nep-reg New Economics Papers
on Regulation
Issue of 2018‒07‒23
thirteen papers chosen by
Natalia Fabra
Universidad Carlos III de Madrid

  1. Renewable Energy Policy in the Age of Falling Technology Costs By Karsten Neuhoff; Nils May; Jörn C. Richstein
  2. The impact of the interchange fee regulation on merchants: evidence from Italy By Guerino Ardizzi; Michele Savini Zangrandi
  3. Buses, Houses or Cash? Socio-Economic, Spatial and Environmental Consequences of Reforming Public Transport Subsidies in Buenos Aires By Paolo Avner; Shomik Raj Mehndiratta; Vincent Viguie; Stéphane Hallegatte
  4. Employing Simple Cost-Sharing Policies to Motivate the Efficient Implementation of Distributed Energy Resources By Brown, David P.; Sappington, David E. M.
  5. European Industrial Energy Intensity: The Role of Innovation 1995-2009 By Ajayi, V.; Reiner, D.
  6. The European Single Market in Electricity: An Economic Assessment By Pollitt, M.
  7. Emission Pathways Towards a Low-Carbon Energy System for Europe: A Model-Based Analysis of Decarbonization Scenarios By Karlo Hainsch; Thorsten Burandt; Claudia Kemfert; Konstantin Löffler; Pao-Yu Oei and Christian von Hirschhausen
  8. The Iberian electricity market:Price dynamics and risk premium in an illiquid market By Márcio Ferreira; Hélder Sebastião
  9. Renewable Energy Policies and Contradictions in Causality: A case of Next 11 Countries By Sinha, Avik; Shahbaz, Muhammad; Sengupta, Tuhin
  10. Shadow Price of CO2 Emissions in Indian Thermal Power Sector By Rakesh Kumar Jain; Surender Kumar
  11. Consumers' evaluation of public charging infrastructure for electric vehicles By Globisch, Joachim; Plötz, Patrick; Dütschke, Elisabeth; Wietschel, Martin
  12. Carbon emissions intensity reduction target for China¡¯s power industry: An efficiency and productivity perspective By Yujiao Xian; Ke Wang; Xunpeng Shi; Chi Zhang; Yi-Ming Wei; Zhimin Huang
  13. Forecasting the value of battery electric vehicles compared to internal combustion engine vehicles: the influence of driving range and battery technology By JongRoul Woo; Christopher L. Magee

  1. By: Karsten Neuhoff; Nils May; Jörn C. Richstein
    Abstract: Cost of renewable energies have dropped, approaching wholesale power price levels. As a result, the role of renewable energy policy design is shifting – from covering incremental costs towards facilitating risk-hedging. An analytical model of the financing structure of renewable investment projects is developed to assess this effect und used to compare different policy design choices: contracts for differences, sliding premia, fixed premia and a setting without dedicated remuneration mechanism. The expected benefit for electricity consumers from reduced risk and financing costs is approximated at the example of a 2030 scenario for Germany. Policies like sliding premia, previously evaluated as providing low-risk investment environments, provide for less risks hedging, when technology costs approach wholesale power prices. Contracts for differences provide in all scenarios the most effective hedge for investors against power prices uncertainty, enabling low-cost financing and reducing costs for consumers, while also hedging electricity consumers against high power prices.
    Keywords: Investments under uncertainty, financing costs, renewable energy policy, contracts for difference
    JEL: Q42 Q55 O38
    Date: 2018
  2. By: Guerino Ardizzi (Bank of Italy); Michele Savini Zangrandi (Bank of Italy)
    Abstract: Interchange fees (IF) are fees that a cardholder’s bank (issuer) receives from the merchant’s bank (acquirer) when a card payment is executed. Interchange fees are an important part of the fees charged to merchants by acquirers. Because of their level and fragmentation, interchange fees can restrict competition and have thus been regulated in the EU. The Interchange Fee Regulation (IFR) came into effect for all EU member states in 2015 and sets maximum limits on interchange fees. By using a panel of Italian banks we assess the impact of introducing the IF regulation on the fees that acquiring banks charge to merchants (merchant fees), and on the merchants’ acceptance of card-based payments. We find that, in line with the regulatory intent, the ceiling imposed on interchange fees has led to a sizeable drop in merchant fees and to an increase in the acceptance of card payments, measured as transactions per terminal.
    Keywords: interchange fee, payment card, acquiring, point of sale, banking panel data
    JEL: E41 G14 G21 G38 L14 L42 L51
    Date: 2018–06
  3. By: Paolo Avner (The World Bank - The World Bank - The World Bank); Shomik Raj Mehndiratta (The World Bank - The World Bank - The World Bank); Vincent Viguie (CIRED - Centre International de Recherche sur l'Environnement et le Développement - CNRS - Centre National de la Recherche Scientifique - ENPC - École des Ponts ParisTech - AgroParisTech - EHESS - École des hautes études en sciences sociales - CIRAD - Centre de Coopération Internationale en Recherche Agronomique pour le Développement); Stéphane Hallegatte (The World Bank - The World Bank - The World Bank)
    Date: 2018–01–29
  4. By: Brown, David P. (University of Alberta, Department of Economics); Sappington, David E. M. (University of Florida, Department of Economics)
    Abstract: We consider the optimal design of simple cost-sharing policies to motivate electricity distribution utilities to manage the costs of distributed energy resource (DER) projects. The optimal share of realized cost savings (s) that is awarded to the utility takes a particularly simple form in certain settings. More generally, s can vary with the prevailing environment in subtle and sometimes counter-intuitive ways. For instance, s may increase as cost savings become less onerous for the utility to secure and as the utility becomes more averse to risk. Gains from affording the utility a choice among cost-sharing policies typically are minimal.
