nep-reg New Economics Papers
on Regulation
Issue of 2016‒06‒25
thirteen papers chosen by
Natalia Fabra
Universidad Carlos III de Madrid

  1. Questioning the EU Target Electricity Model – how should it be adapted to deliver the Trilemma? By David Newbery
  2. An Examination of the Abandonment of Applications for Energy Efficiency Retrofit Grants in Ireland By Collins, Matthew; Curtis, John
  3. Integration and Efficiency of European Electricity Markets: Evidence from Spot Prices By Klaus Gugler; Adhurim Haxhimusa; Mario Liebensteiner
  4. Financing Renewable Energy: Who is Financing What and Why it Matters By Mariana Mazzucato; Gregor Semieniuk
  5. Challenging prospects for roam like at home By Georgios Petropoulos; J. Scott Marcus
  6. Support policies for renewables Instrument choice and instrument change from a Public Choice perspective By Erik Gawel; Sebastian Strunz; Paul Lehmann
  7. Implementing EU renewable energy policy at the subnational level Navigating between conflicting interests By Gilles Lepesant
  8. Regulation versus Regulated Monopolization of a Cournot Oligopoly with Unknown Costs By Saglam, Ismail
  9. Repeated Interaction in Standard Setting By Larouche, Pierre; Schütt, Florian
  10. Towards a political economy framework for wind power : Does China break the mould? By Michael Davidson; Fredrich Kahrl; Valerie Karplus
  11. Coordinated Balancing of the European Power System By Neuhoff, Karsten; Richstein, Jörn
  12. Air Service Agreement Liberalisation and Airline Alliances By OECD
  13. Managing Water for the Future By Zaragoza-Watkins, Matthew

  1. By: David Newbery
    Abstract: Britain considers the energy-only EU Target Electricity Model (TEM) wanting in delivering the trilemma of reliability, sustainability and affordability and argues that a capacity auction with long-term contracts for new entrants is the least-cost solution compared to relying on expectations of future prices to deliver adequate generation and demand side response. The Energy Union argues against feed-in tariffs (FiTs) for renewables, pressing for premium FiTs (pFiTs), just as GB has abandoned PFiTs in favour of FiTs. This paper draws on the GB experience of Electricity Market Reform before and after the 2015 change of government, to highlight promising resolutions of the energy trilemma, and the problems that have arisen between the diagnosis of the problem and the delivery of solutions. It sets out the theory and practice of delivering capacity, energy and quality of supply, gives a brief history of GB electricity from the CEGB to its current unbundled, liberalized and privatized structure. That sheds light on the trilemma problem and discusses possible solutions. The island of Ireland Single Electricity Market reforms illustrate the problem and possible answer of how best to deliver quality of service with high intermittency.
    Keywords: Reliability, sustainability and affordability, capacity auctions, contract design, renewables
    JEL: D47 H23 L94 Q48 Q54
    Date: 2016–06–03
  2. By: Collins, Matthew; Curtis, John
    Abstract: The Sustainable Energy Authority of Ireland (SEAI) operates the Better Energy Homes (BEH) grant scheme to incentivise residential energy efficient retrofits, an ongoing scheme which was implemented in 2009. This scheme provides a financial incentive for home owners to engage in energy efficient retrofits, provided the upgrades meet appropriate energy efficiency standards. This study analyses the BEH data, which is comprised of all applications from March 2009 to October 2015, in order to examine the extent to which applications are abandoned and the determinants thereof. We find that more complicated retrofits are more likely to be abandoned, with variation across certain retrofit measure combinations. We find lower probabilities of abandonment among certain obligated parties, who are energy retailers obliged by the State to reduce energy consumption in Ireland, while others possess greater likelihoods of abandonment, relative to private retrofits. We find that newer homes are less likely to abandon an application than older homes, as are applications made for apartments, relative to houses. Regional variations exist in abandonment, with rural households more likely to abandon than urban households. A seasonal trend in abandonment is also present, with higher likelihoods of abandonment among applications made during winter.ile-URL:
    Date: 2016–05
