|
on Regulation |
| By: | Robert Marschinski (MCC, PIK, TU-Berlin); Philippe Quirion (CNRS, CIRED, MCC) |
| Abstract: | We study the performance under uncertainty of three renewable energy policy instruments: Tradable Renewable Quota (TRQ), Feed-In-Tariff (FIT), and Feed-In-Premium (FIP). We develop a stylized model of the electricity market, where renewables are characterized by a positive learning externality, which the regulator aims to internalize. Assuming shocks on the fossil-based electricity supply, renewables supply, or on total electricity demand, we analytically derive the conditions determining the instruments’ relative welfare ranking. Although we generally confirm the key role of the slopes of marginal benefits and costs associated with the policy, the specific ranking depends on which type of uncertainty is considered, and whether shocks are permanent or transitory. However, a high learning rate generally favours the FIT, while TRQ is mostly dominated by the other two instruments. These results are confirmed in a numerical application to the US electricity market, in which the FIP emerges as the most and TRQ as the least robust overall choice. |
| Keywords: | Feed-in Premium, Feed-in Tariff, Renewable Energy Policy, Renewable Portfolio Standard, Tradable Renewable Quota, Uncertainty |
| JEL: | Q4 Q48 |
| Date: | 2014–11 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2014.99&r=reg |
| By: | Carlo Cambini; Federico Caviggioli; Giuseppe Scellato |
| Abstract: | In this paper we study the effects of the changes in the level of product market regulation on the industry-level innovation intensity in the Electricity sector across 16 European countries during years 1990-2009. We matched data on R&D budgets and EPO patent applications from IEA and Eurostat Databases and indexes of market regulation conditions from OECD, in order to test the impact of deregulatory policies on the propensity to innovate in new energy technologies. Our findings indicate an increase in the aggregated Electricity R&D and in patenting activities following market deregulation. Our measure of market regulation intensity is based on the aggregation of three factors that capture respectively entry barriers, public ownership and vertical integration. Econometric results suggest that policies aimed at a reduction in vertical integration have a positive impact on both industry-level R&D and patenting. The reduction of public ownership of incumbent operators and entry barriers are mostly associated to a significant increase in R&D expenditures. In the paper we discuss the implication of this evidence in light of the current trend in investment in the electricity sector in Europe. |
| Keywords: | Innovation, Patents, Regulation, Electricity. |
| JEL: | L94 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:bcu:iefewp:iefewp78&r=reg |
| By: | Howell, Bronwyn |
| Abstract: | Vertical separation of upstream network operations from downstream retail activities, as the most extreme form of access regulation, has long been considered a legitimate regulatory remedy against use of market power in upstream infrastructure markets to engage in price- and non-price discrimination to foreclose competition in downstream retail markets. However, the remedy is increasingly being mandated for new networks, sometimes before any investment has been made. This paper uses theories of General Purpose Technologies and regulatory economics to consider how vertical separation - compared to both access regulation and no regulation - poses challenges to the ability to maximise scale economies at the early stage of a network life-cycle. This suggests greater caution in its use at this stage compared to middle and mature phases of the life-cycle. The theories are examined via case studies of two markets where vertical separation has been mandated for Fibre-to-the-Home networks - Australia and New Zealand - and one where it has not - the Netherlands. The case studies suggest that mandatory separation imposes additional constraints on the network owner's ability to achieve scale economies arising from rapid uptake of a new network relative to access regulation when it fails to replicate amongst any retailers the vertically-integrated operator's incentives to engage in aggressive early-stage marketing. Analysis also suggests that contractual limitations may have greater effect on the ability to achieve scale economies than structural impositions and ownership limitations. |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:itsb14:106840&r=reg |
| By: | Klein, Gordon; Wendel, Julia |
| Abstract: | Regulation of traditional narrow- and broadband networks remains a key issue in telecommunication policies. Due to the vertical structure of telecommunication markets and to promote investment, regulatory policies in many European Member States focus on wholesale obligations (so-called remedies) which mandate incumbent operators to share sell or split their infrastructure. On the European level, such remedies were introduced with regularity (e.g. 'Local Loop Unbundling' in 2000). Interestingly, in most cases the obligations were before implemented and tested at the national level. This paper analyses the process of diffusion of different regulatory means across European Member States and presents respective factors of influence on the event of (non-)adoption by the NRAs. Using a panel of European countries for a time period of 17 years, we find different patterns for different regulatory policies and in particular an effect of current state of broadband penetration levels. |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:itsb14:106862&r=reg |
