nep-reg New Economics Papers
on Regulation
Issue of 2017‒08‒13
eight papers chosen by
Natalia Fabra
Universidad Carlos III de Madrid

  1. Distributed Photovoltaic Power Generation: Possibilities, Benefits, and Challenges for a Widespread Application in the Mexican Residential Sector By Hancevic, Pedro; Nuñez, Héctor; Rosellón, Juan
  2. Reliability in Multy-Regional Power Systems - Capacity Adequacy and the Role of Interconnectors By Hagspiel, Simeon; Knaut, Andreas; Peter, Jakob
  3. Incentivizing efficient utilization without reducing access: The case against cost-sharing in insurance By Fels, Markus Peter
  4. Power-to-Heat for Renewable Energy Integration: Technologies, Modeling Approaches, and Flexibility Potentials By Andreas Bloess; Wolf-Peter Schill; Alexander Zerrahn
  5. Amazonian farmers’ response to fire policies and climate change By Cammelli, Federico; Angelsen, Arild
  6. Managing the Power Grid Ramping challenges critical to success of India’s Renewable Energy Targets By Annaluru, Rajeev; Garg, Amit
  7. Asymmetric Reactions of the U.S. Natural Gas Market and Economic Activity By Bao H. NGUYEN; OKIMOTO Tatsuyoshi
  8. Clean Energy Innovation in Latin America By Miller, Justin; Viscidi, Lisa

