nep-reg New Economics Papers
on Regulation
Issue of 2017‒04‒02
eleven papers chosen by
Natalia Fabra
Universidad Carlos III de Madrid

  1. Regulatory Holidays and Optimal Network Expansion By Willems, Bert; Zwart, Gijsbert
  2. Competition in Retail Electricity Markets : An Assessment of Ten Years Dutch Experience By Mulder, M.; Willems, Bert
  3. Sustainable Transmission Planning in Imperfectly Competitive Electricity Industries: Balancing economic efficiency and environmental outcomes By Afzal S. SIDDIQUI; TANAKA Makoto; Yihsu CHEN
  5. Mail Composition and Recipients’ Reaction to Direct Mail By Thomas Geissmann; Christian Jaag; Martin Maegli; Urs Trinkner
  6. Where Do Green Technologies Come From? Inventor Teams’ Recombinant Capabilities and the Creation of New Knowledge. By Orsatti, Gianluca; Pezzoni, Michele; Quatraro, Francesco
  7. Publicly announced speed limit enforcement and its impact on road safety: Evidence from the German Blitzmarathons By Molitor, Ramona
  8. To Toss a Coin or Shake a Hand: An Overview of Renewable Energy Interventions and Procurement in selected African Countries By Ackah, Ishmael; A. Opoku, Freda; Suleman, Shafic
  9. Economic calculus or personal and social values? A micro-econometric analysis of the acceptance of climate and energy policy measures By Andreas Ziegler
  10. Prizes versus Contracts as Incentives for Innovation By Che, Yeon-Koo; Iossa, Elisabetta; Rey, Patrick
  11. Quantification of the Energy Efficiency Gap in the Swedish Residential Sector By Eoin Ó Broin; Érika Mata; Jonas Nässén; Filip Johnsson

  1. By: Willems, Bert (Tilburg University, TILEC); Zwart, Gijsbert (Tilburg University, TILEC)
    Abstract: We model the optimal regulation of continuous, irreversible, capacity expansion, in a model in which the regulated network firm has private information about its capacity costs, investments need to be financed out of the firm's cash flows from selling network access and demand is stochastic. If asymmetric information is large, the optimal mechanism consists of a regulatory holiday for low-cost firms, and a mark-up regime for higher-cost firms. With the regulatory holiday, a firm receives the full revenue of capacity sales, and expands capacity as if it were an unregulated monopolist. Under the mark-up regime, a firm receives only a fraction of the capacity revenues, and is obliged to expand capacity whenever the price for capacity reaches a threshold. The regulatory holiday is necessary to fund information rents to the most efficient firms, which invest relatively early, as direct investment subsidies are not feasible.
    Keywords: egulatory holiday; real option value; asymmetric information; optimal contract
    Date: 2016
  2. By: Mulder, M.; Willems, Bert (Tilburg University, TILEC)
    Abstract: This paper examines a decade of retail competition in the Dutch electricity market and discusses market structure, regulation, and market performance. We find a proliferation of product variety, in particular by the introduction of quality-differentiated green-energy products. Product innovation could be a sign of a well-functioning market that caters to customer’s preferences, but it can also indicate a strategic product differentiation to soften price competition. Although slightly downward trending, gross retail margins remain relatively high, especially for green products. Price dispersion across retailers for identical products remains high, as also across products for a single retailer. We do not find evidence of asymmetric pass-through of wholesale costs. Overall, the retail market matured as evidenced by fewer consumer complaints and higher switching rates. A fairly intensive regulation of mature energy retail markets appears to be needed to create benefits for consumers.
    Keywords: retail electricity market; competition; regulation; ex-post assessment
    Date: 2016
  3. By: Afzal S. SIDDIQUI; TANAKA Makoto; Yihsu CHEN
    Abstract: We explore the role of a transmission system operator (TSO) that builds a transmission line to accommodate renewable energy while attempting to lower emissions. A TSO in a deregulated electricity industry can only indirectly influence outcomes through its choice of the transmission line capacity. Via a bi-level model, we show that this results in less transmission capacity and with limited emissions control in a perfectly competitive industry vis-a-vis a benchmark centrally planned system. Surprisingly, a carbon tax on industry leads to a perfect alignment of incentives and maximized social welfare only under perfect competition. By contrast, a carbon tax actually lowers social welfare under a Cournot oligopoly as the resulting reduction in consumption facilitates the further exercise of market power.
