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on Regulation |
| By: | Karsten Neuhoff; Nolan Ritter; Aymen Salah-Abou-El-Enien; Philippe Vassilopoulos |
| Abstract: | A fundamental question regarding the design of electricity markets is whether adding auctions to the continuous intraday trading is improving the performance of the market. To approach this question, we assess the experience with the implementation of the 3 pm local auction for quarters in Germany at the European Power Exchange (EPEX SPOT) in December 2014 to assess the impact on trading volumes/liquidity, prices, as well as market depth. We discuss further opportunities and challenges that are linked with a potential implementation of an intraday auction. |
| Keywords: | auctions, electricity, empirical analysis, market design |
| JEL: | C5 C57 C93 D44 D47 L50 |
| Date: | 2016–03–21 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:1616&r=reg |
| By: | Ty, Dyna; Bergstrom, John C. |
| Abstract: | This study seeks to analyze competitiveness in electric rates in the U.S. residential sector under a market-based solar sharing network platform and/or a market-based energy trading platform. We argue that under the solar sharing or trading platform there plausibly exist social welfare gains from economics of distributed generation (DG) of renewable energy among grid-connected, photovoltaic (PV) system households. Thus, in this work, we consider a theoretical analysis framework using a model where grid-connected PV-system households are both simultaneously consumers and producers of electricity. |
| Keywords: | Net energy metering, Demand and Price Analysis, Industrial Organization, Production Economics, Resource /Energy Economics and Policy, L, N, O, Q, Z, |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aaea16:235797&r=reg |
| By: | Roberta Distante (Maersk Line); Elena Verdolini (Centro Euro-Mediterraneo sui Cambiamenti Climatici (CMCC) and Fondazione Eni Enrico Mattei); Massimo Tavoni (Centro Euro-Mediterraneo sui Cambiamenti Climatici (CMCC), Fondazione Eni Enrico Mattei and Politecnico di Milano) |
| Abstract: | We empirically assess the distributional impacts and welfare effects of policies to incentivize renewable electricity production for the case of Italy. We use data from the Household Budget Survey between 2000 and 2010 to estimate a demand system in which energy goods' shares of expenditure are modelled using different empirical approaches. We show that the general Exact Affine Stone Index (EASI) demand system provides more robust estimates of price elasticities of each composite good than the commonly used Almost Ideal Demand System (AIDS). The estimated coefficients are used to perform a welfare analysis of the Italian renewable electricity production incentive policy. We show that different empirical approaches give rise to significantly different estimates of price elasticities and that methodological choices are the reasons for the very high elasticities of substitutions estimated using similar data by previous contributions. We find no evidence of regressivity of the incidence of the Italian renewable incentive scheme in the period under consideration. The renewable subsidies act as a middle-class tax, with the higher welfare losses experienced by households in the second to fourth quintiles of the expenditure distribution. |
| Keywords: | Energy taxes, Consumer Demand System, Welfare Effects, Equity |
| JEL: | D12 H22 Q48 |
| Date: | 2016–05 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2016.36&r=reg |
| By: | Claude Menard (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | The legitimate emphasis put on the two leading contributions from Ronald Coase, ‘The nature of the Firm’ and ‘The problem of social cost’, has its dark side: it has kept under the bushel the rich empirical investigations that provided the scaffolding of most Coasean analyses. With the possible exception of his often revisited assessment of the Federal Communications Commission (1959) and his economics of the lighthouses (1974), very little attention has been paid to the continuing investment that Coase made in the analysis of network infrastructures. Throughout his long intellectual life, Coase published over 30 notes, papers, books, and extensive reports on what we now identify as network infrastructures, mainly telecommunications and postal services, but also gas, electricity, or ‘public’ transportation. He started doing so very early, in a devastating review of a book on the institutional structure of public utilities (1938a) and continued to do so without major disruptions until his very last contributions. In this chapter, I propose an exploration of this abundant and rich material, with an emphasis on two major lessons: (1) the analyses developed by Coase remain particularly relevant for the modern analysis of network infrastructures; (2) they highlight an approach to regulation and policy a good deal more subtle than is often assumed. |
| Keywords: | Transaction costs, infrastructures, networks, institutions, meso-institutions |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:hal:cesptp:hal-01320425&r=reg |
| By: | Cohen, Alex; Keiser, David |
