nep-reg New Economics Papers
on Regulation
Issue of 2016‒12‒18
sixteen papers chosen by
Natalia Fabra
Universidad Carlos III de Madrid

  1. Analysis of Distributed Energy Systems and Implications for Electrification: The Case of ASEAN Member States By Han Phoumin; Shigeru Kimura
  2. The Determinants of Entry in The Electricity Generation Sector in OECD Countries: A Focus on Renewable Energy By David Benatia; Tomasz Koźluk
  3. A future auction mechanism for distributed generation By Greve, T.; Pollitt, M.
  4. Multiproduct Pricing Made Simple By Armstrong, Mark; Vickers, John
  5. Essays in environmental policy and household economics By Motavasseli, Ali
  6. Estimating the marginal maintenance cost of rail infrastructure usage in Sweden: does more data make a difference? By Odolinski , Kristofer; Nilsson , Jan-Eric
  7. How Do Product Market Regulations Affect Workers?: Evidence from the Network Industries By Oliver Denk
  8. Do Fossil fuel Taxes Promote Innovation in Renewable Electricity Generation? By Lazkano, Itziar; Pham, Linh
  9. To Rebate or Not to Rebate: Fuel Economy Standards vs. Feebates? By Durrmeyer, Isis; Samano, Mario
  10. The impact of cumulative tons on rail infrastructure maintenance costs By Odolinski , Kristofer
  11. Estimating the marginal cost of different vehicle types on rail infrastructure By Smith, Andrew S.J.; Odolinski, Kristofer; Hossein Nia, Saeed; Jönsson, Per-Anders; Stichel, Sebastian; Iwnicki, Simon; Wheat, Phillip
  12. An Examination of Energy Efficiency Retrofit Depth in Ireland By Collins, Matthew; Curtis, John
  13. Urban spatial structure, transport-related emissions and welfare By Laurent Denant-Boèmont; Carl Gaigné; Romain Gaté
  14. A simple introduction to the economics of storage: shifting demand and supply over time and space By Newbery, D. G.
  15. Using a spatial econometric approach to mitigate omitted variables in stochastic frontier models: An application to Norwegian electricity distribution networks By Orea, L.; Álvarez, I; Jamasb, T.
  16. Asset Ownership, Windfalls, and Income: Evidence from Oil and Gas Royalties By Brown, Jason; Fitzgerald, Timothy; Weber, Jeremy G.

  1. By: Han Phoumin; Shigeru Kimura (Economic Research Institute for ASEAN and East Asia (ERIA))
    Abstract: The study of distributed energy systems (DES) in the Association of Southeast Asian Nations (ASEAN) highlights the potential role of DES to enhance electricity access and provide energy solutions as a modern energy system in response to increasing energy demand. This study grasps the overall status and policies of DES in selected ASEAN member states through literature survey and information exchanges from meetings and conferences within the region. The study also attempts to estimate the DES-related renewable energy capacity and investment needed for 2013-2040. At the ASEAN level, the estimates of DES-related renewable capacity and needed investment for combined renewable energy such as wind, solar photovoltaic (PV), geothermal, hydropower, and biomass will increase significantly from the investment opportunity of US$34 billion in the business-as-usual (BAU) scenario to US$56 billion in the alternative policy scenario (APS). At the same time, the application of DES-related renewable energy also implies reduced CO2 emissions of 46.1 million metric tonnes for BAU and 64.6 million metric tonnes for APS. Thailand's case study of DES in the form of small power producers (SPPs) and very small power producers (VSPPs) demonstrated the likelihood of DES expansion in ASEAN member states in the future. Finally, the study suggests that the DES-related investment opportunity is large, and will provide jobs and business opportunities to the community. DES is a modern generation system and its deployment will also help address the electricity supply shortage in ASEAN member states.
