boom, Anette; Schwenen, Sebastian
  7. Taxing Carbon under Market Incompleteness By Valentina Bosetti; Marco Maffezzoli
  8. Investments in renewable energy sources in OPEC members: a dynamic panel approach By Romano, Antonio Angelo; Scandurra, Giuseppe

  1. By: HIBIKI Akira; KURAKAWA Yukihide
    Abstract: Much attention has been paid to the feed-in tariff (FIT) scheme and the renewable portfolio standard (RPS) scheme to promote the usage of renewable energy recently. When a non-renewable generator, which is a monopolist in the retail market, is a dominant firm and renewable generators are competitive fringes in the renewable electric market, under the FIT scheme, a non-renewable generator utilizes its market power only in the retail market. Under the RPS scheme, a non-renewable generator utilizes its market power in both the retail market and the renewable electricity market. In addition, a non-renewable generator needs to purchase a certain percentage of its electricity production from renewable generators. Thus, it has an incentive to reduce production due to higher marginal cost. The main findings of this article are that the RPS scheme: (1) is more socially desirable when marginal external cost is high and (2) is able to achieve the first best by appropriate initial deductions for the purchase of electricity from renewable generators.
    Date: 2013–10
  2. By: Anna Alberini (AREC, University of Maryand, USA College Park, Fondazione Eni Enrico Mattei (FEEM), Italy and Centre for Energy Policy and Economics (CEPE) at ETH-Zürich, Switzerland); Will Gans (Consultant with NERA, USA); Charles Towe (AREC, University of Maryand, College Park, USA)
    Abstract: We use a unique dataset that combines the responses from an original survey of households, information about the structural characteristics of their homes, utility-provided longitudinal electricity usage records, plus utility program participation information, to study the uptake of energy efficiency incentives and their effect on residential electricity consumption. Attention is restricted to homes where heating and cooling are provided exclusively by heat pumps, which are common in our study area—four counties in Maryland—and were covered by federal, state and utility incentives during our study period (2007-2012). We deploy a difference-in-difference study design. We find that replacing an existing heat pump with a new one does reduce electricity usage: the average treatment effect is an 8% reduction. However, the effect differs dramatically across households based upon whether they receive an incentive towards the purchase of a new heat pump. Among those that receive the purchase incentive, the effect is small or nil, and indeed, the larger the incentive, the smaller the reduction in electricity usage. Those that do not receive incentives reduce usage by about 16%. Our results appear to be driven by the numerous free riders in our sample and by persons who—inferred from their responses to survey questions—might be exploiting the subsidy to purchase a larger system and increase usage, with no emissions reductions benefits to society.
    Keywords: Energy Efficiency, Household Behavior, Energy Efficiency Incentives, Electricity Usage, Rebound Effect, Free Rider
    JEL: Q41 D12 H3
    Date: 2013–10
  3. By: Rabindra Nepal (School of Economics, University of Queensland); Tooraj Jamasb (Business School, Durham University)
    Abstract: Economic theory suggests that market-based policies and reforms should promote energy efficiency in developing and transition countries. his paper, therefore, analyses the impacts of a varied set of market-oriented macro-level reforms on macro level energy efficiency across the transition countries. Since the early 1990s, these economies experienced a rapid marketization process which transformed them from central planning towards more market driven economies. The results from the relatively new bias corrected fixed-effect analysis (LSDVC) technique suggest that between 1990 and 2010, reforms in overall market liberalisation, financial sector and infrastructure industries, excluding the power sector, drove the energy efficiency improvements in these countries. Also, privatisation programmes only improved energy efficiency in the SEE countries. Thus, the empirical evidence support market driven energy efficiency policies aimed at addressing the market failures in the network industries and capital markets. We conclude that these results can help explain the energy efficiency policy puzzles in developing and transition countries where energy efficiency improvement can be a leading policy response to growing climate change and security of supply concerns.
    Keywords: Market Reforms, Energy Efficiency, Transition Countries, Institutions
    JEL: P28 Q54 C33
    Date: 2013–11
  4. By: Léautier, Thomas-Olivier
    Abstract: This article examines imperfectly competitive investment in electric power generation in the presence of congestion on the transmission grid. Under simple yet realistic assumptions, it precisely derives the technology mix as a function of the capacity of the transmission interconnection. In particular, it …nds that, if the interconnection is congested in one direction only, the cumulative capacity is not a¤ected by the congestion, while the baseload capacity is simply the uncongested baseload capacity, weighted by the size of its domestic market, plus the interconnection capacity. If the interconnection is successively congested in both directions, the peaking capacity is the cumulative uncongested capacity, weighted by the size its domestic market, plus the capacity of the interconnection, while the baseload capacity is the solution of a simple …rst-order condition. The marginal value of interconnection capacity is shown to generalize the expression obtained under perfect competition. It includes both a short-term component, that captures the reduction in marginal cost from substituting cheaper for more expensive power, but also a long-term component, that captures the change in installed capacity. Finally, increasing interconnection is shown to have an ambiguous impact on producerspro…ts. For example, if the interconnection is congested in one direction only, increasing capacity increases a monopolist pro…t. On the other hand, if the line is almost not congested, it reduces oligopolistspro…ts.
