nep-reg New Economics Papers
on Regulation
Issue of 2015‒09‒18
fourteen papers chosen by
Natalia Fabra
Universidad Carlos III de Madrid

  1. Residental energy efficiency and European carbon policies A CGE-analysis with bottom-up information on energy efficiency technologies By Brita Bye; Taran Fæhn; Orvika Rosnes
  2. Market pull instruments and the development of wind power in Europe: a counterfactual analysis By Marc Baudry
  3. Strategic environmental regulation of multiple pollutants By Ambec, Stefan; Coria, Jessica
  4. Investment vs. Refurbishment: Examining Capacity Payment Mechanisms Using Mixed Complementarity Problems With Endogenous Probability By Lynch, Muireann Á.; Devine, Mel
  5. Energy Efficiency and EU Industrial Competitiveness: Energy Costs and their Impact on Manufacturing Activity By Vasily Astrov; Doris Hanzl-Weiss; Sandra M. Leitner; Olga Pindyuk; Johannes Pöschl; Robert Stehrer
  6. Why Do More British Consumers Not Switch Energy Suppliers? The Role of Individual Attitudes By Xiaoping He and David Reiner
  7. The german market for system reserve capacity and balancing energy. By Sebastian Just
  8. Sense and No(n)-Sense of Energy Security Indicators By Christoph Böhringer; Markus Bortolamedi
  9. The Irish Electricity Market: New Regulation to Preserve Competition By Lynch, Muireann Á.; Di Cosmo, Valeria
  10. Do Smart Grids Increase Real Estate Market Values? By C. D'Alpaos; M. Moretto
  11. On the optimal accumulation of renewable energy generating capacity By Gilbert Kollenbach
  12. Technology invention and diffusion in residential energy consumption. A stochastic frontier approach By Giovanni Marin; Alessandro Palma
  13. Is Energy Efficiency Priced in the Housing Market? - Large Sample Evidence From Germany By M. Cajias; F. Fürst; S. Bienert
  14. How Regulation Affects Innovation: The Smart Grid Case At Urban Scale By V. Antoniucci; C. D'Alpaos; G. Marella

  1. By: Brita Bye; Taran Fæhn; Orvika Rosnes (Statistics Norway)
    Abstract: While the introduction and reformation of climate policy instruments take place rapidly in Europe, the knowledge on how the instruments interact lags behind. In this paper we analyse different interpretations of the 2030 climate policy goals for residential energy efficiency and how they interact with targets for restricting CO2 emissions. We focus on Norway, whose climate and energy policies are integrated with those of the EU. As we account for investment costs of improving energy efficiency we find substantial welfare costs of energy efficiency policies, particularly when interacting with carbon pricing. Rebound effects within households are small, but economy-wide indirect rebound is significant because energy-intensive, trade-exposed (EITE) industries expand. As residential energy use consists mainly of carbon-free electricity, this expansion of EITE-industries leads to increased total CO2 emissions.
    Keywords: Carbon policies; Energy efficiency policies; General Equilibrium analysis; Rebound effects
    JEL: D58 Q43 Q48
    Date: 2015–08
  2. By: Marc Baudry
    Abstract: Renewable energy technologies are called to play a crucial role in the reduction of greenhouse gas emissions. Since most of these technologies are immature, public policies provide for two types of support: technology push and market pull. The latter aims at creating demand for new technologies and at stimulating their diffusion. Nevertheless, due to the complex self-sustained dynamics of diffusion it is hard to determine whether newly installed capacities are imputable to the impulse effect of instruments at the beginning of the diffusion process or to the current support. The paper addresses this problem. A micro-founded model of technology diffusion is built to estimate the impact of the yearly average Return-on-Investment (RoI) on the yearly count of commissioned wind farms in six European countries over the last decade. A counter-factual analysis is carried out to assess the impact of policy instruments on the RoI and, indirectly, on diffusion.
    Keywords: Renewable energy; technology diffusion; wind power; market pull; technology push.
