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on Regulation |
| By: | Casimir Lorenz |
| Abstract: | Abstract This paper expands the discussion about future balancing reserve provision to the long-term perspective of 2050. Most pathways for a transformation towards a decarbonized electricity sector rely on very high shares of fluctuating renewables. This can be a challenge for the provision of balancing reserves, although their influence on the balancing cost is unclear. Apart from the transformation of the generation portfolio, various technical and regulatory developments within the balancing framework might further influence balancing costs: i) dynamic dimensioning of balancing reserves, ii) provision by fluctuating renewables or new (battery) storage technologies, and iii) exchange of balancing reserves between balancing zones. The first part of this paper discusses and transforms these developments into quantitative scenario definitions. The second part applies these scenarios to dynELMOD (dynamic Electricity Model), an investment model of the European electricity system that is extended to include balancing reserve provision. In contrast to other models applied in most papers on balancing reserves, this model is capable of evaluating the interdependencies between developments in balancing reserve provision and high shares of fluctuating renewables jointly. The results show that balancing reserve cost can be kept at current levels for a renewable electricity system until 2050, when using a dynamic reserve sizing horizon. Apart from the sizing horizon, storage capacity withholding duration and additional balancing demand from RES are the main driver of balancing costs. Renewables participation in balancing provision is mainly important for negative reserves, while storages play an important role for the provision of positive reserves. However, only on very few occasions, additional storage investments are required for balancing reserve provision, as most of the time sufficient storage capacities are available in the electricity system. |
| Keywords: | balancing reserves, electricity sector modeling, investment model, renewable participation, cross-border cooperation, dynamic sizing |
| JEL: | Q42 Q47 Q48 C61 L94 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwwpp:dp1656&r=reg |
| By: | Catherine Leining (Motu Economic and Public Policy Research); Corey Allan (Motu Economic and Public Policy Research); Suzi Kerr (Motu Economic and Public Policy Research) |
| Abstract: | When it was launched in 2008, the New Zealand Emissions Trading Scheme (NZ ETS) pioneered the design concept of implementing an emissions trading scheme (ETS) across all sectors of the economy (e.g. stationary energy, transport, industrial processes, forestry, waste and biological emissions from agriculture) and all six major greenhouse gases (GHGs). This reflected New Zealand’s relatively unique emission profile among industrialised countries (with heavy renewable generation, nearly half of emissions from agriculture, and a large land area suitable for forestry) and its interest in finding effective, efficient, and equitable solutions to the challenge of meeting its international emission reduction targets. Further innovations at the time – influenced in part by the government’s previous efforts to implement a carbon tax in the energy and industry sectors – were the selection of predominantly upstream points of obligation in the energy sector, with the potential for some major downstream energy users to opt in voluntarily, and the selection of a default processor-level obligation in the agriculture sector, with the option to shift to a farmer-level obligation. As of 2017, the entry of biological emissions from agriculture has been deferred indefinitely. Otherwise, the proof of concept on both broad sectoral coverage and upstream points of obligation has been demonstrated through practical experience. To help inform future ETS policy making in New Zealand and internationally, this paper provides a conceptual foundation for design decisions on ETS coverage and points of obligation, and explores the history of and rationale for the specific design choices that have been made in this regard in New Zealand. |
| Keywords: | Emissions trading, sectoral coverage, point of obligation, NZ ETS |
| JEL: | Q58 Q48 Q50 |
| Date: | 2017–04 |
| URL: | http://d.repec.org/n?u=RePEc:mtu:wpaper:17_05&r=reg |
| By: | Catherine Leining (Motu Economic and Public Policy Research); Judd Ormsby (Motu Economic and Public Policy Research); Suzi Kerr (Motu Economic and Public Policy Research) |
| Abstract: | The New Zealand Emissions Trading Scheme (NZ ETS) was conceived as New Zealand’s gateway to the international carbon market with two objectives: assisting New Zealand to meet its international climate change obligations and reducing domestic net emissions below business-as-usual levels. Underlying these objectives was the principle of least-cost compliance for both the New Zealand government and NZ ETS participants. Uniquely among ETS to date, from 2008 through mid-2015 the NZ ETS operated with buy-and-sell linkages to the Kyoto market that did not constrain domestic emissions and were used to set the domestic price. As international Kyoto unit prices plunged from 2011 onward, so did New Zealanders’ incentives to invest in higher-cost domestic mitigation. Instead, NZ ETS participants complied by purchasing large numbers of Kyoto units. In November 2012, the government announced it would take its post-2012 commitment under the UNFCCC, not the Kyoto Protocol. NZ ETS participants responded by surrendering low-cost Kyoto units and banking NZUs which were expected to remain usable in the longer term. In mid-2015, the NZ ETS delinked from the Kyoto market. Although