nep-reg New Economics Papers
on Regulation
Issue of 2017‒11‒26
twelve papers chosen by
Natalia Fabra
Universidad Carlos III de Madrid

  1. Some Considerations in Respect to Customer-Centric Demand Response Market Design By Ekaterine Maglakelidze; Maia Veshaguri
  2. Carbon pricing in climate policy: seven reasons, complementary instruments, and political economy considerations By Baranzini, Andrea; van den Bergh, Jeroen C. J. M.; Carattini, Stefano; Howarth, Richard B.; Padilla, Emilio; Roca, Jordi
  3. Evaluating market consolidation in mobile communications By Genakos, Christos; Valletti, Tommaso; Verboven, Frank
  4. Speed 2.0: evaluating access to universal digital highways By Ahlfeldt, Gabriel M.; Koutroumpis, Pantelis; Valletti, Tommaso
  5. New road infrastructure: the effects on firms By Gibbons, Stephen; Lyytikainen, Teemu; Overman, Henry G.; Sanchis-Guarner, Rosa
  6. Accounting for Elimination-by-Aspects Strategies and Demand Management in Electricity Contract Choice By Daniel, Aemiro Melkamu; Persson, Lars; Sandorf, Erlend Dancke
  7. Impact of German Energiewende on transmission lines in the Central European region By Jan Málek; Lukáš Recka; Karel Janda
  8. The distance factor in Swedish bus contracts: how far are operators willing to go? By Vigren , Andreas
  9. Preferences for distributional impacts of climate policy By Lea Skræp Svenningsen; Bo Jellesmark Thorsen
  10. Literature survey on the relationships between energy variables, environment and economic growth By Sofien, Tiba; Omri, Anis
  11. Electricity consumption and Economic growth: A panel data approach to Brics countries By Khobai, Hlalefang
  12. Does renewable energy consumption drive economic growth: Evidence from Granger-causality technique By Khobai, Hlalefang; Le Roux, Pierre

  1. By: Ekaterine Maglakelidze (University of Georgia); Maia Veshaguri (Ivane Javakhishvili Tbilisi State University (TSU))
    Abstract: For already of the past decade, the Georgia?s electricity sector has been engaged in a complex process to bring increased competition to the business of electric generation, sales, and service delivery. But initial legislative and regulatory efforts to promote competition have focused on the supply side of the market: creating trading floors for energy and capacity sales, removing barriers to independent generators and marketers, and promoting open and non-discriminatory access to the transmission grid. It is assumed by many that robust competition among a variety of suppliers would be sufficient to ensure reasonable electricity rates and service options to customers. But the principal lesson learned from New England?s, French, Germany, Austria and other power systems and markets is that competition among electricity suppliers alone (without an active demand response) is not enough to create efficiently competitive electricity markets. Demand response provides a fair reward to consumers for demand flexibility without compensation of suppliers and relies on available technical solutions. But customers benefit alone is not enough to make demand response to participate in balancing market. Suppliers could also gain by making use of demand response, if they chose to do so. Thus, the purpose of Our study is twofold: to show that robust competition among a variety of suppliers without an active demand response is not enough to create efficiently competitive electricity markets, and to test the hypothesis that ?Only under the fully liberalized customer-centric demand response electricity market with ?Aggregators? on place Georgia?s domestic customers can reap the benefits from their ?demand response? behavior in the form of reduced energy bills without the need of compensating suppliers?.In order to test our hypothesis, empirical analyses have been applied. Based exclusively on secondary data obtained from various sources, We have made the modification to the Georgian Electricity Market Model (GEMM2015) developed by Deloitte Consulting in collaboration with Pierce Atwood Attorneys LLC in 2012. Our considerations are based mainly on the cost-benefit analysis commissioned by Regulatory Assistance Project (RAP) aiming to prove that all customers benefit from explicit demand response, not just those customers who reduce their demand.Thus, instead of paying to generators that sell energy in the balancing market a ?market-clearing price? (in the event of ?over-scheduling?) or compensating generators to reduce generation (in the event of ?under-scheduling?), it would be more reasonable to deploy responsive demand for balancing purposes.
    Keywords: Keywords: Demand response market design, explicit demand, implicit demand, peak demand, demand flexibility, energy policy, aggregator.
