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on Regulation |
| By: | Bell, William Paul; Wild, Phillip; Foster, John; Michael, Hewson |
| Abstract: | This paper analyses wind speed and electricity demand correlation to determine the ability of wind turbine generators to meet electricity demand in the Australian National Electricity Market (NEM) without the aid of energy storage. With the proposed increases in the number of windfarms to meet the Large-scale Renewable Energy Target (LRET), this correlation study is formative to identifying price and power stability issues and determining what transmission structure is required to best facilitate the absorption of wind power. We calculate correlations between wind speed and electricity demand data for the years 2010 to 2012 using Weather Research & Forecasting Model (WRF 2015) wind speed data and Australian Energy Market Operator (AEMO) electricity demand data. We calculate state level correlations to identify potential bottlenecks in the interconnectors that link each state’s transmission network. The transmission lines within each state tend to be less of a constraint. We find a small temporal increase in correlation between electricity demand and wind speed. This we attribute to an unwitting renewable energy portfolio effect with the increase in solar PV and solar water heating. Strengthening this portfolio effect is the decline in manufacturing that makes household domestic demand relatively larger. Comparing our study with an earlier correlation analysis by Bannister and Wallace (2011) tends to confirm our initial findings. We find the most advantage from the lack of correlation between wind speed between the NEM’s peripheral states including Queensland, South Australia and Tasmania. Additionally, the correlation between electricity demand and wind speed is strongest between these states. Similarly, we find the most advantage from the lack of correlation between electricity demand in each of these states. The self-interest groups within Victoria and New South Wales and the transmission companies geographically contained within each state hinders the development of optimal interconnector capacity to maximise the benefit of wind power in the peripheral states and the NEM generally. |
| Keywords: | Wind speed Electricity demand Correlation Australian National Electricity Market Wind turbine generators Renewable energy Renewable energy portfolio solar PV |
| JEL: | Q4 Q42 Q47 Q5 Q53 Q56 |
| Date: | 2015–11–10 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:68185&r=reg |
| By: | Wei Jin (School of Public Policy, Zhejiang University, Hangzhou, China); ZhongXiang Zhang (College of Management and Economics, Tianjin University, Tianjin, China) |
| Abstract: | In creating a level playing field that facilitates the deployment of renewable energy technology (RET), the traditional energy policy regime based on eliminating RET’s cost gaps versus fossil energy technology (FET) may be not sufficient. Building on an economic model of energy technology adoption that features network externality, this paper takes an explicit account of the potential importance of network externality in the design of RET adoption policies. We argue that as incumbent FET has established pervasive deployment and installed base advantages within the existing energy production, distribution and service network, it would create a network externality mechanism that makes it difficult to dislodge the dominant FET-based technological regime, leading to an inertia against the adoption of newly emerging RET even if energy policy regulations have been put in place to eliminate RET’s cost disadvantage. We hence propose that a reformulation of RET policy paradigm should consider extending the traditional scheme centring on eliminating cost gap to a new one that corrects for both cost and network externality gaps |
| Keywords: | Renewable Energy Deployment, Energy Technology Adoption, Network Externality, Climate Technology Policies |
| JEL: | Q41 Q42 Q48 Q54 Q55 Q58 H23 O13 |
| Date: | 2015–09 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2015.76&r=reg |
| By: | ZhongXiang Zhang (College of Management and Economics, Tianjin University and School of Economics, Fudan University, China) |
| Abstract: | The Chinese central government has approved the seven pilot carbon trading schemes. These seven pilot regions are deliberately selected to be at varying stages of development and are given considerable leeway to design their own schemes. These pilot trading schemes have features in common, but vary considerably in their approach to issues such as the coverage of sectors, allocation of allowances, price uncertainty and market stabilization, potential market power of dominated players, use of offsets, and enforcement and compliance. This article explains why China opts for emissions trading, rather than carbon or environmental taxes at least initially, discusses the key common and varying features of these carbon trading pilots and their first-year performance, draws the lessons learned, discusses the potential pathways for evolution of regional pilot carbon trading schemes into a nationwide carbon trading scheme, and raises fundamental issues that must be addressed in order to make such an emissions trading scheme to work reliably and effectively and with an increasingly expanded coverage and scope. |
| Keywords: | Pilot Carbon Trading Schemes, Environmental Taxes, Compliance, Carbon Offsets, Energy Prices, China |
| JEL: | H23 O13 P28 Q43 Q48 Q52 Q54 Q58 |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2015.38&r=reg |
| By: | Manfred Hafner (Associate Researcher, FEEM); Simone Tagliapietra (Senior Researcher, FEEM) |