    Date: 2017–03
  4. By: Saad Al Jandal
    Abstract: Kuwait Institute for Scientific Research (KISR) has commissioned a number of research projects to carry out techno-economic assessments of clean energy power generation options, including efficient fossil fuel (ff) thermal and renewable energy (RE) plants. The objective of the assessments is to explore the potential capabilities and ranks of different clean technologies in meeting future energy demand in Kuwait. KISR, in close collaboration with the Kuwait National Nuclear Energy Committee (KNNEC), Ministry of Electricity & Water (MEW) and Kuwait Petroleum Corporation (KPC), completed the development of a TIMES-VEDA Kuwait Power and Water model (KPW). The multi-sector model was used to investigate future scenarios for power generation involving cost effect fossil fuel switching and RE energy technology options. The KPW model was constructed to represent the projected demands; the existing and planned power generation, and water desalination plants within the energy system of Kuwait. The representation included; the expected retirement of existing plants, future ff prices and availability. This was extended to include parameters for comparing assumed lower demand growth, lower oil and gas prices, higher RE costs or lower availability, RE capacity credit and higher plant investment costs under a levelized cost of electricity (LCOE) optimization approach. The TIMES-VEDA KPW model time horizon covers the period from 2008 (the base year) and extending out to 2050, with emphasis focusing on the period of 2010 to 2030. The model identifies least-cost energy system configurations that satisfy all of the system constraints. The analysis shows that RE technologies provide complimentary fuel saving and emission reductions to fossil technology. The 2030 cost-effective electrical power generation share is 10%, given the projected costs for RE technologies. Increasing the RE target share to 20%, increases the 2030 costs by US8.3 billion. Higher capacity credit for solar PV and CSP technologies with storage increases the cost-effective RE shares to more than 9% and results in slightly higher investment in those technologies. RE, thus, contributes to fuel and emissions savings without necessarily compromising the reliability of the power system, seeing that the excess capacity already in place by the time it comes in. This paper presents the overview concept of establishing the KPW model and its construction approach. It discusses details of the methodology for conducting policy analysis, and a summary of the case study results related scenario analysis conducted during the modeling process. see above see above
    Keywords: Kuwait, Energy and environmental policy, Modeling: new developments
    Date: 2015–07–01
  5. By: Thomas Geissmann; Christian Jaag; Martin Maegli; Urs Trinkner
    Abstract: This paper examines the relevance of interdependencies between various types of mail in analogy to other platform markets. It then empirically analyzes the interdependencies of various mail types based on a Swiss data set of 2016. It shows that a balanced mailmix increases the probability of the recipient reacting positively to addressed advertisement significantly. For example, a higher share of non-advertisement mail in the recipients’ mailbox increases response rates to direct advertisement, thereby increasing the advertisers’ willingness to pay for postal services. If so, postal services with a high share of advertisement mail might, in particular if they are not restricted by direct competition from competing deliverers, aim to reflect externalities between different mail types in their pricing. More explicitly, such postal services might want to increase the price of advertising mail and decrease the price of mail pieces that recipients like to receive in their mailbox.
    Keywords: Mailstream, Postal Sector, Platform, recipient's reaction, Direct Mail
    JEL: L43 L51
    Date: 2017–01
  6. By: Orsatti, Gianluca; Pezzoni, Michele; Quatraro, Francesco (University of Turin)
    Abstract: By exploiting the EPO universe of patent data, we investigate how inventors’ teams recombinant capabilities drive the creation of Green Technologies (GTs).Results suggest the importance of recombinant creation patterns in fostering the generation of GTs. We also find diverse moderating effects of technological green experience and environmental regulation stringency on exploration behaviors. Precisely, the positive effect of team’s explorative behaviors is magnified for teams lacking technological green experience, even more in regimes of weak environmental regulation. Conversely, the effect of explorative behaviors is reduced for green experienced teams, especially in regimes of weak environmental regulation. Finally, we find positive effects of both team’s previous technological green experience and environmental regulation stringency.
    Date: 2017–03
  7. By: Molitor, Ramona
    Abstract: This paper studies a unique traffic law enforcement campaign in Germany and its impact on road safety. Key features of the campaign are (1) repeated one-day lasting massive speed limit monitoring (so called Blitzmarathons) and (2) a media campaign that informs the public in advance about the timing, extent, and purpose of the speed limit monitoring. Using administrative records on all police reported vehicle crashes in Germany from 2011 to 2014 and generalized difference-indifferences estimations, we find an eight percent reduction in the number of traffic accidents and a nine percent reduction in the number of slightly injured during Blitzmarathon-day compared to regular days. The effect begins to emerge with the onset of the media campaign, one to three days before a Blitzmarathon. However, while the initiators of the Blitzmarathons intended a permanent change in road safety, we do not find that the reduction in traffic accidents persists beyond a Blitzmarathon-day. In terms of mechanisms, we show that a substitution of traffic from motorized vehicles to other modes of transport not targeted by the Blitzmarathons does not drive our results, and we demonstrate that overall driving speed is lower during a Blitzmarathon-day compared to other days. Given the general relevance of traffic law enforcement strategies, our result have important implications for policy makers beyond the German context.