    Keywords: distributed energy system (DES), electricity access, investment opportunity, energy demand, energy security
    JEL: Q40 Q41 Q47 Q48
    Date: 2016–12
  2. By: David Benatia; Tomasz Koźluk
    Abstract: Ease of entry is crucial to well-functioning electricity markets. This paper investigates the patterns of entry in the generation segment of the electricity industry of OECD countries and seeks to provide an understanding of their key determinants. It aims to derive implications for the design of policies aimed at spurring competition under significant renewable policy objectives. The analysis focuses on investments in renewable-based electricity generation in all OECD countries over the period 1990-2007. Hypotheses drawn from the literature are tested empirically with using a panel data set based on UDI’s World Electric Power Plant Database. Findings suggest that the likelihood and the volume of entry in renewable-based power generation technologies are significantly affected by industry regulation, renewable support policies, local structural industry characteristics, such as concentration, sectoral expansion and the share of renewable-based capacity already present in the host country. Finally, micro-level factors such as the size of the (parent) firm, its experience with renewables, and whether it is a utility company, are found to significantly affect firm-level investment and entry decisions. La facilité d’entrée sur les marchés de l’électricité est cruciale pour leur bon fonctionnement. Ce rapport étudie les schémas d’entrée dans le segment « production » du secteur de l’électricité dans les pays de l’OCDE, et s’efforce d’en élucider les principaux déterminants. Il vise à en tirer les conséquences pour la conception de politiques destinées à stimuler la concurrence en tenant compte d’objectifs ambitieux concernant les énergies renouvelables. L’analyse s’intéresse principalement aux investissements dans les moyens de production électrique renouvelables de tous les pays de l’OCDE sur la période 1990-2007. Des hypothèses tirées d’une revue de la littérature sont testées empiriquement en appliquant divers modèles économétriques à des jeux de données de panel provenant, pour l’essentiel, de la base de données World Electric Power Plant Database de l’Utility Data Institute (UDI). Les résultats obtenus permettent de conclure que de nombreux facteurs affectent la probabilité d’entrée sur le marché et le volume de ces entrées dans la production d’électricité renouvelable au niveau régional, notamment la réglementation du secteur, les politiques de soutien aux renouvelables, l’innovation, l’expansion sectorielle et la part de puissance installée reposant sur les renouvelables dans le pays concerné. Enfin, il apparaît que certains facteurs au niveau microéconomique, par exemple la taille de l’entreprise, son expérience dans le domaine des énergies renouvelables ou le fait qu’elle soit ou non une compagnie d’électricité, exercent une influence considérable sur les investissements au niveau des entreprises et les décisions d’entrée.
    Keywords: competition, Electricity generation, electricity market liberalisation, energy policy, market entry, market structure, regulation, renewable energy
    JEL: Q40 L10 L94
    Date: 2016–12–15
  3. By: Greve, T.; Pollitt, M.
    Abstract: Auction designs in current electricity markets will need to be adjusted to cope with massively increased small-scale distributed generation and demand response, as these are integrated into the electricity system. We present a VCG mechanism that addresses the two most important challenges facing future power systems, namely uncertainty of costs and complexity of bidding strategies. The mechanism is built up around heterogeneous goods, useful for different levels of response time of electricity or different Quality of Service agreements, package bidding and a proxy agent. The proxy agent will ensure optimal bids from non-professional suppliers. Our mechanism has the expected desirable properties by design.
    Keywords: Future electricity networks, electricity subscriptions, proxy agent, VCG auction mechanism
    JEL: D44 Q41
    Date: 2016–12–12
  4. By: Armstrong, Mark; Vickers, John
    Abstract: We study multiproduct firms in the contexts of unregulated monopoly, regulated monopoly and Cournot oligopoly. Using the concept of consumer surplus as a function of quantities (rather than prices), we present simple formulas for optimal prices and show that Cournot equilibrium exists and corresponds to a Ramsey optimum. We then discuss a tractable class of preferences that involve a generalized form of homotheticity. Profit-maximizing quantities are proportional to efficient quantities. We discuss optimal monopoly regulation when the firm has private information about its cost vector, and find situations where optimal regulation leaves relative price decisions to the firm.
