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on Regulation |
| By: | Jan Abrell (ETH Zürich, Switzerland); Hannes Weigt (University of Basel, Switzerland) |
| Abstract: | Natural gas plays an important role in the future development of electricity markets, as it is the least emission-intensive fossil generation option and additionally provides the needed plant operating flexibility to deal with intermittent renewable generation. As both the electricity and the natural gas market rely on networks, congestion in one market may lead to changes in the other. In addition, investment in one market impacts investment in the other market to the extent that these investments may even become substitutes for each 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 sufficient potential for investment substitution and market interactions that warrant the application of coupled models, especially with regard to simulations of long-term system developments. |
| Keywords: | Electricity network, Natural gas network, Europe, MCP |
| JEL: | L94 L95 C63 |
| Date: | 2016–03 |
| URL: | http://d.repec.org/n?u=RePEc:eth:wpswif:16-237&r=reg |
| By: | Christine Brandstätt; Gert Brunekreeft; Ken Furusawa; Toru Hattori |
| Abstract: | In response to the global climate challenge many countries are faced with increasing shares of energy from renewable sources in their power supply. The integration of RES (renewable energy sources) generation however entails technical as well as institutional challenges for power grids. This study relies on recent experiences of German distribution network operators in network planning and network pricing and looks at their transferability to Japan. Distributed generation may cause problems of voltage variation and asset overloading in conventional power grids. Technical solutions for these problems are available and well-known yet require considerable investments. The study presents regulatory incentives for network operators to take efficient means to maintain supply quality. With distributed generation self-supplying customers may contribute too little to network cost and new generators and flexible consumers may cause significant investment by uncoordinated siting and operation. An adequate pricing scheme can serve to sustainably finance the infrastructure while at the same time giving incentives to coordinate network users. This study points out options for network charging in grids with high shares of distributed generation from renewable sources. |
| Keywords: | Electric Utilities, Regulation, Market Structure |
| JEL: | L1 L43 L51 L94 |
| Date: | 2015–03 |
| URL: | http://d.repec.org/n?u=RePEc:bei:00bewp:0020&r=reg |
| By: | Raphaël Homayoun Boroumand (ESG Research Lab - ESG Management School, City University London - City University London); Stéphane Goutte (Banque-Finance - LED - Laboratoire d'Economie Dionysien - UP8 - Université Paris 8, Vincennes-Saint-Denis); Simon Porcher (LSE - Department Mathematics [London] - LSE - London School of Economics); Thomas Porcher (ESG Research Lab - ESG Management School) |
| Abstract: | As market intermediaries, electricity retailers buy electricity from the wholesale market or self generate for re(sale) on the retail market. Electricity retailers are uncertain about how much electricity their residential customers will use at any time of the day until they actually turn switches on. While demand uncertainty is a common feature of all commodity markets, retailers generally rely on storage to manage demand uncertainty. On electricity markets, retailers are exposed to joint quantity and price risk on an hourly basis given the physical singularity of electricity as a commodity. In the literature on electricity markets, few articles deals on intra-day hedging portfolios to manage joint price and quantity risk whereas electricity markets are hourly markets. The contributions of the article are twofold. First, we define through a VaR and CVaR model optimal portfolios for specific hours (3am, 6am,. .. ,12pm) based on electricity market data from 2001 to 2011 for the French market. We prove that the optimal hedging strategy differs depending on the cluster hour. Secondly, we demonstrate the significantly superior efficiency of intra-day hedging portfolios over daily (therefore weekly and yearly) portfolios. Over a decade (2001-2011), our results |
| Keywords: | VaR,Intra-day,Retailer,Electricity,Risk,Hedging,Portfolio,CVaR |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:halshs-01194750&r=reg |
| By: | Durmaz, Tunç (School of Energy and Environment, City University of Hong Kong) |
| Abstract: | As renewable energy depends on meteorological shocks and is non-controllable, the overall energy production becomes riskier with the rising renewable share. Although this has led to a renewed interest in storage technologies, not much consideration has been given to energy storage due to precautionary motives. In our study, we look at to what extent a convex marginal utility (prudence) and a convex marginal cost (frugality) can spur precautionary energy storage. We set up a simple theoretical model of energy consumption and production with intermittent renewable sources, dispatchable systems, and energy storage. First, we characterize the optimum and demonstrate how prudence and frugality can lead to higher levels of energy storage. By applying our findings to perfectly competitive markets, we further show that prudence and frugality increase the market energy price through higher demand for energy storage and decrease price volatility. Our analysis can have implications for inventory decisions in various other industries where firms face capacity constraints and are exposed to production risks. |
| Keywords: | Precautionary energy storage; Intermittency; Renewable energy; Fossil fuel energy; Prudence; Frugality; Rational Expectations Equilibrium |
| JEL: | D24 D41 D81 D84 Q41 Q42 |
| Date: | 2016–02–25 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:nhhfms:2016_005&r=reg |
| By: | Andrea Attar; Eloisa Campioni; Gwenaël Piaser |
| Abstract: | We study games in which several principals design incentive schemes in the presence of privately informed agents. Competition is exclusive: each agent can participate with at most one principal, and principal-agents corporations are isolated. We analyze the role of standard incentive compatible mechanisms in these contexts. First, we provide a clarifying example showing how incentive compatible mechanisms fail to completely characterize equilibrium outcomes even if we restrict to pure strategy equilibria. Second, we show that truth-telling equilibria are robust against unilateral deviations toward arbitrary mechanisms. We then consider the single agent case and exhibit sufficient conditions for the validity of the revelation principle. |
| Keywords: | Competing Mechanisms, Exclusive Competition, Incomplete Information. |
| JEL: | D82 |
| Date: | 2016–03–17 |
| URL: | http://d.repec.org/n?u=RePEc:ipg:wpaper:2015-632&r=reg |