    Keywords: traffic,law enforcement,safety,accidents
    JEL: H76 K42 R41
    Date: 2017
  8. By: Ackah, Ishmael; A. Opoku, Freda; Suleman, Shafic
    Abstract: Open and competitive bidding process (toss a coin) promotes transparency, efficiency and cost reduction as compared to direct negotiations (shake a hand). This paper provides an overview of renewable energy interventions in Angola, Algeria, Cote Dvoire, Ghana and Nigeria. Further, best practices in Germany and South Africa are discussed. It was discovered that, apart from South Africa, most countries in Sub-Saharan Africa uses direct negotiations and feed-in-tariff which has contributed to high cost of renewables. The study recommends that countries should build tendering capacity, put in place simple but robust tendering process and research to identify their renewable energy potential to procure new renewable energy capacity through open and competitive bidding process.
    Keywords: Competitive Bidding, Renewable Energy Investments, Sub-Saharan Africa, Energy
    JEL: Q2 Q21 Q28 Q4 Q48
    Date: 2017–03–09
  9. By: Andreas Ziegler (Universität Kassel)
    Abstract: Based on data from a representative survey among more than 2200 households, this paper empirically examines the agreement to the German energy transition in total and to six single energy policy measures, which are components of this challenging national policy approach. Our micro-econometric analysis with uni- and multivariate binary and ordered probit models reveals that both economic calculus and personal and social values are relevant for this agreement. An expected future electricity price increase due to the energy transition (which especially incorporates the price expectations in the hypothetical case that the measures of the energy transition are withdrawn) is significantly negatively correlated with the agreement to the two core measures of the energy transition, namely the nuclear phase-out and the financial support of the expansion of renewable energies. While other economic variables like income and energy expenditures also have some significant effects, our estimation results especially reveal that political identification and other personal values are at least equally relevant. For example, an overall left-green orientation is significantly positively correlated with the agreement to the energy transition in total and especially to the aforementioned core measures of the energy transition, which are also significantly positively affected by strong environmental values. Our econometric analysis suggests that studies that only include economic variables or only include personal and social values in order to explain the acceptance of policy measures can lead to biased estimation results and thus distorted conclusions. For policy makers our study additionally identifies important skeptical population groups which might be addressed in order to increase the acceptance of climate and energy policy measures like the German energy transition.
    Keywords: Climate and energy policy measures, energy transition, energy cost expecta-tions, political identification, environmental values, uni- and multivariate binary and ordered probit models
    JEL: Q48 Q54 A13 C25
    Date: 2017
  10. By: Che, Yeon-Koo; Iossa, Elisabetta; Rey, Patrick
    Abstract: Procuring an innovation involves motivating a research effort to generate a new idea and then implementing that idea effciently. If research efforts are unverifiable and implementation costs are private information, a trade-ooff arises between the two objectives. The optimal mechanism resolves the tradeoff via two instruments: a monetary prize and a contract to implement the project. The optimal mechanism favors the innovator in contract allocation when the value of innovation is above a certain threshold, and handicaps the innovator in contract allocation when the value of innovation is below that threshold. A monetary prize is employed as an additional incentive but only when the value of innovation is suffciently high.
    Keywords: Contract rights; Inducement Prizes; innovation; Procurement and R&D.
    JEL: D44 D82 H57 O31 O38 O39
    Date: 2017–03
  11. By: Eoin Ó Broin (CIRED - Centre International de Recherche sur l'Environnement et le Développement - ENGREF - Ecole Nationale du Génie Rural, des Eaux et des Forêts - CIRAD - Centre de Coopération Internationale en Recherche Agronomique pour le Développement - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique, Chalmers University of Technology [Gothenburg]); Érika Mata (Chalmers University of Technology [Gothenburg]); Jonas Nässén (Chalmers University of Technology [Gothenburg]); Filip Johnsson (Chalmers University of Technology [Gothenburg])
    Abstract: We present a method for quantifying the energy efficiency gap ex-ante. To do this we define the energy efficiency gap as being the difference between the ex-ante market and techno-economic energy savings potentials. The estimation of market potential is based on top-down (econometric) modelling of energy demand using data from the period 1970–2005. The techno-economic estimates are made using a bottom-up building stock model (ECCABS), to assess the effects and cost-efficiency of various energy efficiency measures. Common to these two modelling approaches are two scenarios of energy prices, which differ only with respect to the carbon tax component. We implement the method for the case of useful energy demand for space and water heating in the Swedish residential sector up to 2030. In comparison to the level of energy use in 2005 (74 TWh), the top-down model predicts for 2030 reductions in demand for the two price scenarios of 17 TWh and 21 TWh, respectively. The bottom-up model predicts corresponding reductions in demand of 25 TWh and 31 TWh, respectively. Thus, there is an energy efficiency gap between the two models of at least 8 TWh in 2030. An implicit discount rate of 10% would render the results from the bottom-up modelling identical to those from the top-down modelling. However the presence of the energy efficiency gap indicates that there is a need for enhanced policies in order to make future reductions in energy demand reach the levels predicted by the bottom-up modelling.
    Keywords: Energy efficiency gap,Bottom-up,Residential,Top-down,Heating,Ex-ante
    Date: 2015–10–01

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