    JEL: O33 Q42 Q55 H23 C61
    Date: 2015
  3. By: Ambec, Stefan (Toulouse School of Economics (INRA-LERNA) and University of Gothenburg.); Coria, Jessica (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: We analyze the interplay between policies aimed to control global and local pollution such as greenhouse gases and particulate matter. The two types of pollution interact in the abatement cost function of the polluting firms through economies or diseconomies of scope. They are regulated by distinct entities (global versus local), potentially with di¤erent instruments that are designed according to some specific agenda. We show that the choice of regulatory instrument and the timing of the regulations matter for efficiency. Emissions of local pollution are distorted if the local regulators anticipate that global pollution will later be regulated through emission caps. The regulation is too (not enough) stringent when abatement efforts exhibit economies (diseconomies) of scope. In contrast, we obtain e¢ ciency if the global pollutant is regulated by tax provided that the revenues from taxing emissions are redistributed to the local communities in a lump-sum way.<p>
    Keywords: environmental regulation; multiple-pollutants; policy spillovers; emission tax; emission standard; emissions trading
    JEL: D62 Q50 Q53 Q54 Q58
    Date: 2015–09
  4. By: Lynch, Muireann Á.; Devine, Mel
    Abstract: Capacity remuneration mechanisms exist in many electricity markets. Capacity mechanism designs do not explicitly consider the effects of refurbishment of existing generation units in order to increase their reliability. This paper presents a mixed complementarity problem with endogenous probabilities to examine the impact of refurbishment on electricity prices and generation investment. Capacity payments are found to increase reliability when refurbishment is not possible, while capacity payments and reliability options yield similar results when refurbishment is possible. Final costs to consumers are similar under the two mechanisms with the exception of the initial case of overcapacity.
    Date: 2015–07
  5. By: Vasily Astrov (The Vienna Institute for International Economic Studies, wiiw); Doris Hanzl-Weiss (The Vienna Institute for International Economic Studies, wiiw); Sandra M. Leitner (The Vienna Institute for International Economic Studies, wiiw); Olga Pindyuk (The Vienna Institute for International Economic Studies, wiiw); Johannes Pöschl (The Vienna Institute for International Economic Studies, wiiw); Robert Stehrer (The Vienna Institute for International Economic Studies, wiiw)
    Abstract: Summary Environmental objectives of the EU and the widened energy price gap between the EU and the United States have recently given rise to concerns about the competitiveness of European manufacturing industries, particularly their energy-intensive branches. The study demonstrates that industrial end-user prices for gas and electricity in the EU have indeed gone up strongly relative to some of its main competitors, largely on account of the network costs component. At the same time, over the past two decades there have been marked advances in energy efficiency in response to energy price shocks. These advances have been driven primarily by technological improvements (although in the NMS a structural shift has also played a role), particularly in the case of electricity and in the long run. However, these did not fully offset the energy price increase, so that the energy cost shares have generally gone up. The study empirically demonstrates that this has had some detrimental effect on industrial competitiveness, although the latter has been generally overshadowed by the impact of other cost components such as labour costs.
    Keywords: energy sector, energy prices, energy costs, energy intensity, industrial competitiveness
    JEL: Q40 Q41 Q4
    Date: 2015–08
  6. By: Xiaoping He and David Reiner
    Abstract: Consumers’ activities play an important role in determining the extent to which any market may become competitive. Although energy prices and switching tariffs and suppliers become very salient politically over 2013-14 in the UK and the number and share of small suppliers increased dramatically over that period, relatively fewer customers switched suppliers in UK electricity and gas markets despite the potential for financial gains, suggesting that non-price factors may affect switching decisions. Using a unique nation-wide British survey, we investigate the determinants of consumers’ switching behavior in electricity and gas markets, by emphasizing the effects of individual attitudes towards energy issues as well as perception of switching cost and benefit. We find that the complexity of household energy tariffs, consumers’ lack of attention to issue of energy prices, expectation on the costs of switching process and lack of switching experience discourage switching. Political allegiance also appears to play a role as Labour Party voters are more likely to switch. Few demographic factors are found to affect the likelihood of switching. Higher education qualifications are related to increased activity in energy markets. Households paying by direct debit are more likely to switch than those paying by other ways. Financial hardship a household suffers does not matter for switching decisions, suggesting there is no clear relationship between switching and income. We conclude that policies which emphasize simplification of energy tariffs, increasing convenience of switching, improving consumers’ concerns about energy issues, improving consumers’ confidence to exercise switch are likely to increase consumer activity.