| By: | Weigt, Hannes; Abrell, Jan |
| Abstract: | Natural gas plays an important role in the future development of electricity markets as it is the least emission intensive fossil generation option while additionally providing the needed flexibility in plant operation to deal with intermittent renewable generation. As both the electricity and the natural gas market rely on networks, congestion on one market may lead to changes on another. In addition, investments in one market have an impact in the other and may even become substitutes for one another. The objective of this paper is to develop a dynamic model representation of coupled natural gas and electricity network markets to test the potential interaction with respect to investments. The model is tested under simplified conditions as well as for a stylized European network setting. The results indicate that there is a potential for investment-substitution and significant market interactions that warrants the application of coupled models especially with regard to simulations of long term system developments. |
| JEL: | L94 L95 D92 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc14:100540&r=reg |
| By: | Lange, Mirjam R. J.; Šaric, Amela |
| Abstract: | This paper analyzes the relationship between the traditional fixed-line, mobile and Voice over IP (VoIP) telephony in the EU. In doing so, it aims at filling the gap in the empirical literature on the substitution patterns between these technologies in a comprehensive way. It relies on demand estimation for fixed-line telephony using a unique data set comprising 25 EU member states for the 2006:Q2 - 2011:Q4 period. Employing instrumental variable approach, demand-side substitution for VoIP as well as mobile telephony services is found to be prevalent. Estimated short-run own- and cross-price elasticities are in the inelastic range, however, in the long run demand is clearly elastic. Hence, our results underpin the Europeans Commission's current decision to lift the ex ante regulation on the fixed-line telephony market. |
| Keywords: | Fixed networks,Mobile services,Market definition,(De)regulation |
| JEL: | C23 L43 L51 L96 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:itsb14:106864&r=reg |
| By: | Weber, Arnd |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:itsb14:106852&r=reg |
| By: | André, Francisco J.; de Castro, Luis Miguel |
| Abstract: | Prior research has shown, on the one hand, that firms subject to a cap-and-trade system can enjoy scarcity rents and, on the other hand, that cost effectiveness in a competitive emission permit market could be affected by tacit collusion and price manipulation when the corresponding polluting product market is oligopolistic. It has also been argued that this type of collusive behavior might be responsible for the high prices of permits observed during the first phase of the EU ETS. We analyze these cross market links using a Stackelberg model to show that, under reasonable assumptions, there are no incentives to collude in order to manipulate prices up. However, incentives for manipulating the price of permits upward appear if there is an initial free allocation of permits, which is a policy argument against grandfathering and in favor of auctioning. This effect is increasing with the amount of permits allocated to the leader. The likelihood of observing price manipulation increases with those changes that tend to undermine the leader’s advantage in output production or to reduce the leader’s abatement cost. |
| Keywords: | Emissions permits, Collusion, Market power, Duopoly, Stackelberg model. |
| JEL: | D43 L13 Q58 |
| Date: | 2015–02–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:61770&r=reg |
| By: | Anna Alberini (AREC, University of Maryland, Fondazione Eni Enrico Mattei (FEEM), Center for Economic Research, ETH Zurich, and Queen’s University Belfast); Andrea Bigano (Fondazione Eni Enrico Mattei (FEEM) and Euro-Mediterranean Centre on Climate Change (CMCC)) |
| Abstract: | We evaluate incentives for residential energy upgrades in Italy using data from an original survey of Italian homeowners. In this paper, attention is restricted to heating system replacements, and to the effect of monetary and non-monetary incentives on the propensity to replace the heating equipment with a more efficient one. To get around adverse selection and free riding issues, we ask stated preference questions to those who weren’t planning energy efficiency upgrades any time soon. We argue that these persons are not affected by these behaviors. We use their responses to fit an energy-efficiency renovations curve that predicts the share of the population that will undertake these improvements for any given incentive level. This curve is used to estimate the CO2 emissions saved and their cost-effectiveness. Respondents are more likely to agree to a replacement when the savings on the energy bills are larger and experienced over a longer horizon, and when rebates are offered to them. Reminding about CO2 (our non-monetary incentive) had little effect. Even under optimistic assumptions, the cost-effectiveness of incentives of size comparable to that in the Italian tax credit program is generally not favorable. |
