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on Regulation |
| By: | Newbery, David M G |
| Abstract: | Renewable electricity, particularly solar PV and wind, creates external benefits of learning-by-doing that drive down costs and reduce CO2 emissions. The Global Apollo Programme called for collective action to develop enewable energy. This paper sets out a method for assessing whether a trajectory of investment that involves initial subsidies is justified by the subsequent learning-by-doing spillovers and if so, computes the maximum justifiable additional subsidy to provide, taking account of the special features of renewable electricity -- geographically dispersed and variable quality resource base and local saturation. Given current costs and learning rates, accelerating the current rate of investment appears globally socially beneficial for solar PV in most but not all cases, less so for on-shore wind. The optimal trajectory appears to involve a gradually decreasing rate of growth of installed capacity. |
| Keywords: | cost-benefit analysis; learning-by-doing; PV; Subsidies; wind |
| JEL: | C6 H23 H43 Q42 Q5 Q54 |
| Date: | 2018–02 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:12700&r=reg |
| By: | Kenneth Gillingham; Anders Munk-Nielsen |
| Abstract: | Pricing greenhouse gases is widely understood as the most efficient approach for mitigating climate change, yet distributional effects hamper political acceptance. These distributional effects are especially important in transport, the fastest growing sector for greenhouse gas emissions. Using rich data covering the entire population of vehicles and households in Denmark, this study uncovers an important feature of driving demand: two groups of much more responsive households in the lower and upper tails of the work distance distribution. We further estimate the causal effect of public transport–a critical determinant of the upper tail–and show how public transport access can both reconcile differences in fuel price elasticities between the United States and Europe, and considerably influence the distributional effects of fuel pricing. |
| Keywords: | transportation, distributional effects, urban form, environmental taxes |
| JEL: | L90 R40 Q40 N70 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_6792&r=reg |
| By: | Rohan Best (Crawford School of Public Policy, The Australian National University); Paul J. Burke (Crawford School of Public Policy, The Australian National University) |
| Abstract: | This paper analyzes the roles of policies and preferences in national adoption of solar and wind energy technologies. We use cross-sectional and panel regressions for both the European Union and a broader international sample. We find that countries that price carbon emissions have gone on to adopt more solar and wind energy. The aggregate level of policy support, measured in euros per megawatt hour, appears to have been important for solar energy adoption. We also find that solar energy adoption has been larger in countries with higher proportions of people concerned about climate change. In addition, we assess the effects of other key explanators including financial system size and income levels. |
| Keywords: | Solar energy, wind energy, carbon pricing, aggregate policy support, renewable energy preference, climate change perception |
| JEL: | Q40 Q42 Q48 |
| Date: | 2018–02 |
| URL: | http://d.repec.org/n?u=RePEc:een:ccepwp:1803&r=reg |
| By: | Mardi Dungey; Ali Ghahremanlou; Ngo Van Long |
| Abstract: | We extend existing theoretical frameworks describing electricity markets where each generator provides a Market Operator (MO) with a supply schedule in advance. The MO combines these with demand forecasts to produce equilibrium prices and instructs firms on their dispatch. We incorporate the possibility that generating firms may rebid (or revise) their supply schedule prior to dispatch - an important feature of markets in many countries which has not previously been included in theoretical models. We show that a dominant firm can gain substantially by manipulating its bids, and take advantage of the opportunity to submit rebids. In the Australian National Energy Market (NEM) where settlement prices are an average of six dispatch prices, it can, for example, withhold capacity at lower prices for the first bid in a period, creating a price hike, and then add capacity at lower prices to ensure dispatch. Using data from the Australian NEM we provide the first empirical evidence consistent with the hypothesized theoretical behaviour in the observed data. |
| Keywords: | electricity markets, Australia, rebidding |
| JEL: | Q41 D43 D23 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_6819&r=reg |
| By: | Vincent Bertrand (Climate Economics Chair, Univ. Paris Dauphine, Paris, France; CRESE EA3190, Univ. Bourgogne Franche-Comté, F-25000 Besançon, France); Sylvain Caurla (UMR INRA – AgroParisTech, Laboratoire d’Economie Forestière, 54042 Nancy Cedex, France); Elodie Le Cadre (Climate Economics Chair, Univ. Paris Dauphine, Paris, France); Philippe Delacote (UMR INRA – AgroParisTech, Laboratoire d’Economie Forestière, 54042 Nancy Cedex, France) |
| Abstract: | We compute the optimal subsidy level to fuelwood consumption that makes it possible to achieve the French biomass energy consumption target. In this view, we model the competitions and trade-offs between the consumption of fuelwood for heat (FW-H) and the consumption of fuelwood for power generation (FW-E). To do so, we couple a forest sector model with an electricity simulation model and we test different scenarios combining FW-H and FW-E that account for contrasted potential rise in carbon price and potential reduction in the number of nuclear plants. We assess the implications of these scenarios on (1) the budgetary costs for the Government, (2) the industrial wood producers’ profits, (3) the costs savings in power sector for the different scenarios tested and (4) the carbon balance. We show that the scenario with the higher carbon price and the lower number of nuclear plants is the less expensive from a budgetary perspective. Indeed, when associated with a high carbon price, co-firing may increase FW-E demand with lower subsidy level, which enables reducing the cost of reaching the target. However, in this case, FW-E crowds-out part of FW-H which may cause political economy issues. From a carbon balance perspective, a FW-H only scenario better performs than any other scenario that combines FW-H and FW-E due to the relatively low emissions factors of alternative technologies for electricity generation, in particular nuclear energy. |