    Keywords: cost passthrough; Cournot oligopoly; homothetic preferences; monopoly regulation; multidimensional screening; Multiproduct pricing; Ramsey pricing
    JEL: D42 D43 D82 L12 L13 L51
    Date: 2016–12
  5. By: Motavasseli, Ali (Tilburg University, School of Economics and Management)
    Abstract: This dissertation addresses several issues regarding the consequences of environmental policy and its optimal level, as well as household's decisions on energy consumption and labor supply. In chapter two, a theoretical analysis investigates whether fossil fuel taxation or a consumption cap is sufficient for the adoption of both biofuels and solar energy. It is shown that under these policies solar adoption can crowd out biofuels consumption. Chapter three addresses the link between longevity and optimal environmental policy. It is shown that the significant rise of life expectancy in the recent decades, which is common across different countries, calls for tighter environmental policies. Chapter 4 investigates households's decisions on the utilization of energy-using appliances. Households tend to increase energy service consumptions, like driving or indoor lighting, once they adopt a more efficient appliance, like fuel-efficient cars and LED light bulbs. This increase in the utilization of appliances is called the rebound effect. According to empirical evidence, the rebound effect declines with households' income. The chapter investigates why households with lower income tend to have larger rebound effects. Chapter 5 investigates differences in households decisions from a different perspective. Here, the labor supply decisions of households in urban and rural areas is analyzed in a historical background. Different patterns of the labor supply of rural and urban households is explained based on the changes in market productivities and non-market opportunities.
    Date: 2016
  6. By: Odolinski , Kristofer (VTI); Nilsson , Jan-Eric (VTI)
    Abstract: One cornerstone of EU’s railway policy is that track user charges should be based on marginal costs for infrastructure use. This paper updates knowledge about the marginal cost of maintaining Sweden’s railway network. Using an extended panel dataset, now comprising 16 years, we corroborate previous results using a static model framework. However, the results from the dynamic model show that an increase in maintenance cost during one year increases costs in the next year, which is contrasting previous estimates on a shorter panel dataset. We conclude that more data made a difference in a dynamic setting, but the estimated cost elasticities are rather robust in a European context.
    Keywords: Marginal cost; Rail infrastructure; Maintenance; Access charging; Dynamic model
    JEL: L92 R48
    Date: 2016–12–09
  7. By: Oliver Denk
    Abstract: Knowing who gains and loses from regulatory reform is important for understanding the political economy of reform. Using micro-level data from 26 countries, this paper studies how regulatory reform of network industries, a policy priority in many advanced economies, influences the labour market situation of workers in network industries. Estimates are identified from changes in a worker’s pay, industry-level employment flows and regulation over time. The main finding is that the regulation of network industries provides workers in this industry with a wage premium and higher employment stability relative to similar workers in other industries. Regulatory reform therefore tends to align labour income and employment stability in the reformed industry with those in other industries. Workers in the reformed industry lose out compared with others, because they no longer benefit from “excess” pay and employment stability. Réglementation des marchés de produits : Quelles conséquences pour le marché du travail dans les industries de réseau ? Pour comprendre l’économie politique d’une réforme réglementaire, il est important de savoir qui seront les gagnants et qui seront les perdants. À partir de microdonnées recueillies dans 26 pays, cet article étudie les incidences que la déréglementation des industries de réseau – une priorité de l’action publique dans de nombreux pays avancés – peut avoir sur la situation des travailleurs employés dans ce secteur. Les effets sont estimés sur la base des variations observées au niveau des salaires, des flux de main-d’oeuvre et de la réglementation. Les principaux résultats de l’analyse montrent que, dans les industries de réseau, la réglementation se traduit par une prime de salaire et une plus grande stabilité de l’emploi que dans les autres secteurs. La déréglementation tend donc à aligner vers le bas les revenus salariaux et le niveau de stabilité de l’emploi des travailleurs concernés, qui sont les perdants de la réforme puisqu’ils ne bénéficient plus du surcroît de salaire et de stabilité dont ils jouissaient auparavant dans leur emploi.