| Keywords: | Energy-efficiency Incentives, Free Riding, Adverse Selection, Stated Preferences, CO2 Emissions Reductions; CO2 emissions Reductions Supply Curves, Residential Energy Consumption |
| JEL: | Q41 Q48 Q54 Q51 |
| Date: | 2014–11 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2014.97&r=reg |
| By: | Dakshina De Silva; Robert P. McComb; Anita Schiller |
| Abstract: | The shift toward renewable forms of energy for electricity generation in the electricity generation industry has clear implications for the spatial distribution of generating plant. Traditional forms of generation are typically located close to the load or population centers, while wind and solar-powered generation must be located where the energy source is found. In the case of wind, this has meant significant new investment in wind plant in primarily rural areas that have been in secular economic decline. This paper investigates the localized economic impacts of the rapid increase in wind power capacity at the county level in Texas. Unlike Input-Output impact analysis that relies primarily on levels of inputs to estimate gross impacts, we use traditional econometric methods to estimate net localized impacts in terms of employment, personal income, property tax base, and key public school expenditure levels. While we find evidence that both direct and indirect employment impacts are modest, significant increases in per capita income accompany wind power development. County and school property tax rolls also realize important benefits from the local siting of utility scale wind power although peculiarities in Texas school funding shift localized property tax benefits to the state. |
| Keywords: | wind energy, industry studies, per capita income, public sector revenues and expenditure |
| JEL: | H23 H72 Q42 Q48 R11 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:lan:wpaper:75316471&r=reg |
| By: | Jeong-Yoo Kim (Department of Economics, Kyung Hee University, Korea); Nathan Berg (Department of Economics, University of Otago, New Zealand) |
| Abstract: | This paper presents a model of quantity regulation aimed at mitigating externalities from over-use of a commons: for example, restrictions on use of automobiles, fisheries, computer networks and electronic stock quotation systems with high-frequency traders. The model provides a counter-intuitive answer to the question of what happens when quantity restrictions are legislated but enforcement is imperfect. If the probability of enforcement depends on both violation rates and enforcement expenditures, then equilibrium congestion can become worse as the quantity restriction becomes more severe. Stricter regulation causes more agents to violate the regulation which consequently reduces the probability of detection. Aggregate payoffs respond nonmonotonically to stricter regulatory rules. We find an interior near-optimal solution which is neither too permissive nor too strict. We show, however, that this near-optimal quantity regulation falls short of achieving socially optimal levels of use. Moreover, socially optimal levels of use can never be achieved in the sense that there exist some agents who rationally choose to violate the regulation if the regulator sets the restricted activity level at the socially optimal level. We also discuss optimal enforcement. |
| Keywords: | congestion, emissions cap, regulation standard, tragedy of the commons |
| JEL: | K42 |
| Date: | 2014–05 |
| URL: | http://d.repec.org/n?u=RePEc:otg:wpaper:1406&r=reg |
| By: | Pethig, Rüdiger; Eichner, Thomas |
| Abstract: | This paper studies within a multi-country model with international trade the stability of international environmental agreements (IEAs) when countries regulate carbon emissions either by taxes or caps. Regardless of whether coalitions play Nash or are Stackelberg leaders the principal message is that the choice of caps or taxes matters. International trade and tax regulation turn out to be necessary conditions for the existence of the encompassing self-enforcing IEA, and that the latter is attained the more likely, the less severe the climate damage. Hence, cap regulation is inferior to tax regulation insofar as in case of the former there exist no large and effective self-enforcing IEAs, in particular not the encompassing self-enforcing IEA. Further results are that for the formation of encompassing self-enforcing IEAs it does not matter (much) whether climate coalitions play Nash or are Stackelberg leaders or whether fossil fuel is modeled as a consumer good or an intermediate good. |
| JEL: | C72 F18 Q54 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc14:100342&r=reg |
| By: | Mauritzen, Johannes (Norwegian School of Economics) |
| Abstract: | Studies have shown that many consumers and businesses fail to invest in energy efficiency improvements despite seemingly ample financial incentives to do so – the so called energy efficiency gap or paradox. Attempts to explain this gap often focus on searching costs, information frictions and behavioral factors. Using data on Norwegian electricity prices and Google searches for heat pumps, I suggest that the inherently spikey nature of many electricity markets has a strong and significant positive effect on searching for information on energy efficiency goods. Because consumers pay for electricity based on at least monthly averages of the wholesale price, I can identify the informational and behavioral effect by decomposing prices into smoothed and deviation components using a novel method of measuring spikiness, comparing the actual price series with a range of deviations from Loess smoothed series. |