the New Zealand government has explored bilateral ETS linkages, none has come to fruition to date. As of 2017, the NZ ETS operates as a stand-alone system with a substantial participant-held NZU bank as the legacy of past linking. The government now faces important decisions about the future of unit supply in the NZ ETS and linkages to international markets. This paper examines New Zealand’s experience with linking and de-linking its ETS to capture lessons that could be of value to policy makers in New Zealand and other countries. It finds that the considerable opportunities to a small ETS market from linking can be negated if the environmental, economic and political risks are not managed strategically. It also highlights some of the technical and political challenges of negotiating bilateral linking agreements. New Zealand’s future policy on ETS linking, and more generally support for international mitigation as part of our global contribution, should ensure the integrity of New Zealand’s contribution to global mitigation and support strategic domestic decarbonisation in the longer term. |
| Keywords: | Emissions trading, environmental economics, climate change, greenhouse gases, linking emissions trading schemes, environmental public policy, history |
| JEL: | Q50 Q54 Q58 N5 N57 |
| Date: | 2017–04 |
| URL: | http://d.repec.org/n?u=RePEc:mtu:wpaper:17_06&r=reg |
| By: | Sarah La Monaca; L. (Lisa B.) Ryan |
| Abstract: | Countries with low irradiation and solar PV adoption rates are increasingly considering policy support for solar PV, though consumer electricity demand and solar generation profiles are often mismatched. This paper presents a methodology for policy makers in countries with such conditions to examine more precisely the financial performance of residential solar PV from the consumer perspective as part of an ex-ante policy assessment. We model a range of prospective policy scenarios and compare policy mechanisms that compensate homeowners for generation, those that reduce their upfront costs, and those that assist with financing, using Ireland as a case study. The results confirm the intuitive notion that more generous financial remuneration schemes provide quicker payback, however, we observe that upfront grants do little to accelerate payback timeframes. We also show the importance of retail tariff structure in consumer payback for a solar PV system, with one-part tariffs generating shorter paybacks than two-part tariff structures, although the latter is more likely to secure revenue for electricity infrastructure investment. Drawing from this analysis, the paper proposes some options for the design of policy supports and tariff structures to deliver a sustainable residential renewable electricity system. |
| Keywords: | Residential solar PV; Energy policy; Energy economics; Electricity rate structure; Financial performance; Distributed generation |
| JEL: | H23 Q41 Q42 Q48 |
| Date: | 2016–12 |
| URL: | http://d.repec.org/n?u=RePEc:ucn:wpaper:201619&r=reg |
| By: | Kirmas, Alexander (RWTH Aachen University); Madlener, Reinhard (E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN)) |
| Abstract: | We examine the economic viability of second-life batteries from electric vehicles for load shifting and peak shaving in residential applications. We further investigate the expected impact of a growing number of residential storage systems on the electricity market. For the analysis a simulation model of a private household with integrated PV-storage system is used that is parametrized for an electricity demand of three people and a location in southern Germany. The conditions for which investments in second use batteries are profitable are examined for three scenarios. The central scenario S2 tackles an expected net increase in the electricity price by 4% per year. Upward and downward deviations from this price trajectory are covered by scenarios S1 and S3. For scenario S1, we find that investments in storage systems are profitable for all Li-ion battery costs assumed. In scenario S2, the breakeven battery price is found to be 107 € kWh-1, whereas in scenario S3 with the lowest electricity price growth the battery price has to be equal or lower than 73 € kWh-1 to maintain economic viability. |
| Keywords: | E-vehicle; Residential electricity; Battery storage; Load shifting; Peak shaving |
| JEL: | D12 Q41 |
| Date: | 2017–04 |
| URL: | http://d.repec.org/n?u=RePEc:ris:fcnwpa:2016_007&r=reg |
| By: | Llanto, Gilberto M.; Gerochi, Hope A. |
| Abstract: | The EDSA bus market is fiercely competitive. In theory, allowing competition among many bus operators is expected to result in cost-effective and reliable transport services, and efficient use of roads. However, in reality, the outcomes are far different: daylong traffic jam and poor bus service along Metro Manila's most important road artery. This paper examined an option proposed by some quarters that consolidating bus operation along EDSA will solve road congestion. It was thought that having fewer but bigger bus operators will be the solution. Based on a review of country experiences, this paper argues that one way to address road congestion and other market failures in the bus markets is to shift the regulatory framework for bus transport services from the current competition "in the market" (the status quo) toward competition "for the market". Bus consolidation is an initial step to relieve the roads of traffic congestion, but it is not a sufficient condition for sustainable quality bus service. However, casting bus consolidation within a competition for the market regulatory framework presents a better and more workable option for improving bus transport services in EDSA. The alternative regulatory approach called "competition for the market