    Keywords: Energy markets; switching supplier; household behaviors; logit model
    JEL: C25 D21 Q49 R29
    Date: 2015–09–10
  7. By: Sebastian Just (Chair for Management Sciences and Energy Economics, University of Duisburg-Essen)
    Abstract: This paper provides the technical background, describes the market design and its development as well as summarizes the market results of the German system reserve capacity market and the balancing energy mechanism, which are the key tools for required balancing the of the electricity system.
    Keywords: system reserve capacity, balancing energy mechanism, German electricity market,market design
    JEL: Q40
    Date: 2015–08
  8. By: Christoph Böhringer (Carl von Ossietzky Universität Oldenburg, Institut für Volkswirtschaftslehre & ZenTra); Markus Bortolamedi (Carl von Ossietzky Universität Oldenburg, Institut für Volkswirtschaftslehre)
    Abstract: Energy security ranks high on the policy agenda of many countries. To improve on energy security, governments undertake regulatory measures for promoting renewable energy, increasing energy efficiency, or curbing carbon dioxide emissions. The impacts of such measures on energy security are typically monitored by means of so-called energy security indicators. In this paper, we show that the common use of wide-spread energy security indicators falls short of providing a meaningful metric. Regulatory measures to improve on energy security trigger ambiguous effects across energy security indicators. We conclude that a major pitfall of energy security indicators is the lack of a rigorous microeconomic foundation.
    Keywords: energy security, energy security indicators, computable general equilibrium analysis
    JEL: D58 Q48
    Date: 2015–09
  9. By: Lynch, Muireann Á.; Di Cosmo, Valeria
    Date: 2015–03
  10. By: C. D'Alpaos; M. Moretto
    Abstract: Purpose –Buildings energy efficiency is generally considered in terms of energy consumption, costs and GHG emissions reduction in line with the 2020 goals. It is commonly agreed that the greater the building energy efficiency, the greater the property market value. To increase energy efficiency, deep retrofitting was set in place and simultaneously photovoltaic power plants (PV) were installed, boosted through feed-in-tariffs that made them extremely attractive for both institutional and small private investors. Nonetheless Government incentives and regulations were not able to foster consumers to substantially change their energy consumption patterns. In this scenario overall cost-savings by PV-generation systems would only have a marginal impact on real estate market values, if the energy consumption pattern of the household does not match the most beneficial generation pattern and energy management is not properly performed. Aim of the paper is to investigate whether Smart Grids can increase market values due to higher production and consumption flexibility. Smart grids give de facto producers and consumers, the opportunity to be active in the market and strategically decide their optimal production/consumption pattern. We provide a model based on the real option theory to determine the value of this flexibility and the related market value increase. Design/Methodology/Approach – We model the homeowner decision to invest in a PV plant and connect to a Smart Grid. We determine the property potential market value increase due to the opportunity to perform active energy management given by smart grids and we compare this value increase to the PV plant value per se. To capture the value of managerial flexibility we implement a real option approach. Findings – The paper provides a theoretical framework to model the owner’s decision to invest in a PV plant, to be integrated in a smart grid, and determines the real estate market value increase. The greater the flexibility the greater the market value Research limitations/implications – Interesting policy implications might be driven from the model implementation. It might be derived the optimal mix between building energy retrofitting and energy market participation that increases property values in a smart grid scenario. Originality/values – The novelty of the paper lies in the attempt to define energy efficiency also in terms of flexible energy management and its implications in the energy market.
