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on Regulation |
| By: | Thibault Roy (European Commission) |
| Abstract: | To shift to a low-carbon economy, the EU has been encouraging the deployment of variable renewable energy sources (VRE). However, VRE lack of competitiveness and their technical specificities have substantially raised the cost of the transition. Economic evaluations show that VRE life-cycle costs of electricity generation are still today higher than those of conventional thermal power plants. Member States have consequently adopted dedicated policies to support them. In addition, Ueckerdt et al. (2013) show that when integrated to the power system, VRE induce supplementary not-accounted-for costs. This paper first exposes the rationale of EU renewables goals, the EU targets and current deployment. It then explains why the LCOE metric is not appropriate to compute VRE costs by describing integration costs, their magnitude and their implications. Finally, it analyses the consequences for the power system and policy options. The paper shows that the EU has greatly underestimated VRE direct and indirect costs and that policymakers have failed to take into account the burden caused by renewable energy and the return of State support policies. Indeed, induced market distortions have been shattering the whole power system and have undermined competition in the Internal Energy Market. EU policymakers can nonetheless take full account of this negative trend and reverse it by relying on competition rules, setting-up a framework to collect robust EU-wide data, redesigning the architecture of the electricity system and relying on EU regulators. |
| Keywords: | Variable renewable energy, Integration costs, Distortion costs, EU electricity system, System costs |
| JEL: | L51 L94 O52 Q20 Q42 |
| Date: | 2015–12 |
| URL: | http://d.repec.org/n?u=RePEc:coe:wpbeep:37&r=reg |
| By: | Zhang,Fan; Huang,Tao |
| Abstract: | This paper analyzes the dynamic effects of rate-of-return regulation on firms? emissions compliance behavior when the price of emissions permits is uncertain. The paper shows that uncertainty regarding the price of permits would motivate a regulated firm to adopt a more self-sufficient strategy and would reduce the cost-effectiveness of emission allowance trading. When allowance transactions are treated as capital investments, uncertainty could reverse the classic Averch-Johnson effect, so that a regulated firm would purchase fewer permits in the ex ante period than its unregulated counterpart. These results are driven by the asymmetric impact of a price change on the expected marginal value of allowances under rate-of-return regulation. A wider variation in the permit price and a decline in the regulated rate of return would amplify the asymmetry. These results have implications for the efficiency of the proposed global carbon trading system. |
| Keywords: | Energy Production and Transportation,Debt Markets,Climate Change Mitigation and Green House Gases,Markets and Market Access,Climate Change Economics |
| Date: | 2015–06–26 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:7343&r=reg |
| By: | Balmer, Roberto E. |
| Abstract: | Alternative telecommunications operators have continuously invested in their own infrastructure in recent years. After more than a decade since liberalization, competitive conditions have substantially changed, especially in urban areas. European regulatory authorities have acknowledged this development by starting regional deregulation. Additionally, different forms of cooperative investments in next generation broadband have appeared on the market. This article reviews the theoretical and empirical literature on geographic regulation as well as practical cases. Based on this review it is suggested that regulators consider geographically segmented access prices to set optimal incentives for the investment in next generation broadband infrastructure. |
| Keywords: | next generation access,co-investment,geographic regulation |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:itse15:127125&r=reg |
| By: | Thure Traber; Claudia Kemfert |
| Abstract: | The German support for renewable energies in the electricity sector is based on the feed-in tariff for investors that grants guaranteed revenues for their renewable energy supply. Corresponding to differences of granted tariffs and respective market values, a surcharge on consumption covers differential costs. While granted tariffs are bound to fall with advances in renewable energy technologies, the market design and the flexibility of the system influence the expected market values of renewables and the necessary surcharge. We apply the European electricity market equilibrium model EMELIE-ESY to investigate this relationship. We find a crucial dependence of market values of renewables on a high system flexibility and the current so-called energy-only market design. Under these conditions, the market values of renewables sequentially recover with increasing market prices by 2024 and 2034. This allows to limit the increase of the core surcharge to below a quarter of its 2013 value by 2024 despite a doubling of renewables, and to introduce substantial surcharge reductions through 2034. However, the introduction of a capacity market would erode market values of renewable energies and induce a pronounced growth of the core surcharge. Under inflexible supply structures and a capacity market, we find an increase of the core surcharge of more than 50 percent by 2024, a respective loss of the market value of wind power of the same magnitude, and an increase of the generation induced part of the consumer prices of more than a quarter. |