framework" provides a stronger incentive for bus operators to consolidate because a competitive tendering mechanism is used to select an optimum number of formal bus transport operators that will serve the market. Government takes more control of critical aspects of bus services (design of the bus network, quality standards, frequency, among others), which, thus, provide an opportunity to address the market failures that are inherent in liberalized urban bus markets. The government via its pipeline of bus rapid-transit (BRT) projects--including one being prepared for EDSA--seems to lean in favor of this framework. To be effective and to encourage the application of this new framework also to non-BRT corridors, complementary reforms have to be implemented in parallel and these would include improving the capacity of regulatory agencies, institutions (rules of the game), procurement, contract monitoring, and traffic management. |
| Keywords: | Philippines, urban bus market, market failures, consolidation, competition-for-the-market, competitive tendering, bus-rapid-transit system (BRTS), competition-in-the market, bus transport, traffic management, bus regulation, urban transport |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:phd:dpaper:dp_2017-10&r=reg |
| By: | Orla Lynskey |
| Abstract: | Increasing regulatory and doctrinal attention has recently focused on the problem of ‘platform power’. Yet calls for regulation of online platforms fail to identify the problems such regulation would target, and as a result appear to lack merit. In this paper, two claims are advanced. First, that the concept of ‘platform power’ is both an under and over-inclusive regulatory target and, as such, should be replaced by the broader concept of a ‘digital gatekeeper’. Second, that existing legal mechanisms do not adequately reflect the power over information flows and individual behaviour that gatekeepers can exercise. In particular, this gatekeeper power can have implications for individual rights that competition law and economic regulation are not designed to capture. Moreover, the technological design, and complexity, of digital gatekeepers renders their operations impervious to scrutiny by individual users, thereby exacerbating these potential implications. |
| JEL: | L81 |
| Date: | 2017–02–21 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:73404&r=reg |
| By: | Idrisov Georgy (Gaidar Institute for Economic Policy); Gordeev Dmitry (Gaidar Institute for Economic Policy) |
| Abstract: | The paper analyzes the need to change the approaches to Russia’s natural gas pricing in domestic and foreign markets. The authors conclude that changes are inevitable in the medium term because existing pricing practices are becoming obsolete in the rapidly transforming gas market. The development of the gas industry is severely hampered by inefficient domestic consumption due to distorted price incentives, lack of competition in the domestic market and the pegging of export gas prices to the oil product basket. The paper discusses possible development options for Russia’s gas industry and their potential macroeconomic effects. |
| Keywords: | natural gas, pricing, cross subsidization |
| JEL: | D24 D40 D60 E20 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:gai:wpaper:wpaper-2017-274&r=reg |
| By: | Alaali, Fatema |
| Abstract: | This study examines the responses of some of the UK transportation, travel and leisure, and oil and gas firms to oil price changes. Fama-French-Carhart's (1997) four-factor asset pricing model is augmented with the oil price risk factor to study the association of oil and stock prices of 25 firms over the period from January 1998 to December 2012. The extent of the exposure of UK transportation and travel and leisure firms is generally negative but it is particularly significant for a number of firms including delivery services, travel and tourism, and airlines. Oil price risk exposures of UK oil and gas companies are generally positive and significant. With the aid of asymmetric and scaled specifications, some firms show strong evidence of asymmetry in the reaction of stock returns to changes in the price of oil comprising travel and tourism, airlines, and integrated oil and gas. Moreover, the results document that oil price risk exposures vary over time. In particular, the global recession of 2008 has significantly contributed to the oil price risk exposure of travel and tourism and integrated oil and gas firms. These results should be of interest to financial analysts, corporate executives, regulators and policy makers. |
| Keywords: | Oil Price, Stock returns, Asset pricing |
| JEL: | G21 Q31 |
| Date: | 2017–03–26 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:78013&r=reg |
| By: | Milad Maralani; Milad Maralani; Basil Sharp; Golbon Zakeri |
| Abstract: | In New Zealand approximately 39% of electricity is consumed by large industries. In 2012, The University of Auckland engineering team proposed to develop novel heat exchanger technology to allow electricity demand shaving and load shifting in light metal industries. This technology provides significant cost savings for such companies and preserves generation capacity at peak times for other users. The aim of this study is to represent the impact of adopting this technology in a particular, electricity intensive sector (e.g. steel or light metals manufacturing), on the electricity market and economic system as a whole. New Zealand’s economy is represented as a static CGE model, and the electricity sector is represented by a bottom-up model. An iterative algorithm settles the quantities and price between these two models; the general equilibrium sub-model uses the MCP format, and the electricity sector is based on optimization. Initial results show that a decrease in electricity demand by our targetted sector has an impact on some other sectors of the economy(e.g. manufacturing). Exports increase as a result of lower equilibrium prices for domestic intermediate goods. However, the domestic price of final products increased slightly as a result of more goods being exported. |