    Keywords: Investment Under Uncertainty; Real Estate Market Values; Real Options; Smart Grids
    JEL: R3
    Date: 2015–07–01
  11. By: Gilbert Kollenbach
    Keywords: Fossil Fuel, Renewable Energy, Capacity
    JEL: Q20 Q32 Q42
    Date: 2015
  12. By: Giovanni Marin (IRCrES-CNR, Milano (Italy)); Alessandro Palma (IEFE-Bocconi, Milano (Italy))
    Abstract: Traditional large appliances absorb a large share of residential electricity consumption and represent important targets of energy policy strategies aimed at achieving energy security. Despite being characterized by rather mature technologies, this group of appliances still offers large potential in terms of efficiency gains due to their pervasive diffusion. In this paper we analyse the electricity consumption of a set of four traditional ‘white goods’ in a panel of ten EU countries observed over 21 years (1990-2010), with the aim of disentangling the amount of technical efficiency from the overall energy saving. The technical efficiency trend is modelled through a set of technology components representing both the invention and adoption process by the means of specific patents weighted by production and bilateral import flows, which allows to overcome the rigid Stochastic Frontier framework in modelling the effect of technical change. Our results show that the derived energy demand and inefficiency trends are both related to changes in the amount of available technology embodied in energy efficient appliances. The effect is significant both in its domestic and international components and suggests an active role of innovation and trade policies for achieving efficiency targets which directly impact the amount of electricity consumed by households.
    Keywords: energy efficiency, technological diffusion, electrical appliances, stochastic frontier analysis, residential sector
    JEL: O33 Q55 Q41
    Date: 2015–09
  13. By: M. Cajias; F. Fürst; S. Bienert
    Abstract: The European Union introduced Energy Performance Certificates (EPC) in 2002 to all member states in order to enhance the environmental awareness in the real estate industry. EPCs act nowadays as a mandatory instrument in investment decisions when letting or selling new and particularly existing buildings. Empirical research across the member states has shown over the last years that energy conservation pays off as the financial benefits might exceed potential investment costs. Although Germany adopted a strict sustainability agenda to reach a carbon neutral stock by 2050, evidence about the potential energy premium in the housing market is scarce. In this paper we investigate the effect of energy performance measured by EPCs on asking rents in the German housing market based on a database involving more than 1,000,000 observations. We explore the relationship extensively between 2013 and 2014 using advanced semiparametric regression models and provide evidence of a substantial impact of energy savings on asking rents and thus on the buildings' performance.
    Keywords: Energy Performance; Epc; Generalized Additive Models; German Housing; Sustainability
    JEL: R3
    Date: 2015–07–01
  14. By: V. Antoniucci; C. D'Alpaos; G. Marella
    Abstract: Purpose: The paper discusses energy saving policies implemented in Italy in the last ten years and shows their ineffectiveness in promoting innovation in new energy systems, such as Smart Grids.The economic fundamentals involved in energy consumption are investigated with specific reference to high rise – high density settlements and their prevalent building typology, i.e. tall buildings. The paper discusses how the energy demand and consumption of a single building can affect the energy trade-off of entire cities.Approach – We examine current local and national policies- for energy consumption reduction, then we discuss how Italian urban planning should adopt ad hoc regulation in order to pursue innovative systems of energy saving. We also - debate on the present absence of procedures to evaluate these policies’ effects on market demand in both new building construction and deep energy retrofit. Finally we argue the inadequacy of Italian national and local legislation in promoting Smart Grids as innovative systems of electric energy production, distribution and consumption.Findings – We represent the stat of art in the Italian legislation for energy saving and we offer a theoretical framework to verify the effectiveness of these measures. Furthermore we propose a new way to promote innovative systems of energy production for high density settlements. In this respect, due to technological and facility management characteristics tall buildings are an opportunity to experiment smart grids at neighborhood level. Beyond the construction engineering advances, we present how regulation should help to improve innovation.Research limitations/implications – The paper is mainly exploratory and identifies some issues for further research. Data on housing market demand related to public incentives must be collected to measure the effectiveness of local norms. Furthermore, selected case studies must be investigated to verify the energy demand at diverse urban density: this survey is preliminary to the definition of protocols for both technological and regulatory interventions.Originality/values – The paper is the first attempt in Italy to present the role of town planning norms in the promotion of Smart Grids and, in general, to match innovative distributed energy systems to legislation in planning. Furthermore the present contribution highlights the potential of specific building typologies, e.g. tall buildings, in the promotion of Smart Grids.
    Keywords: Energy Saving; Skyscrapers; Smart Grids; Sustainability; Urban Planning
    JEL: R3
    Date: 2015–07–01

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