  1. By: Hancevic, Pedro; Nuñez, Héctor; Rosellón, Juan
    Abstract: Mexico plans to implement a national program to support the adoption of distributed photovoltaic generation (DPVG) among qualified households. The main objectives of such a program would be to reduce the burden of the substantial federal energy subsidy and increase the share of renewable energy sources used to generate electricity. In this paper we assess the current conditions under which the Mexican residential electricity sector operates, and quantify the potential effects that the massive adoption of DPV systems would have on household expenditure and welfare, subsidy reduction, pollution and water resource usage. Based on the positive results in terms of both economic and environmental effects, our paper provides a significant support for further design and implementation of a DPVG program.
    Keywords: Energía, Investigación socioeconómica,
    Date: 2017
  2. By: Hagspiel, Simeon (Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI)); Knaut, Andreas (Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI)); Peter, Jakob (Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI))
    Abstract: Based upon probabilistic reliability metrics, we develop an optimization model to determine the efficient amount and location of firm generation capacity to achieve reliability targets in multiregional electricity systems. A particular focus lies on the representation and contribution of transmission capacities as well as variable renewable resources. Calibrating our model with a comprehensive dataset for Europe, we find that there are substantial benefits from regional cooperation. The amount of firm generation capacity to meet a perfectly reliable system could be reduced by 32.4GW (i.e., 6.1 %) compared to an isolated regional approach, which translates to savings of 12.9 Bn Euro when being valued with typical investment costs of an open-cycle gas turbine. Interconnectors contribute in both directions, with capacity values up to their technical maximum of close to 200 %, while wind power contributions are in the range of 3.8 - 29.5 %. Furthermore, we find that specific reliability targets heavily impact the efficient amount and distribution of reliable capacity as well as the contribution of individual technologies, and should therefore be chosen with care.
    Keywords: Reliability of supply; Capacity Adequacy; Multi-Regional Power System; Interconnector; Variable Renewable Energy
    JEL: C61 C63 L50 Q42 Q48
    Date: 2017–08–09
  3. By: Fels, Markus Peter
    Abstract: Cost-sharing is regarded as an important tool to reduce moral hazard in health insurance. Contrary to standard prediction, however, such requirements are found to decrease utilization both of efficient and of inefficient care. I employ a simple model that incorporates two possible explanations - consumer mistakes and limited access - to assess the welfare implications of different insurance designs. I find cost-sharing never to be an optimal solution as it produces two novel inefficiencies by limiting access. An alternative design, relying on bonuses, has no such side effects and achieves the same incentivization.
    Keywords: Moral Hazard,Limited Access,Cost-Sharing,Insurance Rebates
    JEL: D82 I13 I14
    Date: 2017
  4. By: Andreas Bloess; Wolf-Peter Schill; Alexander Zerrahn
    Abstract: Flexibly coupling power and heat sectors may contribute to both renewable energy integration and decarbonization. We present a literature review of modelbased analyses in this field, focusing on residential heating. We compare geographical and temporal research scopes and identify state-of-the-art analytical model formulations, particularly concerning heat pumps and thermal storage. While numerical findings are idiosyncratic to specific assumptions, a synthesis of results generally indicates that power-to-heat technologies can cost-effectively contribute to fossil fuel substitution, renewable integration, and decarbonization. Heat pumps and passive thermal storage emerge as particularly favorable options.
    Keywords: Power-to-heat, renewable energy, decarbonization, heat pump, thermal energy storage
    JEL: C61 D62 Q42
    Date: 2017
  5. By: Cammelli, Federico (School of Economics and Business, Norwegian University of Life Sciences); Angelsen, Arild (School of Economics and Business, Norwegian University of Life Sciences)
    Abstract: Despite a fall in deforestation, frequency and severity of fires in the Brazilian Amazon are rising, causing huge carbon emissions, biodiversity losses and local economic costs. The ignition sources are anthropogenic and mostly related to the accidental spread of agricultural fires. Fire risk mitigation is a coordination problem with strategic complementarities: a farmer’s benefit of mitigation depends on complementary action of other farmers. We experimentally assess ex-ante the impact of two different policies under varying exogenous drought risk scenarios. Command and control is more effective than payments for environmental services in promoting coordination, possibly because of participants’ risk aversion (to the fine) and a local demand for justice and law enforcement. We also find evidence of a human-mediated self-reinforcing loop of drought and fires: droughts increase the exogenous component of fire risk, giving farmers less incentives to mitigate fire risk coming from their own farms.
    Keywords: Brazilian Amazon; forest fires; climate change; framed field experiment; coordination games
    JEL: C93 Q23 Q54
    Date: 2017–08–09
  6. By: Annaluru, Rajeev; Garg, Amit
    Abstract: Power grids operators around the world have been experiencing challenges in operating the grid with increasing penetration of Variable Generation (VG) sources like Solar PV and Wind. Variability in one form of generation must always be compensated with other forms of generation at all times to ensure grid stability. This paper focuses on the diurnal variability introduced into the Indian power grid and the consequent increase in ramping requirements due to the 175GW by 2022 renewable energy target enunciated by the Government of India. Ramping requirements were quantified for 3 potential renewable energy penetration levels on the grid by the year 2027. Nine separate solution alternatives are created using Coal, Natural Gas and Renewable & Emerging technologies as solution options to meet the identified ramping needs. Energy-mix and carbon prices are calculated for each of the solution scenarios and compared with the baseline scenario computed from the Intended Nationally determined Contribution (INDC) adopted by India in COP22. The paper concludes that the most energy cost and carbon price efficient paths for India to integrate ambitious RE capacity into India’s power grid would be to convert and operate existing coal plants as peaker plants instead of as base load plants.
    Date: 2017–08–04
  7. By: Bao H. NGUYEN; OKIMOTO Tatsuyoshi
    Abstract: This paper provides new empirical evidence on the asymmetric reactions of the U.S. natural gas market and the U.S. economy to its market fundamental shocks in different phases of the business cycle. To this end, we employ a smooth-transition vector autoregression (STVAR) model to capture the asymmetric responses depending on economic conditions. Our results indicate that the STVAR model provides a plausible explanation to the behavior of the U.S. natural gas market, which reacts asymmetrically in both bad and good times. For example, a positive real oil price shock has a negative impact on natural gas production in recessions, while the responses of natural gas production to the same shock are significantly positive during expansions. In addition, the positive relationship between the oil and natural gas prices is more prominent in expansions in the long run. In addition, U.S. economic activity is found to be much more sensitive to oil and natural gas price shocks occurring in recessions than in expansions.
    Date: 2017–07
  8. By: Miller, Justin; Viscidi, Lisa
    Abstract: Clean energy research and commercialization have taken off over the last decade. The annual number of clean technology patent documents more than tripled between 2000 and 2014,while venture capital (VC) investment in the clean tech sector overall doubled in 2010-2014 compared to the previous five years, with most clean tech research and investment focused on energy. But more needs to be done. Governments must triple annual spending on energy research and development (R&D) to more than $50 million to meet climate change mitigation goals, according to the International Energy Agency. This report examines clean energy technology development in Brazil, Mexico and Chile, which are among the Latin American countries with the greatest potential to expand clean energy research and commercialization. All three countries are part of “Mission Innovation,” a global initiative to accelerate public and private clean energy innovation, which was launched during the 2015 United Nations climate talks in Paris. Member countries have committed to double clean energy research and development spending over the five years to 2020.
    Keywords: Ambiente, Cambio climático, Energía, Innovación,
    Date: 2016

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