| Keywords: | Energy efficiency; Deregulated electricity markets; Price spikes; Informational frictions |
| JEL: | D12 D83 Q41 |
| Date: | 2014–11–28 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:iuiwop:1048&r=reg |
| By: | Zerrahn, Alexander; Huppmann, Daniel |
| Abstract: | Lack of transmission capacity hampers the efficient integration of the European electricity market, and thereby precludes reaping the full benefits of competition. We investigate to what extent the expansion of the transmission grid promotes competition, efficiency, and welfare. This work proposes a three-stage model for grid investment: a benevolent planner decides on network upgrades; she considers the welfare benefits of investment through a reduction of market power exertion by strategic generators. These firms anticipate their impact on the Independent System Operator and are able to exert market power, in particular when lines are congested. We illustrate the model on a simple three-node network. Results indicate that network expansion indeed provides a suitable way of enhancing welfare due to a reduction of market power potential. |
| JEL: | L13 L51 C61 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc14:100459&r=reg |
| By: | Basaure, Arturo; Suomi, Henna; Hämmäinen, Heikki |
| Abstract: | The exponential growth in demand of mobile Internet urges mobile network operators (MNOs) to increase the supply of wireless network capacity at a high pace. From this perspective, operators should not only obtain further network capacity but also make a more efficient use of the existing capacity. Latest developments in load balancing solutions address this challenge through two opposite evolution paths, cooperative and competitive. On the one hand, operator-driven cooperative solutions permit operators to trade spectrum capacity at wholesale level through e.g., Dynamic Spectrum Access (DSA) technologies. On the other hand, user-driven competitive solutions enable users to access and switch between different networks e.g., by adopting user multihoming capability and thereby intensifying retail competition. The deployment of these solutions determines the level of transaction and switching costs and consequently the level of retail competition and wholesale trading of spectrum capacity in a mobile market. This paper analyzes the effects of decreasing these costs in different mobile access scenarios, by employing agent-based modelling. Thus, the performed simulations aim to understand the effect of load balancing technologies on market performance. Finally, the paper suggests policy implications for different markets. |
| Keywords: | transaction costs,switching costs,load balancing,dynamic spectrum access,user multihoming,wholesale trading and retail competition |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:itsb14:106830&r=reg |
| By: | Aflaki, Sam; Masini , Andrea |
| Abstract: | The paper aims to contribute to the longstanding technology-push vs. demand-pull debate and to the literature on renewable energy diffusion and renewable energy policy assessment. The authors argue that in addition to the traditional push-pull dichotomy, the drivers of technological change must be differentiated by whether they are exogenous or endogenous to the economic system. They maintain that a specific type of endogenous demand-pull mechanism (i.e. economic growth) is a major catalyst of environmental innovation. We apply this perspective to study the diffusion of renewable energy (RE) technologies in 15 European Union countries from 1990 to 2012. Applying different panel data estimators, the authors find that public R&D investments, policies supporting RE and per capita income all have a positive impact on RE diffusion, whereas the variability of policy support has a negative impact. However, they also find that economic growth is a stronger driver than either public R&D investments or policies supporting RE, and that models that do not take it explicitly into account tend to overestimate the importance of exogenous drivers. Most importantly, they note that the effect of economic growth on RE diffusion exhibits a nonlinear, U-shaped pattern that resonates with the well-known Environmental Kuznets Curve hypothesis. RE penetration remains negligible at low levels of growth whereas it increases sharply only after income per capita has reached a given threshold and the demand for environmental quality rises. Their findings have implications for policy making. They suggest that for RE diffusion to increase, government action should be directed not only at shielding renewables from competition with fossil fuel technologies but also at stimulating aggregated demand and economic growth. |
| Keywords: | Deployment policy; Technological innovation; Renewable Energy; Environmental Kuznets Curve; Nonstationary Panel |
| JEL: | C23 O31 O33 O38 O44 |
| Date: | 2014–12–01 |
| URL: | http://d.repec.org/n?u=RePEc:ebg:heccah:1070&r=reg |