| Abstract: | Over the last decade decarbonisation has become a key priority for the EU. However, on the contrary of renewable energy or energy efficiency, the role of gas in this process has never been clearly defined. This uncertainty opens a wide debate on the future role of gas in the EU energy system, particularly vis-à-vis the progressively stronger role of renewables in the EU energy mix. This paper tackles this issue with the aim to explore what role gas might play in making the EU decarbonisation path more balanced and secure up to 2030 and beyond. |
| Keywords: | Gas, Decarbonisation, EU Energy Policy |
| JEL: | Q40 Q42 Q48 |
| Date: | 2015–10 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2015.86&r=reg |
| By: | Olivier Durand-Lasserve (OECD Environmental Directorate, France); Lorenza Campagnolo (Ca’ Foscari University of Venice, Centro Euro-Mediterraneo sui Cambiamenti Climatici and Fondazione Eni Enrico Mattei, Italy); Jean Chateau (OECD Environmental Directorate, France); Rob Dellink (OECD Environmental Directorate, France) |
| Abstract: | This report develops an analytical framework that assesses the macroeconomic, environmental and distributional consequences of energy subsidy reforms. The framework is applied to the case of Indonesia to study the consequences in this country of a gradual phase out of all energy consumption subsidies between 2012 and 2020. The energy subsidy estimates used as inputs to this modelling analysis are those calculated by the International Energy Agency, using a synthetic indicator known as “price gaps”. The analysis relies on simulations made with an extended version of the OECD’s ENV-Linkages model. The phase out of energy consumption subsidies was simulated under three stylised redistribution schemes: direct payment on a per household basis, support to labour incomes, and subsidies on food products. The modelling results in this report indicate that if Indonesia were to remove its fossil fuel and electricity consumption subsidies, it would record real GDP gains of 0.4% to 0.7% in 2020, according to the redistribution scheme envisaged. The redistribution through direct payment on a per household basis performs best in terms of GDP gains. The aggregate gains for consumers in terms of welfare are higher, ranging from 0.8% to 1.6% in 2020. Both GDP and welfare gains arise from a more efficient allocation of resources across sectors resulting from phasing out energy subsidies. Meanwhile, a redistribution scheme through food subsidies tends to create other inefficiencies. The simulations show that the redistribution scheme ultimately matters in determining the overall distributional performance of the reform. Cash transfers, and to a lesser extent food subsidies, can make the reform more attractive for poorer households and reduce poverty. Mechanisms that compensate households via payments proportional to labour income are, on the contrary, more beneficial to higher income households and increase poverty. This is because households with informal labour earnings, which are not eligible for these payments, are more represented among the poor. The analysis also shows that phasing out energy subsidies is projected to reduce Indonesian CO2 emissions from fuel combustion by 10.8% to 12.6% and GHG emissions by 7.9% to 8.3%, in 2020 in the various scenarios, with respect to the baseline. These emission reductions exclude emissions from deforestation, which are large but highly uncertain and for which the model cannot make reliable projections. |
| Keywords: | Computable General Equilibrium Model, Households’ Heterogeneity, Fossil Fuel Subsidy Reforms, Distributional Impacts, Indonesia |
| JEL: | C68 H23 O53 |
| Date: | 2015–07 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2015.68&r=reg |
| By: | Jussi Lintunen (Natural Resources Institute Finland); Olli-Pekka Kuusela (Natural Resources Institute Finland) |
| Abstract: | We examine the optimal management of emission permit markets when banking but not borrowing of permits is allowed. The regulator maximizes expected social welfare through an optimal allocation rule in an infinite horizon setting. The policy is second-best as the emission cap is set before the uncertainty about the current state of the economy is resolved. In this setting, the role of banking is to decrease the regulator’s risk as it generates an endogenous price floor in the permit markets. We show that the regulator’s optimal policy adjusts the emissions cap irrespective of the existing number of permits in the bank, with the implication that the regulator neutralizes the effect of the existing bank on future permit prices. We derive the optimality conditions for the second-best emission cap with banking and solve the model analytically in the case of IID shocks. Our results show that the discount factor together with the slopes of the marginal damages and benefits determine the welfare gains from allowing baking of permits. Finally, to address the current state of the EU Emission Trading Scheme (EU ETS) and guide the design of future permit markets, we solve the model numerically with persistent shock process and show that the optimal emission cap is positively correlated with business cycles, meaning that during downturns the regulator should tighten the cap. The expected emissions and permit prices also correlate positively with economic activity |
| Keywords: | Cap and Trade, Climate Change, Business Cycle, Second Best, Prices vs. Quantities |
| JEL: | E32 Q54 Q58 |
| Date: | 2015–05 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2015.48&r=reg |
| By: | Glyn Wittwer |