    JEL: M31 Q41
    Date: 2017–10
  2. By: Baranzini, Andrea; van den Bergh, Jeroen C. J. M.; Carattini, Stefano; Howarth, Richard B.; Padilla, Emilio; Roca, Jordi
    Abstract: Carbon pricing is a recurrent theme in debates on climate policy. Discarded at the 2009 COP in Copenhagen, it remained part of deliberations for a climate agreement in subsequent years. As there is still much misunderstanding about the many reasons to implement a global carbon price, ideological resistance against it prospers. Here, we present the main arguments for carbon pricing, to stimulate a fair and well-informed discussion about it. These include considerations that have received little attention so far. We stress that a main reason to use carbon pricing is environmental effectiveness at a relatively low cost, which in turn contributes to enhance social and political acceptability of climate policy. This includes the property that corrected prices stimulate rapid environmental innovations. These arguments are underappreciated in the public debate, where pricing is frequently downplayed and the erroneous view that innovation policies are sufficient is widespread. Carbon pricing and technology policies are, though, largely complementary and thus are both needed for effective climate policy. We also comment on the complementarity of other instruments to carbon pricing. We further discuss distributional consequences of carbon pricing and present suggestions on how to address these. Other political economy issues that receive attention are lobbying, co-benefits, international policy coordination, motivational crowding in/out, and long-term commitment. The overview ends with reflections on implementing a global carbon price, whether through a carbon tax or emissions trading. The discussion goes beyond traditional arguments from environmental economics by including relevant insights from energy research and innovation studies as well.
    JEL: N0
    Date: 2017–07
  3. By: Genakos, Christos; Valletti, Tommaso; Verboven, Frank
    Abstract: We study the dual relationship between market structure and prices and between market structure and investment in mobile telecommunications. Using a uniquely constructed panel of mobile operators’ prices and accounting information across 33 OECD countries between 2002 and 2014, we document that more concentrated markets lead to higher end user prices. Furthermore, they also lead to higher investment per mobile operator, though the impact on total investment is not conclusive. Our findings are not only relevant for the current consolidation wave in the telecommunications industry. More generally, they stress that competition and regulatory authorities should take seriously the potential trade-off between market power effects and efficiency gains stemming from agreements between firms.
    Keywords: mobile telecommunications; market structure; prices; investments; mergers
    JEL: F3 G3
    Date: 2017–06
  4. By: Ahlfeldt, Gabriel M.; Koutroumpis, Pantelis; Valletti, Tommaso
    Abstract: This paper shows that having access to a fast Internet connection is an important determinant of capitalization effects in property markets. Our empirical strategy combines a boundary discontinuity design with controls for time-invariant effects and arbitrary macro-economic shocks at a very local level to identify the causal effect of broadband speed on property prices from variation that is plausibly exogenous. Applying this strategy to a micro data set from England between 1995 and 2010 we find a significantly positive effect, but diminishing returns to speed. Our results imply that disconnecting an average property from a high-speed first-generation broadband connection (offering Internet speed up to 8 Mbit/s) would depreciate its value by 2.8%. In contrast, upgrading such a property to a faster connection (offering speeds up to 24 Mbit/s) would increase its value by no more than 1%. We decompose this effect by income and urbanization, finding considerable heterogeneity. These estimates are used to evaluate proposed plans to deliver fast broadband universally. We find that increasing speed and connecting unserved households passes a cost-benefit test in urban and some suburban areas, while the case for universal delivery in rural areas is not as strong.
    Keywords: internet; property prices; capitalization; digital speed; universal access to broadband
    JEL: H4 L1 R2
    Date: 2017–07
  5. By: Gibbons, Stephen; Lyytikainen, Teemu; Overman, Henry G.; Sanchis-Guarner, Rosa
    Abstract: This paper estimates the impact of new road infrastructure on employment and labour productivity using plant level longitudinal data for Britain. Exposure to transport improvements is measured through changes in accessibility, calculated at a detailed geographical scale from changes in minimum journey times along the road network. These changes are induced by the construction of new road link schemes. We deal with the potential endogeneity of scheme location by identifying the effects of changes in accessibility from variation across small-scale geographical areas close to the scheme. We find substantial positive effects on area level employment and number of plants. In contrast, for existing firms we find negative effects on employment coupled with increases in output per worker and wages. A plausible interpretation is that new transport infrastructure attracts transport intensive firms to an area, but with some cost to employment in existing businesses.