| Abstract: | This paper examines the failure of command-and-control pollution policies in the presence of overlapping regulations. We study the case of recent bans on phosphate in household dishwasher detergent. We show that the effectiveness of the bans in reducing effluent depends critically on existing pollution regulations at receiving wastewater treatment facilities. Some facilities face limits on how much phosphorus they can emit. As cost minimizers, limit facilities face no incentive to deviate from this standard. Using novel datasets on wastewater treatment facilities, we show that bans have weak effects on phosphorous effluent, especially in the most polluted waterways. |
| Keywords: | Environmental Regulation, Policy Interactions, Water Quality, Phosphorous, Environmental Economics and Policy, Public Economics, Q50, Q53, Q58, H11, H23, D23, |
| Date: | 2015–06 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aaea16:235533&r=reg |
| By: | Musiliu O. Oseni; Michael G. Pollitt |
| Abstract: | This study focuses on how energy and communications have evolved over the last 50 years and what we can learn from history in order to examine the prospects for smart energy pricing by 2050. We begin by discussing the nature of energy and telecoms products and why price discrimination should be expected. We then review various business and pricing strategies that have evolved in the two industries. We find that business models for both the telecoms and energy sectors have changed from the traditional services business model (i.e., offering of calls and messages for telecoms, and utility supply services for energy) to more dynamic, integrated and complex business models. These new business models include the managed services provider model, the bundled services model, and the prosumer business model, among others. Similarly, several changes in pricing structure have evolved. There has been a reduction in the number of distanced-based and increasing time-based price differentiation in fixed line telecoms and the abolition of residential floor area-based differentiation in residential electricity pricing. We conclude with a discussion on how the rollout of the next generation of electricity meters (smart and advanced meters) may further shape electricity pricing in the future. |
| Keywords: | smart pricing, business models, telecoms, energy, residential, UK |
| JEL: | L94 L96 |
| Date: | 2016–03–22 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:1622&r=reg |
| By: | Laura-Lucia Richter; Melvyn Weeks |
| Abstract: | This paper presents and employs an alternative approach to explore consumer preferences and willingness-to-pay (WTP) for resilience of the electricity grid. The methodological and practical relevance of this approach is demonstrated using the example of the UKs incentive regulation scheme for electricity distribution network operators (DNOs). The estimation strategy exibly accounts for preference heterogeneity in the population, allows for scale heterogeneity (i.e. heterogeneity in the randomness of choice) and exploits individual posterior distributions to improve the estimates. Since the results suggest significant parameter heterogeneity within and across DNOs, it is argued that Ofgem's current method to evaluate consumer preferences and WTP is likely to result in an inefficient level of resilience services. The welfare implications in case of public and private goods and services are discussed. The suggested approach is straightforward to implement, could improve policy evaluations and foster more nuanced and efficient incentive regulation. |
| Keywords: | Willingness-to-Pay, electricity service quality, mixed logit, social welfare |
| JEL: | L98 |
| Date: | 2016–05–10 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:1631&r=reg |
| By: | Thomas Greve; Michael G. Pollitt |
| Abstract: | Energy storage seems set to play a key role in managing and balancing the future electricity system. Storage can act as a generator and as a load, providing both energy and ancillary services such as fast frequency response and operating reserve. Therefore, it can provide the desired flexibility for the network. Current mechanism designs do not take advantage of the full potential of a given storage facility and the auctions used to buy and sell potential storage products have design flaws. This paper gives an overview of how storage products are bought and sold today and the problems of the current designs. It then presents a new mechanism design to integrate storage in the most efficient way, based on social welfare. |
| Keywords: | Electricity storage, interconnectors, auctions |
| JEL: | D44 D85 Q42 |
| Date: | 2016–04–25 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:1628&r=reg |
| By: | Carl T. Kitchens; Taylor Jaworski |
| Abstract: | In this paper, we quantify the difference between public and private prices of residential electricity immediately before and after major federal reforms in the 1930s and 1940s. Previous research found that public prices were lower in a sample of large, urban markets. Based on new data covering over 15,000 markets and nearly all electricity generated for residential consumption, we find the difference between public and private prices was small in 1935 and negligible in 1940 for typical levels of monthly consumption. These findings are consistent with a market for ownership that helped to discipline electricity prices during this period. That is, private rents were mitigated by the threat that municipalities would use public ownership to respond to constituent complaints and public rents were limited by electoral competition and the growth of private provision. |
| JEL: | D4 N12 |
| Date: | 2016–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:22254&r=reg |