    Keywords: employment stability, labour income, network industries, reform, regulation
    JEL: L52 J31 L98 J63
    Date: 2016–12–15
  8. By: Lazkano, Itziar (Dept. of Economics, Norwegian School of Economics and Business Administration); Pham, Linh (University of Wisconsin-Milwaukee)
    Abstract: We evaluate the role of a fossil fuel tax and research subsidy in directing innovation from fossil fuel toward renewable energy technologies in the electricity sector. Using a global firm-level electricity patent database from 1978 to 2011, we find that the impact of fossil fuel taxes on renewable energy innovation varies with the type of fossil fuel. Specifically, a tax on coal reduces innovation in both fossil fuel and renewable energy technologies while a tax on natural gas has no statistically significant impact on renewable energy innovation. The reason is that easily dispatchable energy sources like coal-fired power plants need to complement renewable energy Technologies in the grid because renewables generate electricity intermittently. Our results suggest that a tax on natural gas, combined with research subsidies for renewable energy, may effectively shift innovation in the electricity sector towards renewable energy. In contrast, coal taxation or a carbon tax that increases coal prices has unintended negative consequences for renewable energy innovation.
    Keywords: Electricity; Energy taxes; Renewable; coal; natural gas technologies
    JEL: L90 O30 Q40
    Date: 2016–11–16
  9. By: Durrmeyer, Isis; Samano, Mario
    Abstract: We compare the welfare effects in equilibrium of two environmental regulations that aim at increasing the new cars fleet’s average fuel efficiency: the fuel economy standards and the feebate policies. Maintaining the same environmental benefit and tax revenue, we simulate the implementation of each policy in France and the United States. Standard-type policies have larger negative welfare effects, up to 3.2 times those from the feebate. Effects on manufacturers are heterogeneous: some are better of under the standard regulation. The addition of a market to trade levels of fuel efficiency dominates the simple standard regulation but not always the feebate. We also consider the attribute-based standard, technological improvements, and the equivalence with fuel taxes as extensions.
    Keywords: Environmental regulation, automobile market, structural model, policy simulations
    JEL: C51 L50 Q51
    Date: 2016–11
  10. By: Odolinski , Kristofer (VTI)
    Abstract: In this paper the cost impact of rail infrastructure usage in Sweden is estimated, using a measure of the cumulative tons experienced by the tracks since they were renewed. The cost elasticity with respect to this measure is compared to the corresponding estimate from annual tons, a standard measure of output in the literature. The cumulative ton measure generates a higher cost elasticity compared to annual tons, and is quite high for tracks that have been extensively used. The results are informative for the Swedish infrastructure manager that needs to strike a balance between maintenance and renewals; the expected cost of maintenance with respect to accumulated use can be compared to the expected cost of a renewal.
    Keywords: Rail infrastructure; Maintenance costs; Cumulative tons
    JEL: L92 R48
    Date: 2016–12–09
  11. By: Smith, Andrew S.J. (Institute for Transport Studies (ITS) and Leeds University Business School); Odolinski, Kristofer (VTI); Hossein Nia, Saeed (KTH); Jönsson, Per-Anders (KTH); Stichel, Sebastian (KTH); Iwnicki, Simon (Institute of Railway Research (IRR), University of Huddersfield); Wheat, Phillip (Institute for Transport Studies (ITS) and Leeds University Business School)
    Abstract: In this paper we combine engineering and economic methods to estimate the relative cost of damage mechanisms on the Swedish rail infrastructure. The former method is good at predicting damage from traffic, while the latter is suitable for establishing a relationship between damage and cost. We exploit the best features of both methods in a two-stage approach and demonstrate its applicability for rail infrastructure charging. Our estimations are based on 143 track sections comprising about 11 000 km of tracks. We demonstrate how the estimated relative costs of damage mechanisms can be used in order to calculate the marginal wear and tear cost of different vehicle types. The results are relevant for infrastructure managers in Europe who desire to differentiate their track access charges such that each vehicle pays its short run-marginal wear and tear cost, which can create a more efficient use of the rail infrastructure.