  3. By: Klaus Gugler (Department of Economics, Vienna University of Economics and Business); Adhurim Haxhimusa (Research Institute for Regulatory Economics, Vienna University of Economics and Business); Mario Liebensteiner (Department of Economics, Vienna University of Economics and Business)
    Abstract: This paper seeks to investigate the current state of market integration among European electricity day-ahead spot prices. We provide reasoning that market integration brings about benefits, such as lower average prices and increased welfare from allocative efficiency. Yet, price convergence leads to higher prices in the low-price market and to lower prices in the high-price market, which creates winners and losers and thus makes the political implementation of market integration cumbersome. In our empirical analysis, we utilize a large sample of hourly spot prices of 25 European markets for the period 01.01.2010–30.06.2015 and combine it with other relevant data such as interconnector capacities and the existence of market coupling. Firstly, empirical results from cointegration analysis indicate that market integration increased from 2010 to 2012 but then declined until 2015, most likely due to increased feed-in from intermittent renewables. Secondly, we empirically assess the speed of adjustment from price shocks and reach the conclusion that the resulting efficiency of integration is rather modest. In general, our findings suggest that integration among European electricity markets has a large potential for improvements from additional capacity investments and further promotion of market coupling.
    Keywords: Market integration, Spot Price, Convergence, Internal Market, Electricity
    JEL: F15 L81 L98 Q48
    Date: 2016–06
  4. By: Mariana Mazzucato (Science Policy Research Unit, University of Sussex.); Gregor Semieniuk (Science Policy Research Unit, University of Sussex.)
    Abstract: Accelerating innovation in renewable energy (RE) requires not just more finance, but finance servicing the entire innovation landscape. Given that finance is not "neutral", more information is required on the quality of finance that meets technology and innovation stage-specific financing needs for the commercialization of RE technologies. We investigate the relationship between different financial actors with investment in different RE technologies. We construct a new deal-level dataset of global RE asset finance from 2004 to 2014 based on Bloomberg New Energy Finance data, that distinguishes 10 investor types (e.g. private banks, public banks, utilities) and 11 RE technologies into which they invest. We also construct a heuristic investment risk measure that varies with technology, time and country of investment. We nd that particular investor types have preferences for particular risk levels, and hence particular types of RE. Some investor types invested into far riskier portfolios than others, and financing of individual high-risk technologies depended on investment by specific investor types. After the 2008 financial crisis, state-owned or controlled companies and banks emerged as the high-risk taking locomotives of RE asset finance. We use these preliminary results to formulate new questions for future RE policy, and encourage further research.
    Keywords: renewable energy nance, direction of innovation, nancial actor types, deployment, technology risk, investment portfolio
    Date: 2016–12
  5. By: Georgios Petropoulos; J. Scott Marcus
    Abstract: On 25 November 2015, the European Union enacted new rules for international mobile roaming (IMR) under Regulation 2015/2120, which seeks to implement a Roam Like at Home (RLAH) regime among the member states of the European Union. Questions remain, however, as to whether it is possible to implement RLAH without mandating below-cost pricing and thus introducing significant regulatory and economic distortions. It is difficult to see how RLAH could be implemented for other than trivial amounts of IMR traffic without significant cross-subsidisation of the IMR service in many different dimensions. Identifying ways to maintain the ubiquity of the IMR service without unduly distorting the economics of European mobile markets and networks would appear to pose serious challenges; the saving grace, however, might well be that IMR revenue now represents a small enough fraction of total mobile revenue (thanks to previous regulation) that the necessary cross-subsidies might be manageable. The European Commission, which is required to assess the situation and to provide legislative proposals by 15 June 2016, faces a daunting task.