| By: | Venus, Thomas J.; Drabik, Dusan |
| Abstract: | The objective of this paper is to analyze the interaction effects of labeling genetically modified organisms (GMOs) on the EU biodiesel market. On the one hand, the EU biofuel mandate reduces the area available for food cultivation. On the other hand, strict GMO regulations hamper the use of GM crops in EU Member States. Our motivation comes from the present political discussion of how to regulate a number of new plant breeding techniques (NPBTs) in the European Union. In case the European Commission considers NPBTs as conventional breeding technique, several agricultural markets will be affected differently than when NPBTs fall under the scope of the genetically modified organism (GMO) regulation. This regulation decision affects labeling (and hence marketing) of NPBTs. We simulate the introduction of oilseed plants produced from NPBTs on the biodiesel market. We assume that rapeseed from NPBTs are more productive than conventional breeding techniques. We consider the case of rapeseed to show the implications of GM labeling on a crop that can be used for food, feed, and fuel. Rapeseed oil obtained from crushing rapeseed can be used for human or biofuel consumption while the byproduct rapeseed extraction meal (henceforth: meal) is mainly used as protein feed for animals (e.g., cows and cattle). We develop a theoretical model that links prices of rapeseed as well as rapeseed oil and meal, and also links the quantities through supply of oil and meal and demand for oil, meal, and biodiesel. Our preliminary results show that regulating NPBTs under the GM regulation reduces the inflationary effects on food prices of the biofuel policy. However, this reduced price effect is not for free. By comparing the welfare effects of the three scenarios, we show which consumers and producers benefit and loose from the GMO policy decision. |
| Keywords: | genetically modified organisms, biofuel policies, biodiesel, New Plant Breding Technology, Agricultural and Food Policy, |
| Date: | 2016–08 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aaea16:236283&r=reg |
| By: | Xavier Labandeira (Rede (Universidade de Vigo) and European University Institute); José M.aría Labeaga (Departamento de Análisis Económico (UNED)); Xiral López-Otero (Rede (Universidade de Vigo)) |
| Abstract: | Price elasticities of energy demand have become increasingly relevant in estimating the socio-economic and environmental effects of energy policies or of other events with influence on the prices of energy goods. Since the 1970s a large number of academic papers have provided both short and long-term price elasticity estimates for different countries by using several models, data and estimation techniques. Yet the literature offers a rather wide range of estimates for the price elasticities of demand for energy. This paper quantitatively summarizes the recent, but still sizeable, empirical evidence on this matter to facilitate a sounder economic assessment of energy price changes. It does so by using meta-analysis to identify the main factors affecting the elasticity results, both short and long term, for energy in general as well as for specific products: electricity, natural gas, gasoline, diesel and heating oil. |
| Keywords: | Keywords: short-term; long-term; electricity; gas; gasoline; diesel; oil |
| JEL: | C13 C83 Q41 |
| Date: | 2015–12 |
| URL: | http://d.repec.org/n?u=RePEc:efe:wpaper:04-2015&r=reg |
| By: | David Newbery |
| Abstract: | High levels of low variable cost intermittent renewables lower wholesale electricity prices, and the depression of these prices could legitimately be recovered from consumers, preferably through capacity payments. Given that renewables are frequently subsidized for their learning benefits and carbon reduction, this paper asks what part of these subsidies should be recovered from final consumers. In long-run equilibrium, renewables have no impact on the number of hours peaking capacity runs, and its impact is to displace largely baseload capacity. The fall in competitive prices is considerably less than the fall in fossil operating costs and provides a case for only a modest share of total subsidies to be charged to electricity consumers. The paper quantifies the amount that can legitimately be charged. |
| Keywords: | renewables, electricity prices, subsidies, investment |
| JEL: | D47 H23 L94 Q42 Q48 Q54 |
| Date: | 2016–01–05 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:1601&r=reg |
| By: | Zhang, Yiyuan |
| Abstract: | This paper examines the efficiency and environmental impact of market organization in the context of the Texas electricity market. Taking advantage of its transition from a bilaterally trading scheme to a centralized pool, I show that low-cost generators displaced high-cost generators in production. The change in generation pattern supports improved information aggregation about congestion externalities under the centralized market. In the nine months following the transition, the generation cost was reduced by $65 million. The increased carbon dioxide emission, however, substantially offsets the efficiency gain. |
| Keywords: | Market Design, Electricity Markets, Congestion Externality, Carbon Emissions, Environmental Economics and Policy, Industrial Organization, Production Economics, Resource /Energy Economics and Policy, L51, L94, Q41, Q51, |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aaea16:235715&r=reg |