| Abstract: | California has suffered a four year drought that has imposed severe stress on the state's water resources. Irrigators and urban users have both been affected by unprecedented water restrictions. How should California allocate water? The state has long-standing water allocation issues, as economic mechanisms historically have played little or no role in allocation. USAGE-TERM is a multi-regional CGE model that represents 12 key irrigation counties in California as separate economies. Water trading between irrigators would help California cope with drought. In particular, sales of water from annual crops grower to perennial producers may lower the costs of maintaining plantations, given the high fixed costs arising from the alternative action of drilling new wells. Diverting substantial volumes of irrigation water from plantations to urban users may not be consistent with welfare maximisation. |
| Keywords: | Drought impacts, regional CGE modelling, water trading |
| JEL: | C54 Q11 Q15 |
| Date: | 2015–12 |
| URL: | http://d.repec.org/n?u=RePEc:cop:wpaper:g-258&r=reg |
| By: | Michael Jakob (Mercator Research Institute on Global Commons and Climate Chang and Potsdam Institute for Climate Change Impact Research); Claudine Chen (Mercator Research Institute on Global Commons and Climate Change); Sabine Fuss (Mercator Research Institute on Global Commons and Climate Change); Annika Marxen (Technical University Berlin and Mercator Research Institute on Global Commons and Climate Change); Narasimha Rao (International Institute of Systems Analysis); Ottmar Edenhofer (Mercator Research Institute on Global Commons and Climate Change, Potsdam Institute for Climate Change Impact Research and Technical University Berlin) |
| Abstract: | Introducing a price on greenhouse gas emissions would not only contribute to reducing the risk of dangerous anthropogenic climate change, but would also generate substantial public revenues. Some of these revenues could be used to cover investment needs for infrastructure providing access to water, sanitation, electricity, telecommunications and transport. In this way, emission pricing could promote sustainable socio-economic development by safeguarding the stability of natural systems which constitute the material basis of economies while at the same time providing public goods that are essential for human well- being. An analysis of several climate scenarios with different stabilization targets and technological assumptions reveals that emission pricing has a substantial potential to close existing access gaps. |
| Keywords: | Q31, H54 |
| Date: | 2015–10 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2015.94&r=reg |
| By: | Maximilian Schumacher (Neon Neue Energieökonomik GmbH (Neon), Germany); Lion Hirth (Neon Neue Energieökonomik GmbH (Neon), Germany, Potsdam Institute for Climate Impact Research (PIK), Germany, Mercator Research Institute on Global Commons and Climate Change (MCC), Germany) |
| Abstract: | Accurate information about electricity generation and consumption is crucial to power system modelling. Several institutions publish such data: for European countries these include the association of system operators ENTSO-E, the EU body Eurostat, and the International Energy Agency; for Germany they comprise the sector organisation BDEW, the federal statistical office Statistisches Bundesamt, the working group AG Energiebilanzen, and the four transmission system operators. This paper compares the terminology, methodology, and reported data of these sources, finding inconsistencies at all three levels. For example, annual electricity generation from wind and solar power in Germany differs by as much as 10% – 20%, depending on who you ask. ENTSO-E publishes “hourly load”, which is widely used among power system modellers. The data documentation provides a (constant) “representativity factor” that should be used to scale the hourly load values. However, we find that the scaling factor, when derived from ENTSO-E’s own more comprehensive data sources (“monthly consumption”), is neither the one provided, nor is it constant. The deviation is particularly worrying in Germany, where peak electricity demand might be underestimated by up to a quarter, and so we propose a scaling procedure that avoids such bias. |
| Keywords: | Power system data, Power market modelling |
| JEL: | L94 C63 |
| Date: | 2015–10 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2015.88&r=reg |
| By: | ZhongXiang Zhang (College of Management and Economics, Tianjin University) |
| Abstract: | China has realized that for its own sake and from the international community’s perspective, it cannot afford to continue along the conventional path of encouraging economic growth at the expense of the environment. Accordingly, the country has placed ecological goals at the same level of priority as policies on economic, political, cultural and social development. Specifically, to meet the grand goal involves not only capping China’s nationwide coal consumption to let it peak before 2020 and carbon emissions peak around 2030, but also putting in place a variety of flagship programs and initiatives, prices and policies. This paper argues that the 2030 carbon emissions peak goal is ambitious but achievable and concludes by arguing why China’s anti-pollution outcomes this time might be different from the previous ones. |
| Keywords: | Low-Carbon Economy, Carbon Emissions Peaks, Coal Consumption, Carbon Pricing, Energy Prices, Resource Tax Reform, Renewable Energy, China |
| JEL: | H23 P28 Q42 Q43 Q48 Q53 Q54 Q58 |
| Date: | 2015–10 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2015.95&r=reg |