    Keywords: Marginal cost; Rail infrastructure; Maintenance; Access charging; Track damage; Econometric methods; Engineering simulation
    JEL: L92 R48
    Date: 2016–12–09
  12. By: Collins, Matthew; Curtis, John
    Keywords: energy efficiency/Ireland
    Date: 2016–06
  13. By: Laurent Denant-Boèmont (University of Rennes1 - CREM UMR CNRS 6211, France); Carl Gaigné (INRA, UMR1302 SMART, France and University of LAVAL, CREATE, Québec, Canada); Romain Gaté (University of Rennes1 - CREM UMR CNRS 6211, France and INRA, UMR1302 SMART, France)
    Abstract: In this paper, we study the effects of urban design on pollution and welfare. We build a theoretical model of residential choices with pollution externalities arising from commuting, where the size of the central business district (CBD) and the demand for housing are endogenous. We show that a polycentric city is desirable from welfare and ecological perspective, provided that travel speed and/or the number of roads directly connected with the CBD are sufficiently high. The spatial extension of cities remains the critical variable to curb transport-related urban pollution.
    Keywords: Urban form; Housing; Travel speed; Carbon emissions; Welfare
    JEL: Q53 R14 R21
    Date: 2016–10
  14. By: Newbery, D. G.
    Abstract: The literature on electrical energy storage (EES) is technical and complex which this paper aims to simplify. It quantifies the current scale, costs and value of different types of EES and compares them to peaking generators and interconnectors. Worldwide, dams have 2,700 times the storage capacity of pumped storage, which accounts for 99% of conventional EES, batteries making up the rest. Indirect use of hydro power, and in future, electric vehicles, adds to their value and if accessible at reasonable cost, would be cheaper than conventional EES. EES, peakers and DC interconnectors can offer flexibility services which considerably enhance their value, but hopes of a battery revolution enabling a smarter electricity system should not be exaggerated.
    Keywords: electrical energy storage, interconnectors, flexibility services
    JEL: L94 Q41
    Date: 2016–12–01
  15. By: Orea, L.; Álvarez, I; Jamasb, T.
    Abstract: An important methodological issue for the use of efficiency analysis in incentive regulation of regulated utilities is how to account for the effect of unobserved cost drivers such as environmental factors. This study combines the spatial econometric approach with stochastic frontier techniques to control for unobserved environmental conditions when measuring firms’ efficiency in the electricity distribution sector. Our empirical strategy relies on the geographic location of the firms as a useful source of information that has previously not been explored in the literature. The underlying idea in our empirical proposal is to utilise variables from neighbouring firms that are likely to be spatially correlated as proxies for the unobserved cost drivers. We illustrate our approach using the data of Norwegian distribution utilities for the years 2004 to 2011. We find that the lack of information on weather and geographic conditions can likely be compensated with data from surrounding firms using spatial econometric techniques. Combining efficiency analysis and spatial econometrics methods improve the goodness-of-fit of the estimated models and, hence, more accurate (fair) efficiency scores are obtained. The methodology can also be used in efficiency analysis and regulation of other types of utility sectors.
    Keywords: Spatial econometrics, stochastic frontier models, environmental conditions, electricity distribution networks.
    JEL: D24 L51 L94
    Date: 2016–12–12
  16. By: Brown, Jason (Federal Reserve Bank of Kansas City); Fitzgerald, Timothy; Weber, Jeremy G.
    Abstract: In 2013, total oil and gas royalty-related income exceeded $64 billion. Each dollar in royalties generated an additional $0.52 of local income. Areas with locally owned resources capture $0.29 more of each dollar earned on production.
    Keywords: Oil; Gas; Royalties; Resource ownership; Shale; Income growth
    JEL: D23 Q32 Q33 R11
    Date: 2016–12–08

This nep-reg issue is ©2016 by Natalia Fabra. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
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