    Date: 2016–06
  6. By: Erik Gawel; Sebastian Strunz; Paul Lehmann
    Abstract: This paper frames the transition towards clean energies as a sequential process of instrument choice and instrument change. First, regulators decide how to initiate the transition away from fossil energies. Here, support policies for renewable electricity are politically convenient because they face low resistance from fossil energies. interest groups. In the second stage, regulators need to adapt support policies for renewables to challenges arising along the transition pathway.We empirically substantiate our arguments by tracing the development of support policies in Germany. Against the backdrop of this analysis, we point towards small-step policies that could foster the transition process.
    Keywords: Environmental policy, Management, Renewable energy sources
    Date: 2016
  7. By: Gilles Lepesant
    Abstract: The European Union (EU) has set targets for gradually reducing greenhouse gas emissions through 2050. One of the instruments involved is the 2009 Renewable Energy Directive, which specifies a 20 per cent renewable energy target for the EU by 2020. This paper reviews tensions and institutional innovations that can arise at local and regional levels within the context of the implementation of this policy.Drawing on empirical evidence collected in two regions, one in a federal country (Brandenburg in Germany), one in a unitary state (Aquitaine in France), the paper describes the factors that determine community and market acceptance of renewable energies, suggesting that appropriate multi-level governance schemes are instrumental in the successful adoption and implementation of EU priorities at the local level.
    Keywords: Forests and forestry, Renewable energy sources, State governments
    Date: 2016
  8. By: Saglam, Ismail
    Abstract: This paper studies whether a Cournot oligopoly with unknown costs should be left unregulated, or regulated according to the optimal mechanism of Gradstein (1995), or first monopolized and then regulated according to the optimal mechanism of Baron and Myerson (1982). We show that the answer to this question depends on the number of the oligopolistic firms and the size of their fixed costs, as well as on the weight of the producer welfare in the social objective function.
    Keywords: Monopoly; Oligopoly; Cournot Competition; Regulation; Asymmetric Information
    JEL: D82 L51
    Date: 2016–06–06
  9. By: Larouche, Pierre (Tilburg University, Center For Economic Research); Schütt, Florian (Tilburg University, Center For Economic Research)
    Abstract: As part of the standard-setting process, certain patents become essential. This may allow the owners of these standard-essential patents to hold up implementers of the standard, who can no longer turn to substitute technologies. However, many real-world standards evolve over time, with several generations of standards succeeding each other. Thus, standard setting is a repeated game in which participants can condition future behavior on whether or not hold-up has occurred in the past. In the presence of complementarity between the different patents included in the standard, technology contributors have an incentive to discipline each other and keep royalties low, which can be achieved by threatening to exclude contributors who have engaged in hold-up from future rounds of the process. We show that repeated standard setting can sustain FRAND royalties provided the probability that another round of standard setting will occur is sufficiently high. We also examine how the decision-making rules of standard-setting organizations affect the sustainability of FRAND royalties.
    Keywords: standard setting; repeated interaction; FRAND royalties
    JEL: L94 L43 L11
    Date: 2016
  10. By: Michael Davidson; Fredrich Kahrl; Valerie Karplus
    Abstract: We propose a general taxonomy of the political economy challenges to wind power development and integration, highlighting the implications in terms of actors, interests, and risks. Applying this framework to three functions in China.s electricity sector.planning and project approval, generator cost recovery, and balancing area coordination.we find evidence of challenges common across countries with significant wind investments, despite institutional and industry characteristics that are unique to China.We argue that resolving these political economy challenges is as important to facilitating the role of wind and other renewable energies in a low carbon energy transition as providing dedicated technical and policy support. China is no exception.
    Keywords: Renewable energy sources
    Date: 2016
  11. By: Neuhoff, Karsten; Richstein, Jörn
    Date: 2016
  12. By: OECD
    Abstract: This document explores the key elements of bilateral air service agreements (ASAs) and recent trends towards increasing liberalisation and examines linkages between ASAs and cross border airline alliance. It discusses issues related to antitrust reviews of proposed alliances and summarises and comments on the impacts of international airline alliances.
    Date: 2014–12–01
  13. By: Zaragoza-Watkins, Matthew
    Keywords: Environmental Economics and Policy,
    Date: 2016–02–25

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