| Keywords: | New Zealand, Energy and environmental policy, General equilibrium modeling |
| Date: | 2016–07–04 |
| URL: | http://d.repec.org/n?u=RePEc:ekd:009007:9308&r=reg |
| By: | Klára Major; Drucker, Luca Flóra |
| Abstract: | This paper presents the results of a CGE application that is used to measure and understand how sectoral shocks might influence the Hungarian economy, its economic agents and its different industries. The electricity outages are modelled by the decrease in the supply of energy. A 62 sectoral CGE model has been calibrated for the Hungarian economy. The capital stock of the energy industry is shocked, which has led to a decrease in the supply of energy. It is assumed that energy is a close complement to other goods both in production and consumption. In the base scenario a 2.08% decline in the supply of energy leads to a 0.53% decline in the GDP. Without price rigidities and other frictions, the adjustment is mainly driven by agents who can react at the lowest price. Therefore, this estimation should be considered as a lower bound on the real costs of adjustment. It is also shown that if prices are distorted, the costs of an outage are higher. |
| Keywords: | Hungary, Impact and scenario analysis, General equilibrium modeling |
| Date: | 2016–07–04 |
| URL: | http://d.repec.org/n?u=RePEc:ekd:009007:9580&r=reg |
| By: | Arif Mamun; Duncan Chaplin; Ali Protik; John Schurrer; Divya Vohra; Kristine Bos; Hannah Burak; Laura Meyer; Anca Dumitrescu |
| Abstract: | This issue brief summarizes findings from the final evaluation report of a large energy-sector project in Tanzania. |
| Keywords: | Tanzania, Africa, electricity, energy, rigorous evaluation, Millennium Challenge Corporation, MCC |
| JEL: | F Z |
| URL: | http://d.repec.org/n?u=RePEc:mpr:mprres:7b7c03d5fe8a47dbab8e8098b7795b86&r=reg |
| By: | Constantino Hevia (Universidad Torcuato di Tella); Norman Loayza (The World Bank); Claudia Meza-Cuadra (The World Bank) |
| Abstract: | This paper presents an analytical framework that captures the informational problems and trade-offs that policy makers face when choosing between public goods (e.g., infrastructure) and industrial policies (e.g., firm or sector-specific subsidies). After a discussion of the literature, we set up the model economy, consisting of a government and a set of heterogeneous firms. We first present the first-best allocation (under full information) of government resources among firms. We then introduce uncertainty by restricting information regarding firm productivity to be private to the firm. We develop an optimal contract (which replicates the first best) consisting of a tax-based mechanism that induces firms to reveal their true productivity. As this requires high government capacity, we consider other simpler policies. We conclude that providing public goods is likely to dominate industrial policies under most scenarios, especially when government capacity is low. |
| Keywords: | Industrial Policy, Public Goods, Uncertainty, Private Information, Firm Subsidies and Taxes |
| JEL: | H2 H4 O1 O2 |
| Date: | 2017–04 |
| URL: | http://d.repec.org/n?u=RePEc:apc:wpaper:2017-093&r=reg |
| By: | Niamh Dunne |
| Abstract: | Establishing open and undistorted competition within the internal market is a primary goal of the EU legal framework. Price controls, by contrast, are among the clearest derogations from this overarching objective. Yet much price regulation continues to occur within the internal market. The treatment of such regulation thus raises challenging questions, both substantive and institutional, about the nature of economic governance in the context of the EU’s ‘highly competitive social market economy’. This article begins with a consideration of price regulation, both in economic terms and in relation to its place within the institutional and ideological structure of the EU. It then examines differing approaches seen in EU law: from a sceptical prohibitive approach, to a cautious yet more receptive permissive approach, to an essentially prescriptive approach incorporating price regulation into the fabric of the internal market. The aim is to contribute to a more nuanced understanding of the challenges facing the pursuit of ‘open and undistorted competition’ within a modern social market economy. |
| JEL: | L81 |
| Date: | 2017–02–21 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:73418&r=reg |
| By: | William A. Pizer; Steven Sexton |
| Abstract: | Despite popularity among economists for their efficiency, energy pollution taxes enjoy less political support than standards-based regulation because of common perceptions that they burden the poor relative to the rich. However, the literature on pollution tax incidence and consumption surveys in Mexico, the United Kingdom, and the United States, suggest energy taxes need not be as regressive as often assumed. This paper demonstrates that the incidence of such taxes varies according to the energy commodities that are taxed, the physical, social and climatic characteristics of jurisdictions in which they are implemented, and how the revenue is used. It is also shown that the variation in household energy expenditure within income groups is greater than variation across income groups in many cases. These horizontal equity impacts are reviewed, as are their implications for policy making. |
| JEL: | H22 Q41 Q48 |
| Date: | 2017–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:23318&r=reg |