    Keywords: productivity; employment; accessibility; transport
    JEL: R14 J01
    Date: 2017–05
  6. By: Daniel, Aemiro Melkamu (CERE and the Department of Economics, Umeå University); Persson, Lars (CERE and the Department of Economics, Umeå University); Sandorf, Erlend Dancke (CERE and the Department of Forest Economics, SLU)
    Abstract: We report on a discrete choice experiment aimed at eliciting Swedish households' willingness-to-accept a compensation for restrictions on household electricity and heating use during peak hours. When analyzing data from discrete choice experiments, we typically assume that people make rational utility maximizing decisions, i.e., that they consider all of the attribute information and compare all alternatives. However, mounting evidence shows that people use a wide range of simplifying strategies that are inconsistent with utility maximization. We use a flexible model capturing a two-stage decision process. In the fi rst stage, respondents are allowed to eliminate from their choice set alternatives that contain an unacceptable level, i.e., restrictions on the use of heating and electricity. In the second stage, respondents choose in a compensatory manner between the remaining alternatives. Our results show that about half of our respondents choose according to an elimination-by-aspects strategy, and that, on average, they are unwilling to accept any restrictions on heating in the evening or electricity use, irrespective of time-of-day. Furthermore, we nd that considering elimination-by-aspects behavior leads to a downward shift in elicited willingness-to-accept. We discuss implications for policy.
    Keywords: Choice experiment; Electricity contract; Willingness-to-accept; Household electricity; Elimination-by-aspects; Two-stage decision
    JEL: C25 Q41 Q51 R21
    Date: 2017–11–07
  7. By: Jan Málek; Lukáš Recka; Karel Janda
    Abstract: The impacts of renewable energy production and German nuclear phase-out on the electricity transmission systems in Central Europe is investigated with focus on the disparity between the growth of renewable production and the pace at which new electricity transmission lines have been built, especially in Germany. This imbalance endangers the system stability and reliability in the whole region. The assessment of these impacts on the transmission grid is analysed by the direct current load flow model ELMOD. Two scenarios for the year 2025 are evaluated from different perspectives. The distribution of loads in the grids is shown. Hourly patterns are analysed. Geographical decomposition is made, and problematic regions are identified. The high solar or wind power generation decrease the periods of very low transmission load and increase the mid- and high load on the transmission lines. High solar feed-in has less detrimental impacts on the transmission grid than high wind feed-in. High wind feed-in burdens the transmission lines in the north-south direction in Germany and water-pump-storage areas in Austria.
    Keywords: Energiewende, RES, transmission networks, congestion, loop flows, ELMOD, Central Europe.
    JEL: L94 Q21 Q48 C61
    Date: 2017–11
  8. By: Vigren , Andreas (VTI)
    Abstract: One of the factors differentiating operators the most in bus services is, arguably, the respective distances from their workplaces to the area of a procured contract. More dead running kilometers implies higher costs, and the same should affect operators’ probability to participate in tenders. As previous studies have discussed, this is a relevant competitive factor, but the transport literature lacks studies aiming to assess the size of this distance factor. This paper examines what impact operators’ distance to tendered bus contracts has on their probability to participate in the tender, and how this probability differs across operator types. To address this, an econometric analysis was undertaken using probit regressions with data on tendered Swedish bus contracts over the period 2007–2015 along with operator workplace data. The results show that operators’ distance from a contract has a significantly negative effect on their probability of placing a bid for the contract. While being located near the contract gives, on average, an over 90 percent probability of participating, being 10 kilometers away results in a 30 percent probability. The rival’s distance to the contract also has an effect, but only to a limited extent. Large operators are found to be less affected by their distance to a contract, and they are also more inclined to bid if the procuring authority offers a depot to use.