| Keywords: | electricity market; renewable energy support; capacity mechanism |
| JEL: | C63 D61 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwwpp:dp1452&r=reg |
| By: | Andrea Baranzini; Jeroen van den Bergh; Stefano Carattini; Richard Howarth; Emilio Padilla; Jordi Roca |
| Abstract: | The idea of a global carbon price has been a recurrent theme in debates on international climate policy. Discarded at the Conference of Parties (COP) of Copenhagen in 2009, it remained part of deliberations for a climate agreement in subsequent years. Unfortunately, there is still much misunderstanding about the reasons for implementing a global carbon price. As a result, ideological and political resistance against it prospers. Here we present the main arguments in favor of a carbon price to stimulate a fair and well-informed discussion about climate policy instruments. This includes arguments that have received surprisingly little attention so far. It is stressed that a main reason to use carbon pricing is environmental effectiveness, so not only economic efficiency (including the special case of cost-effectiveness). In addition, we provide ideas on how to implement a uniform global carbon price, whether using a carbon tax or emissions trading. |
| Date: | 2016–02 |
| URL: | http://d.repec.org/n?u=RePEc:lsg:lsgwps:wp224&r=reg |
| By: | Sobolewski, Maciej; Kopczewski, Tomasz |
| Abstract: | Bundling becomes a dominant sales strategy in telecommunications. Dual and triple-play packages are increasingly popular among subscribers. From operators’ perspective, a core issue in bundling design is the knowledge about how consumers value packages. In this paper we focus on elicitation of subscribers willingness to pay for bundles of fixed telecommunication services composed of telephony, Internet and paid TV. We conduct a stated preference discrete choice experiment on a sample of subscribers in Poland, to model subscription choices over packages of fixed services. We obtain estimates of mean willingness to pay as well as entire distributions of reservation prices for single services and possible combinations of bundles. We find that mean WTP for fixed telephony as a stand-alone service or an add-on to bundle is zero. This result suggest that fixed telephony has already become an obsolete service. Out of the three fixed services, Internet generates the biggest value for customers, driving up valuations of bundles. WTP for Internet is much higher than actually paid prices, leaving space for increase of profits. In contrast fixed telephony and pay TV seem to be overpaid which may create a pressure on operators’ revenue. |
| Keywords: | Bundling,stated choice experiment,willingness to pay,fixed telephony,fixed broadband,pay TV,dual play,triple play,fixed-to-mobile substitution |
| JEL: | C25 D12 L96 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:itse15:127182&r=reg |
| By: | Jonas Egerer; Jens Weibezahn; Hauke Hermann |
| Abstract: | We discuss the implications of two price zones, i.e. one northern and southern bidding area, on the German electricity market. In the northern zone, continuous capacity additions with low variable costs cause large regional supply surpluses in the market dispatch while conventional capacity decreases in the southern zone. As the spatial imbalance of supply and load is increasing, the current single bidding area results more often in technically infeasible market results requiring curative congestion management. Additional bidding zones would enable better market integration of scarce transmission capacities in a system exposed to structural regional imbalances. Using a line sharp electricity sector model, this paper analyzes the system implications and the distributional effects of two bidding zones in the German electricity system in 2012 and 2015, respectively. Results show a decrease in cross-zonal re-dispatch levels, in particular in 2015. However, overall network congestion and re-dispatch levels increase in 2015 and also remain high for both bidding zones. Results are very sensitive to additional line investments illustrating the challenge to define stable price zones in a dynamic setting. With two bidding areas, prices in the model results increase in the southern zone and decrease in the northern zone. The average price deviation grows from 0.4 EUR/MWh in 2012 to 1.7 EUR/MWh in 2015 with absolute values being significantly higher in hours with price differences. Stakeholders within zones are exposed to the price deviations to a different extent. Distributional effects are surprisingly small compared to the wholesale price or different network charges. |
| Keywords: | German electricity market, congestion management, bidding zone configuration, distributional effects. |