| By: | Jan Abrell (ETH Zürich, Switzerland); Hannes Weigt (University of Basel, Switzerland) |
| Abstract: | Electricity markets depend on upstream energy markets to supply the fuels needed for generation. Since these markets rely on networks, congestion in one can quickly produce changes in another. In this paper we develop a combined partial equilibrium market model which includes the interactions of natural gas and electricity networks. We apply the model to a stylized representation of Europe’s electricity and natural gas markets to illustrate the upstream and downstream feedback effects which are not obvious on first sight. We find that both congestion and loop-flow effects in electricity markets impact prices and quantities in markets located far from the initial cause of the market changes. |
| Keywords: | Electricity network, Natural gas network, Europe, MCP |
| JEL: | L94 L95 C63 |
| Date: | 2016–03 |
| URL: | http://d.repec.org/n?u=RePEc:eth:wpswif:16-238&r=reg |
| By: | Lucas W. Davis |
| Abstract: | Despite increasing calls for reform many countries continue to provide subsidies for gasoline and diesel. This paper quantifies the external costs of global fuel subsidies using the latest available data and estimates from the World Bank and International Monetary Fund. Under preferred assumptions about supply and demand elasticities, current subsidies cause $44 billion in external costs annually. This includes $8 billion from carbon dioxide emissions, $7 billion from local pollutants, $12 billion from traffic congestion, and $17 billion from accidents. Government incentives for alternative fuel vehicles are unlikely to cost-effectively reduce these externalities as they do little to address traffic congestion or accidents, and only indirectly address carbon dioxide and local pollutants. |
| JEL: | H23 Q31 Q41 Q48 Q52 Q53 Q54 Q58 R41 |
| Date: | 2016–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:22105&r=reg |
| By: | Doraszelski, Ulrich; Seim, Katja; Sinkinson, Michael; Wang, Peichun |
| Abstract: | We explore ownership concentration as a means to seek rents in the context of the U.S. government's planned acquisition of broadcast TV licenses in the upcoming incentive auction. We document the significant purchases of licenses by private equity firms in the run-up to this auction and perform a prospective analysis of the effect of firms controlling multiple licenses on the outcome of the auction. Our results show that multi-license holders are able to earn large rents from a supply reduction strategy where they strategically withhold some of their licenses from the auction to drive up the closing price for the remaining licenses they own. Relative to the case where each license is bid into the auction independently, spectrum acquisition costs increase by one third to one half. Strategic behavior by multi-license holders reduces economic efficiency as the set of licenses surrendered into the auction is not the socially optimal set. A case study illustrates the mechanism in a specific local media market. We propose a partial remedy that mitigates the effect of ownership concentration and reduces the distortion in payouts to broadcast TV license holders by one to two thirds. |
| Date: | 2016–03 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:11173&r=reg |
| By: | Foster, John; Wagner, Liam; Liebman, Ariel |
| Abstract: | This report provides detail on the modelling and scenario frameworks for the economic analysis of the Future Grid. These frameworks and modelling platforms have been constructed to support the Future Grid Cluster in examining policy and market issues which will affect the electricity and natural gas markets in Australia. Initially we provide an overview of the co-optimisation and expansion of transmission networks and electricity generation for the future grid. In this section we outline not only the key mechanisms and analyses required, but also how we have and will continue to collaborate with the other projects within the Future Grid Cluster. In section 3 we provide an extensive analysis of the electricity market modelling platform PLEXOS. This section will outline, not only the mechanistic components of modelling electricity markets, but also some of the assumptions which are required to examine issues such as generation investment under uncertainty. The following section is a discussion of the natural gas modelling platform ATESHGAH. This model has been in construction for several years prior to the commencement of the Future Grid Cluster and represents a significant shift in gas market modelling methodology for Australia, compared to previous approaches. This model is capable of examining multiple issues associated with policy, market, economic, and physical aspects of gas production, transmission, sale and liquefied natural gas (LNG) export simultaneously. We have used this model to examine how Australia’s eastern gas market could be affected by the commencement of LNG exports from Curtis Island in 2015/16. In the remaining section, we present the scenario modelling framework as an overview and present some initial results for Scenario 1: Set and Forget. These results represent the first set of simulations and should thus be viewed as an initial attempt to undertake the large search space that the four scenarios evaluated in the Future Grid Forum encompass. |
| Keywords: | Energy Economics, Electricity Markets |
| JEL: | Q41 Q47 Q48 |
| Date: | 2015–12–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:70114&r=reg |
| By: | Mark Clatworthy; Michael Peel |
| Abstract: | This paper investigates the effects of both regulation and economic demand on the timeliness of UK private companies' accounting information. We study companies' response to a one month shortening of the statutory filing deadline and hypothesise that companies using accounting to communicate financial information to outside capital providers will be timelier in filing their accounts and less affected by the regulatory change than firms preparing accounts for tax and compliance purposes. Our results indicate that companies producing accounting information for reporting to outside investors publish their accounts significantly more quickly than those filing for compliance/tax reasons, though the change in regulation significantly affects both types of companies. We find a reduction in the average filing time, though the proportion of firms filing late increases after the regulatory change. In addition to incurring financial and non-financial penalties, filing after the statutory limit has important economic consequences because our results show that firms filing late have significantly lower credit ratings. We conclude that both regulatory and fundamental factors are important in private company financial reporting and that the two are sometimes interdependent. |
| Date: | 2016–03–16 |
| URL: | http://d.repec.org/n?u=RePEc:bri:accfin:16/3&r=reg |