| Keywords: | Forestry sector, Bioenergy, Biomass-based electricity, Carbon pricing, Nuclear power |
| JEL: | Q41 Q48 Q23 |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:lef:wpaper:2017-03&r=reg |
| By: | Fabra, N. |
| Abstract: | A simple model is built up to capture the key drivers of investment and pricing incentives in electricity markets. The focus is put on the interaction between market power and investment incentives, and the trade-o_ it introduces when designing the optimal regulatory instruments. In contrast to the energy-only market paradigm that assumes perfect competition, our model demonstrates that in the presence of market power scarcity prices do not promote efficient investments, even among risk-neutral investors. Combining price caps and capacity payments allows to disentangle the two-fold objective of inducing the right investment incentives while mitigating market power. Bundling capacity payments with financial obligations further mitigates market power as long as strike prices are set sufficiently close to marginal costs. |
| Keywords: | scarcity pricing, market power, capacity markets, reliability options |
| JEL: | L13 L51 L94 |
| Date: | 2018–02–13 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:1814&r=reg |
| By: | Geir H. M. Bjertnaes |
| Abstract: | A tax on fuel combined with tax-exemptions or subsidies for purchase of fuel-efficient vehicles is implemented in many countries to reduce greenhouse gas emissions and other negative externalities from road traffic. This study, however, shows that a tax on fuel should be combined with heavier taxation of fuel-efficient vehicles to curb externalities from road traffic. The tax on fuel is implemented to curb externalities linked to both consumption of fuel and road use. The heavier tax on fuel-efficient vehicles prevents that motorists avoid the road user charge on fuel by purchasing fuel-efficient vehicles. |
| Keywords: | transportation, optimal taxation, environmental taxation, global warming |
| JEL: | H20 H21 H23 Q58 R48 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_6789&r=reg |
| By: | Lunn, Pete |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:esr:wpaper:rb201804&r=reg |
| By: | Axel Gautier; Julien Jacqmin; Jean-Christophe Poudou |
| Abstract: | Prosumers are households that are both producers and consumers of electricity. A prosumer has a grid-connected decentralized production unit (DPU) and makes two types of exchanges with the grid: energy imports when the local production is insuffcient to match the local consumption and energy exports when local production exceeds it. There exists two systems to measure the exchanges: a net metering system that uses a single meter to measure the balance between exports and imports and a net purchasing system that uses two meters to measure separately power exports and imports. Both systems are currently used for residential consumption. We build a model to compare the two metering systems. Under net metering, the price of exports paid to prosumers is implicitly set at the price of the electricity that they import. We show that net metering leads to (1) too many prosumers, (2) a decrease in the bills of prosumers, compensated via a higher bill for traditional consumers, and (3) a lack of incentives to synchronize local production and consumption. |
| Keywords: | decentralized production unit, grid regulation, solar panel, grid tariff, storage |
| JEL: | D13 L51 L94 Q42 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_6814&r=reg |
| By: | Déborah Leboullenger; Frédéric Lantz; Catherine Baumont |
| Abstract: | This paper aims to find evidence of a “green value†in a local housing market using notarial data on a small urban area in France. We use frontier functions, an original approach that departs from customary hedonistic regressions, to model housing market prices as a production set bordered by an efficiency frontier estimated by Data Envelopment Analysis (DEA). The paper tests if difference in prices (i.e. the distance from the frontier) can be explained by energy performance measured as a normalized categorical ascending kWh/m²/year grade (or Energy Performance Certificate -EPC). We show that there is significative evidence for energy performance's market value. The “Green Property Value†is estimated to range between 1% and 3% of the price for medium-high performance buildings. Our findings are robust to the specifications of the first (frontier estimation) and the second stage (residual analysis). We then propose a cost-benefit analysis to evaluate the return on retrofit investment a household would get from higher market value. We find that housing green property value accounts for a part, between 4.6% in houses and 6.6% in collective dwellings, of the real terms investment in energy retrofit. We interpret our findings with regard to spatial dependencies that affect the market and the heterogeneity between the private and the public social housing stocks. |
| Keywords: | Residential Housing Market, Energy Retrofit, Green Value, Efficiency Analysis, Frontier Functions, Data Envelopment Analysis, Energy Performance Certificates |
| JEL: | C5 Q41 Q51 R15 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:drm:wpaper:2018-8&r=reg |
| By: | Ralph Sonenshine |
