nep-reg New Economics Papers
on Regulation
Issue of 2017‒03‒05
eleven papers chosen by
Natalia Fabra
Universidad Carlos III de Madrid

  1. Wind, Storage, Interconnection and the Cost of Electricity Generation By Valeria Di Cosmo; Laura Malaguzzi Valeri
  2. Divesting Fossil Fuels By Trinks, Arjan; Scholtens, Bert; Mulder, Machiel; Dam, Lammertjan
  3. Designing markets for biodiversity offsets: lessons from tradable pollution permits By Katherine Simpson; Frans P de Vries; Paul Armsworth; Nick Hanley
  4. Influence of Environmental Policy and Market Forces on Coal-fired Power Plants By Pangan, Melboy; Mulder, Machiel
  5. How Different Policy Instruments Affect the Creation of Green Energy Innovation: A Differentiated Perspective By Spyros Arvanitis; Michael Peneder; Christian Rammer; Tobias Stucki; Martin Wörter
  6. Harnessing Policy Complementarities to Conserve Energy: Evidence from a Natural Field Experiment By John List; Robert Metcalfe; Michael Price; Florian Rundhammer
  7. Switching towards coal or renewable energy? The effects of financial capital on energy transitions By Rohan Best
  8. Switching Response to Power Prices: Evidence from German Households By Kussel, Gerhard; Frondel, Manuel
  9. Short-run effects of product markets’ deregulation: a more productive, more efficient and more resilient economy? By Ana Gouveia; Sílvia Santos; Gustavo Monteiro
  10. Demand Response Potential of Electricity End-users Facing Real Time Pricing By Ma, Yiqun
  11. Maintaining Competition in Recurrent Procurement Contracts: A case study on the London Bus Market By Elisabetta Iossa; Michael Waterson