    JEL: D61 L11 L94
    Date: 2013–09–19
  5. By: Elena Claire Ricci (Fondazione Eni Enrico Mattei, Italy)
    Abstract: We assess the optimality of investments in power grid innovation, under both technological options of Super and Smart Grids, using the WITCH model in the version that includes Super-Grids. Super Grids allow producing and trading of electricity generated by large scale concentrated solar power (CSP) plants in highly productive areas that are connected to the %demand centres through High Voltage Direct Current (HVDC) cables. We extend the model to include also Smart-Grids that allow: i) to increase the share of renewable power manageable by the power network, ii) to reduce the costs of customer relationships via Smart Meters; iii) residential consumer to generate electricity via micro-photovoltaic plants, and iv) residential consumer to generate virtual electricity via consumption management. We find that it becomes optimal to invest in grid innovation, in order to start gaining the management benefits and taking advantage of consumer generating opportunities (of electricity and “nega-watts”), starting in 2010 and to exploit the increased possible penetration of renewable energy sources from 2035. Long-distance CSP generation becomes optimal only from 2040, and trade from 2050; but it reaches very high shares in the second half of the century, especially when penetration limits are imposed on nuclear power and on carbon capture and storage operations (CCS). On the whole, climate policy costs can be reduced by large percentages, up to 48%, 34%, 24% for the USA, Western Europe, Eastern Europe, respectively, with respect to corresponding scenarios without the grid innovation via Super and Smart Grid option and with limits on nuclear power, CCS, and CSP import. The analysis is then extended to compare these options considering, at least qualitatively, the differentiated impacts on the environment, technology, organization, society, local and national economies and geopolitics.
    Keywords: Smart-Grids, Climate Policy, Integrated Assessment, Renewable Energy, Residential Power Generation, Demand Side Management Concentrated Solar Power, Super-Grids, Electricity Trade
    JEL: C61 Q42 Q54
    Date: 2013–10
  6. By: Boom, Anette (Department of Economics, Copenhagen Business School); Schwenen, Sebastian (DIW Berlin, German Institute for Economic Research)
    Abstract: We examine welfare effects of real-time pricing in electricity markets. Before stochastic energy demand is known, competitive retailers contract with final consumers who exogenously do not have real-time meters. After demand is realized, two electricity generators compete in a uniform price auction to satisfy demand from retailers acting on behalf of subscribed customers and from consumers with real-time meters. Increasing the number of consumers on real-time pricing does not always increase welfare since risk-averse consumers dislike uncertain and high prices arising through market power. In the Bertrand case, welfare is the same with all or no consumers on smart meters.
    Keywords: Electricity; Real-time Pricing; Market Power; Efficiency.
    JEL: D42 D43 D44 L11 L12 L13
    Date: 2013–10–21
  7. By: Valentina Bosetti (Università Commerciale “L. Bocconi”, IGIER and FEEM); Marco Maffezzoli (Università Commerciale “L. Bocconi” and IGIER)
    Abstract: This paper is the first attempt, to the best of our knowledge, to study the impact of a carbon tax by means of a heterogeneous agents model. The objectives of the paper are two: i) To assess how the results of a representative agent model compare to those coming from a model accounting for heterogeneity across agents when evaluating aggregate economic and environmental impacts of a carbon tax; ii) To assess the distributional implications of a carbon tax (and equivalent cap) and how they can be mitigated through different recycling schemes or allocations.
    Keywords: Carbon Tax, Double Dividend, Heterogeneous Agents Model
    JEL: Q58 Q54 E2
    Date: 2013–09
  8. By: Romano, Antonio Angelo; Scandurra, Giuseppe
    Abstract: In this paper we analyze the key factors promoting the investments in renewable energy sources a in a panel dataset of Petroleum Exporting Countries (OPEC). To address these issues, a dynamic panel analysis of the renewable investments in the sample of OPEC with distinct economic and social structures, in the years between 1980 and 2009, is proposed. Results confirm that key factors promoting investments in renewable energy sources are similar to others study which include more developed countries. However, absence of grant and/or incentives to promote the installations of new renewable power plants is a limit for the future and sustainable development of these countries.
    Keywords: GMM estimator; Renewable energy.
    JEL: C23 Q28
    Date: 2013

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