| Abstract: | In the late 1990s, many U.S. states deregulated electric utilities, allowing for competition among power generators. Deregulated states then adopted a retail choice program, allowing customers to choose their power provider. In addition, a significant merger wave among large utility companies ensued after deregulation. What was the impact of these changes on consumer welfare? While this issue has been widely studied, the results remain ambiguous. This study examines the effects of these events, by analyzing electricity price and output changes among deregulated and regulated states from 2001 through 2014. The study finds that deregulation may have had a positive effect when states adopted certain measures, such as retail choice or fuel changes, that enhanced competition and lowered costs |
| Keywords: | Deregulation, Mergers, Regulated Industries, natural |
| JEL: | L94 L98 G34 G14 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:amu:wpaper:2017-12&r=reg |
| By: | Quentin Hoarau; Yannick Perez |
| Abstract: | Photovoltaic generation and electric mobility are both disruptive technologies in the power and transport sectors raising several issues regarding power grids. Precisely, questions about synergistic potentials when combining these two technologies have attracted academics' interest. Recent researches on this topic demonstrate that interactions between photovoltaic generation and electric mobility could decrease the overall burden on power grids, and empower one technology with the others specificities. Indeed, electric vehicles could use photovoltaic energy and benefit from a low-cost and carbon-free electricity to charge. In return, photovoltaic systems would use the bi-directional flexibility of electric vehicles battery to maximize their self-consumption. As these synergies operate, these technologies economic spillovers may improve, stimulating their joint deployment. The objective of this paper is to develop a systematic framework in order to review the different under-lying conditions for synergy as they have been studied in the literature. It appears that this synergy was driven by technical characteristics as well as economic aspects. First, this synergy happens in middle-sized spatial configuration (large workplace buildings and charging station) and less obviously at other scales and in situation of technologically diversified system. Second, if it was poorly studied in the literature, the economic context (cooperation level between stakeholders, regulation and policies...) of interactions between photovoltaic generation and electric mobility is crucial for a successful synergy. Finally, we identify several remaining issues about these conditions that further researches could investigate. |
| Keywords: | Electric Vehicle, Photovoltaic energy, Smart grid |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:cec:wpaper:1802&r=reg |
| By: | Newbery, D. |
| Abstract: | Renewable electricity, particularly solar PV, creates external benefits of learning-by-doing that drives down costs. If eventually economic, these technologies will thereafter create social value by reducing carbon emissions with value greater than the cost of abatement. This paper sets out a method for assessing whether a trajectory of investment that involves initial subsidies is justified by the subsequent learning-by-doing spillovers and whether it is worth accelerating current investment rates. Given current costs and learning rates, accelerating the current rate of investment appears globally socially beneficial, particularly if that investment is deployed in high insolation locations. |
| Keywords: | Solar PV, learning-by-doing, subsidies, carbon emissions |
| JEL: | C6 H23 H43 Q42 Q54 Q55 |
| Date: | 2017–03–21 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:1715&r=reg |
| By: | Panu Poutvaara; Tuomas Takalo; Andreas Wagener |
| Abstract: | We study the optimal duration of contracts in a principal-agent framework with both moral hazard and adverse selection. Agents decide on a contract-specific and non-verifiable investment. Incentive compatibility requires that initial contracts, which serve to screen the ability of newly hired agents, cannot be longer than continuation contracts, offered to successful agents. Initial contracts remain unpaid unless service quality is unobservable to other agents and the share of high-ability agents is high. Optimal durations depend, in non-monotonic ways, on the principal’s ow valuation of the agent’s service and the share of high-ability agents. |
| Keywords: | contract length, term length, screening |
| JEL: | J30 L14 J41 D72 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_6808&r=reg |
| By: | Lefouili, Yassine; Pinho, Joana |
| Abstract: | This paper explores the incentives for, and the effects of, collusion in prices between two-sided platforms. We characterize the most profitable sustainable agreement when platforms collude on both sides of the market and when they collude on a single side of the market. Under two-sided collusion, prices on both sides are higher than competitive prices, implying that agents on both sides become worse off as compared to the competitive outcome. An increase in cross-group externalities makes two-sided collusion harder to sustain, and reduces the harm from collusion suffered by the agents on a given side as long as the collusive price on that side is lower than the monopoly price. When platforms collude on a single side of the market, the price on the collusive side is lower (higher) than the competitive price if the magnitude of the cross-group externalities exerted on that side is sufficiently large (small). As a result, one-sided collusion may benefit the agents on the collusive side and harm the agents on the competitive side. |
| Keywords: | Collusion; Two-sided markets; Cross-group externalities |
| JEL: | D43 L41 |
| Date: | 2018–02 |
| URL: | http://d.repec.org/n?u=RePEc:tse:wpaper:32485&r=reg |