  1. By: Valeria Di Cosmo (Fondazione Eni Enrico Mattei and Economic and Social Research Institute); Laura Malaguzzi Valeri (Economic and Social Research Institute)
    Abstract: We evaluate how increasing wind generation affects wholesale electricity prices, balancing payments and the cost of subsidies using the Irish Single Electricity Market (SEM) as a test system, with hourly data from 1 January 2008 to 28 August 2012. We model the spot market using a system of seemingly unrelated regressions (SUR) where the regressions are the 24 hours of the day. Wind has a negative impact on the system marginal price, with every MWh increase in wind generation (equal to about 0.2% of the average wind generation in our sample) leading to a decrease of the system marginal price of €0.018/MWh, or about 0.3% of its average value. We use time series models to analyse the balancing market and show that wind generation increases balancing payments, as do the forecast errors of demand and wind. Every MWh of additional wind generation is associated with an increase in constraint payments of €3.2, or about 0.01%. Lack of storage increases the impact of wind on balancing payments whereas the lack of interconnection has no effect. Overall, wind decreases costs through its effect on the electricity price more than it increases constraint payments, even when storage is on outage. The effect of wind remains positive after including the cost of subsidies given to wind generation.
    Keywords: Wind Generation, Constraints, Storage, Interconnection, Subsidies
    JEL: L94 Q42
    Date: 2017–02
  2. By: Trinks, Arjan; Scholtens, Bert; Mulder, Machiel; Dam, Lammertjan (Groningen University)
    Abstract: Fossil fuel divestment campaigns urge investors to sell their stakes in companies that supply coal, oil, and gas. However, avoiding investments in such companies can be expected to impose a financial cost on the investor because of reduced opportunities for portfolio diversification. We compare the risk-adjusted return performance of investment portfolios with and without fossil fuel companies over the period 1927-2015. Contrary to theoretical expectations, we find that fossil-free investing does not seem to impair financial performance. These findings can be explained by the fact that fossil fuel company portfolios do not generate above-market performance and provide relatively limited diversification benefits. Significant performance impacts of a divestment strategy, however, are observed over short time frames and when applying divestment to less diversified investment portfolios.
    Date: 2017
  3. By: Katherine Simpson (University of Edinburgh); Frans P de Vries (Economics Division, University of Stirling); Paul Armsworth (Department of Ecology and Evolutionary Biology, The University of Tennessee); Nick Hanley (School of Geography and Sustainable Development, University of St. Andrews)
    Abstract: Biodiversity offset markets are one option for managing the trade-offs that exist between conservation targets and the increasing demand on land for urban development and agricultural expansion at local, regional and international scales. Drawing on lessons from the tradable pollution permit market literature, we review the key design parameters for biodiversity offset markets and consider how these have been applied in practice in the U.S., Australia, and the UK. We argue that offset markets should only be applied where the conservation target is a well-defined measure of biodiversity. Efficient offset markets require goods to be simple, measurable units that are fully exchangeable. This allows the market to operate under simple trading rules and engage with the widest number of participants, allowing gains from trade to be realised. We argue that a well-designed and managed offset scheme can be a more cost-effective way of meeting conservation targets than regulation.
    Keywords: Discrete biodiversity, offsets, tradeable pollution permits, transactions costs, conservation planning
    JEL: Q28 Q57 Q58
    Date: 2017–02
  4. By: Pangan, Melboy; Mulder, Machiel (Groningen University)
    Date: 2016
  5. By: Spyros Arvanitis (KOF Swiss Economic Institute, ETH Zurich, Switzerland); Michael Peneder (KOF Swiss Economic Institute, ETH Zurich, Switzerland); Christian Rammer (KOF Swiss Economic Institute, ETH Zurich, Switzerland); Tobias Stucki (KOF Swiss Economic Institute, ETH Zurich, Switzerland); Martin Wörter (KOF Swiss Economic Institute, ETH Zurich, Switzerland)
    Abstract: Based on representative firm-level survey data for the three countries Austria, Germany, and Switzerland, we investigate the effects of regulation, energy taxes, voluntary agreements, and subsidies, on the creation of green product innovations. Our data set allows us to distinguish between the supply-side effects (cost effects) and the demand-side effects of policy measures, which improves our understanding of the frequently observed positive net effect of policies. Controlling for the demand effect, taxes and regulations are negatively related with product innovations. Hence, if taxes and regulation do not trigger additional demand, they decrease the propensity to innovate. These effects are ameliorated for technologically very advanced firms and for firms with a high level of financial awareness. Subsidies and (partly) voluntary agreements are positively related with product innovations.
    Keywords: Innovation, Policy, Demand
    Date: 2016–11
  6. By: John List; Robert Metcalfe; Michael Price; Florian Rundhammer
    Abstract: The literature has shown the power of social norms to promote residential energy conservation, particularly among high usage users. This study uses a natural field experiment with nearly 200,000 US households to explore whether a financial rewards program can complement such approaches. We observe strong impacts of financial rewards, particularly amongst low-usage and low-variance households, customers who typically are less responsive to normative messaging. Our data thus suggest important policy complementarities between behavioral and financial incentives: whereas non-pecuniary interventions disproportionally affect intense users, financial incentives are able to affect substantially low-user, "sticky households."
    Date: 2017
  7. By: Rohan Best
    Abstract: Does a country’s stock of financial capital affect its ability to achieve energy transitions? This paper uses data for up to 137 countries for the period 1998–2013 to investigate the importance of financial capital for changes in the use of each energy type. I find that financial capital supports transition to more capital-intensive energy types. For high-income countries, financial capital facilitates transitions from fossil fuels to modern renewable energy sources, especially wind. Both private credit from banks and domestic private debt securities support greater shares of wind energy. For lower-income countries, financial capital supports progression from biomass towards fossil fuel energy sources such as coal. I also find that countries with larger stocks of financial capital are more likely to move to more capital-intensive electricity generation systems.
    Keywords: energy, financial capital
    JEL: O11 O13 Q42 Q43
    Date: 2017
  8. By: Kussel, Gerhard; Frondel, Manuel
    Abstract: Empirical evidence on the response of German households to electricity price changes is largely lacking. Using data from Germany's Residential Energy Consumption Survey (GRECS), we fill this void by employing an instrumental variable approach to cope with the endogeneity of the consumers' tariff choice. Exploiting our information on the households' knowledge about power prices, we additionally employ an Endogenous Switching Regression Model to estimate price elasticities for two groups of households: those that are informed about prices and those that are price-ignorant. With elasticity estimates falling between -0.91 and zero, we find residential electricity demand to be quite inelastic. Households with price information are sensitive to price changes while the demand of uninformed household is entirely price inelastic.
    JEL: Q41 D12 C26
    Date: 2016
  9. By: Ana Gouveia (GPEARI - Research and Economic Policy Division); Sílvia Santos; Gustavo Monteiro
    Abstract: This paper assesses the short-term impact of product market deregulation in upstream sectors on the productivity growth of firms in downstream sectors (i.e. those firms using the output of the reformed sectors as inputs in their production process). Relying on a firm level database for the period 2004-2014 covering all Portuguese firms, we show that the most productive firms - those at the sectoral technological frontier - grasp short-run benefits from these reforms, which are then spread to the other existing firms via spillover mechanisms. In addition, reforms potentiate the exit of the least productive firms, improving the resource allocation in the economy. Finally, we show that the adoption of product market reforms in upstream sectors leads to a more resilient economy, better equipped to face adverse shocks.
    Keywords: Product Market Reforms, Total Factor Productivity, Growth, Exit Rates, Resource Allocation, Resilience
    JEL: D04 D22 L43 L51
    Date: 2017–03
  10. By: Ma, Yiqun (Groningen University)
    Date: 2016
  11. By: Elisabetta Iossa (CEIS & DEF, University of Rome "Tor Vergata",Proxenter,CEPR,IEFE-Bocconi); Michael Waterson (University of Warwick)
    Abstract: Under recurrent procurement, the awarding of a contract to a firm may put it in an advantageous position in future tenders, which may reduce competition over time. The objective of this paper is to study the dynamics of competition for tendered contracts, focusing on factors that may generate incumbent advantage. Particular attention is given to learning economies, sunk costs of entry and switching costs for the procurer. The paper then applies these insights to analyse empirically the evolution of competition in the market for local bus services in London.
    Keywords: Dynamic Competition, Procurement and Incumbent advantage
    JEL: L24 L92 L40
    Date: 2017–02–24

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