    Keywords: Competitive tendering; Distance; Dead running kilometers; Bus; Entry; Competition; Participation
    JEL: C35 H57 L11 L16 L91
    Date: 2017–11–14
  9. By: Lea Skræp Svenningsen (Department of Food and Resource Economics, University of Copenhagen); Bo Jellesmark Thorsen (Department of Food and Resource Economics, University of Copenhagen)
    Abstract: What role do people think distributional aspects should play in design of climate policy? The literature assessing climate policies has shown that assumptions regarding peoples’ distributional preferences for climate change policy impacts are central for policy assessment, but empirical evidence for such preferences is lacking. We design a discrete choice experiment that varies how climate policies affect the income of people living in the future in three geographical regions. The experiment is implemented on a representative sample of the Danish population and preferences are modelled in a latent class model. Our results show that i) a small majority of Danes expresses preferences for climate policies consistent with inequity aversion, ii) a group expresses preferences resembling simple warm glow, while iii) a small group prefers not to support additional climate policies. Finally a somewhat larger group expresses some form of distributional preferences, but shows positive preferences for costs, suggesting that responses could be influenced by strategic behaviour and over-signalling of commitment. Our results provide support for the inclusion of social preferences regarding distributional effects of climate change policies in policy assessments, and hence for the significant impact on policy this inclusion have.
    Keywords: choice experiment, social preferences, inequity aversion, warm glow, altruism, climate change impacts, latent class, social cost of carbon
    JEL: D30 H41 Q51 Q54
    Date: 2017–11
  10. By: Sofien, Tiba; Omri, Anis
    Abstract: This paper provides an extensive survey of the great progress in the literature of energy- environment-growth nexus for both specific- and multi-county studies covering the period from 1978 to 2014. The survey focuses on country (ies) coverage, periods, modeling methodologies, and empirical conclusions. Our survey is based on the direction of causality between (i)energy consumption (electricity, nuclear, renewable and non-renewable) and economic growth; (ii) between economic growth and environment; and between the three variables at the same time. As a general remark from these studies is that the literature produced paradoxical and not conclusive results which energy consumption can boost economic growth through the productivity enhancement and it can boost also the environmental damages through the enhancement of pollutant emissions. This survey gives researchers a ‘snap shot’ of the literature on the causality between the four types of energy, environment and economic growth for both individual and collective cases. Understanding the causal links between environment, economic growth and different types of energy consumption provides a basis for discussion in order to design and implementating effective energy and environmental policies.
    Keywords: Literature survey, economic growth, energy consumption, environment.
    JEL: O4 O44 Q4
    Date: 2016–09–25
  11. By: Khobai, Hlalefang
    Abstract: This paper serves to investigate the causal relationship between electricity consumption and economic growth in the Brics countries during the period 1990 – 2014. Carbon dioxide emissions and urbanisation were included as additional variables to form a multivariate framework. The Kao panel co-integration and Johansen Fisher panel co-integration techniques are applied to analyse the co-integration relationship between the variables while the Vector Error Correction Model (VECM) Granger-causality test is used to estimate the causality relationship among the variables. The study’s results reveal that there is a long run relationship between the variables. The research outcome further detected a unidirectional causality flowing from economic growth to electricity consumption in the long run in Brics countries. So in the light of determination of the study, the policy implication is that a significant transformation of low carbon technologies such as renewable energy should be implemented to curb the emissions and sustain economic growth and development.
    Keywords: Energy consumption; Economic growth; Causality; Brics countries
    JEL: D04 Q2 Q43 Z00
    Date: 2017–11–06
  12. By: Khobai, Hlalefang; Le Roux, Pierre
    Abstract: This study investigates the causal relationship between renewable energy consumption and economic growth in South Africa. It incorporates carbon dioxide emissions, capital formation and trade openness as additional variables to form a multivariate framework. Quarterly data is used for the period 1990 – 2014 and is tested for stationarity using the Augmented Dickey Fuller (ADF), Dickey Fuller Generalised Least Squares (DF-GLS) and Phillips and Perron (PP) unit root tests. The study employs the Autoregressive distributed lag (ARDL) model to examine the long run relationship among the variables. Lastly, the study determines the direction of causality between the variables using the Vector Error Correction Model (VECM). The results validated an existence of a long run relationship between the variables. Moreover, a unidirectional causality flowing from renewable energy consumption to economic growth was established in the long run. The short run results suggested a unidirectional causality flowing from economic growth to renewable energy consumption. The findings of the study suggest that an appropriate and effective public policy is required in the long run, while considering sustainable economic growth and development
    Keywords: Renewable energy consumption; Economic growth; Causality; South Africa
    JEL: Q2 Q21 Q27 Q4 Q42 Q43 Q48
    Date: 2017–11–06

This nep-reg issue is ©2017 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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