| JEL: | L94 Q41 Q48 L51 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwwpp:dp1451&r=reg |
| By: | Carlo Cambini; Michele Polo; Antonio Sassano |
| Abstract: | In this paper, we firstly revise the main technological solutions for ultra-fast broadband connections and summarize the main economic literature (both theoretical and empirical) on the role of regulation to support infrastructure investment in broadband networks We then move to the core of our analysis, that is to assess the relative positioning of the Italian market today in terms of deployment and penetration of broadband access, and then analyse the main relevant policy issues involved in the current Italian plans for broadband deployment. Our goal is to propose a policy framework for fostering the deployment of the Italian ultra-fast broadband network and evaluate the Government master plan. The analysis will also give the opportunity to provide our contribution to the current debate and to suggest how industrial policies in a market-oriented perspective should be re-considered. |
| Keywords: | Broadband network, regulation and investment, state aids. |
| JEL: | L51 L52 L96 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:bcu:iefewp:iefewp83&r=reg |
| By: | Horstmann, Niklas; Krämer, Jan; Schnurr, Daniel |
| Abstract: | We investigate the effects of alternative open access regimes on market performance. In particular, by means of an economic laboratory experiment we compare the market outcomes under unregulated wholesale competition, under a price-fixing rule (where firms must maintain their wholesale price for a fixed period of time), and under a margin squeeze rule (where the retail price of integrated firms must exceed their wholesale price). Our analysis suggests that wholesale and retail prices are substantially reduced by the introduction of a price-fixing rule at the upstream level compared to the unregulated scenario. In contrast, we do not find evidence that a margin squeeze regulation reduces retail market prices. In fact, while such a rule benefits the reselling firm by allowing for a viable profit margin, prices for consumers tend to be even higher than in the unregulated case. |
| Keywords: | Next Generation Access Networks,Access Regulation,Open Access,Upstream Competition,Experimental Economics,Margin Squeeze |
| JEL: | C92 L51 L90 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:itse15:127149&r=reg |
| By: | Peyman Khezr (School of Economics, The University of Queensland); Ian A. MacKenzie (School of Economics, The University of Queensland) |
| Abstract: | This article investigates pollution permit auctions that incorporate allowance reserves. In these auctions the sale of a fixed quantity of permits is supplemented by an additional permit reserve. This reserve automatically releases permits if a sufficiently high price is triggered. The main justifications for implementing an allowance reserve are to reduce price volatility as well as assisting in cost containment. We show—paradoxically—that incorporating an allowance reserve into a permit auction can decrease firms’ payoffs, increase the clearing price, and increase the associated costs of compliance. This has direct policy implications for all major cap-and-trade markets, including the US Regional Greenhouse Gas Initiative. |
| Keywords: | permit auction, allowance reserve |
| JEL: | D44 Q52 |
| Date: | 2016–01–14 |
| URL: | http://d.repec.org/n?u=RePEc:qld:uq2004:553&r=reg |
| By: | Marcus, J. Scott; Gantumur, Tseveen |
| Abstract: | A European debate over measures ostensibly to fully achieve a single market for electronic communications across the EU was brought to a head by the European Commission’s 2013 proposed Telecoms Single Market (TSM) legislative package. The Commission apparently hoped to achieve a Single European Market for electronic communications solely by means of regulatory harmonisation. The Commission’s proposal can serve as the basis for important reflections on harmonisation at European level. Why do we seek regulatory harmonisation? How does harmonisation differ from uniformity? What benefits flow from centralisation, and what benefits from decentralisation? Is the European Union in fact a Union? To what extent do the Member States differ from one another in ways that are not readily altered in the near term? What economic consequences (beyond those already achieved by the current regulatory framework) might be expected from more extensive harmonisation of European electronic communication? What do these considerations tell us about the degree of harmonisation that is desirable, and the degree that is realistically achievable? The approach taken in this paper can help to clarify thinking as to costs and benefits of stronger harmonisation or centralisation of electronic communications regulation, but we do not claim that we have evaluated every regulatory possibility, nor that our assessment is definitive. It is a thought exercise that is meant to help clarify the bounds to what can be achieved solely by means of regulatory harmonisation. |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:itse15:127167&r=reg |