    Keywords: distributed energy resources; procurement; regulation
    JEL: L51 L94
    Date: 2018–06–30
  5. By: Ajayi, V.; Reiner, D.
    Abstract: We investigate the direct role of technological innovation and other influencing factors on industry-level energy intensity based on a sample of 12 industries across 17 EU countries over 1995–2009. We develop an innovative industry-level patent dataset and find compelling evidence that patent stock negatively influences industrial energy intensity. Using a fixed effects estimator, we find a much stronger effect on energy-intensive industries with an estimated coefficient of -0.138 almost double that of less energy-intensive industries (estimated at -0.085). While our results show energy price remains the major determinant of energy intensity, the chemicals industry appears to be more susceptible to energy prices relative to other energy-intensive industries that are covered by the EU Emissions Trading Scheme (ETS). Our study reveals that asymmetric response of energy intensity to energy prices in which price rises between 2004 and 2008 accounts for more change in efficiency than when prices fall. We also explore regional differences, notably that carbon tax policy in Northern European countries, which began in the early 1990s, is responsible for a significant fraction of the decline in energy intensity in Northern Europe.
    Keywords: Industrial energy intensity, innovation, energy price, carbon tax
    JEL: O13 C33 Q41 Q55
    Date: 2018–06–19
  6. By: Pollitt, M.
    Abstract: The European single market in electricity has been promoted vigorously by the European Commission since 1996. We discuss how national electricity markets and cross border electricity markets have been reshaped by the process. We examine the Commission’s own work on evaluating the benefits of the single market. We look at the wider evidence of impact on prices, security of supply, the environment and on innovation. We conclude that the institutional changes are extensive and there has been significant market harmonisation and integration. However, the measured benefits are difficult to identify, but likely to be small. This is partly because over the same period there has been a large rise in subsidised renewable generation driven by the decarbonisation agenda.
    Keywords: electricity single market, decarbonisation
    JEL: L94
    Date: 2018–05–24
  7. By: Karlo Hainsch; Thorsten Burandt; Claudia Kemfert; Konstantin Löffler; Pao-Yu Oei and Christian von Hirschhausen
    Abstract: The aim of this paper is to showcase different decarbonization pathways for Germany and Europe with varying Carbon dioxide (CO2) constraints until 2050. The Global Energy System Model (GENeSYS-MOD) framework, a linear mathematical optimization model, is used to compute low-carbon scenarios for Europe as a whole, as well as for 17 European countries or regions. The sectors power, low- and high-temperature heating, and passenger and freight transportation are included, with the model endogenously constructing capacities in each period. Emission constraints differ between different scenarios and are either optimized endogenously by the model, or distributed on a per-capita basis, GDP-dependent, or based on current emissions. The results show a rapid phase-in of renewable energies, if a carbon budget in line with established climate targets is chosen. In the 2° pathway, the power and low-temperature heat sectors are mostly decarbonized by 2035, with the other sectors following. Wind power is the most important energy source in Europe by 2050, followed by solar energy and hydro power. The heating sector is dominated by biogas and heat pumps, while electric vehicles emerge in the transportation sector in the later periods. Differences in renewable potentials lead to different developments in the regions, e.g., converting Germany from a net exporter of electricity into an importing country by 2050. In the 1.5° pathway, not all calculations are feasible, showcasing that especially countries like Poland or the Balkan region that heavily rely on fossil fuels will face difficulties transitioning away from their current generation capacities. It can, however, be shown that the achievement of the 2° target can be met with low additonal costs compared to the business as usual case, while reducing total emissions by more than 30%.
    Keywords: Decarbonization, energy system modeling, GENeSYS-MOD, renewables, energy policy, energy transition
    JEL: C61 Q4 L9
    Date: 2018
  8. By: Márcio Ferreira (CFisUC, Department of Physics of the University of Coimbra); Hélder Sebastião (CeBER and Faculty of Economics of the University of Coimbra)
    Abstract: This paper studies the relationship between the electricity spot and futures prices in the Iberian electricity market, with a special focus on the ex-post risk premium of monthly futures contracts. The study covers the period from 1 July 2006 to 31 March 2017, during which 128 monthly futures contracts were traded. We show that the risk premium is dynamic and presents on average a negative value. Within contracts, the risk premium presents a non-linear dependence on the remaining trading days until maturity. There is no statistical evidence for rejecting the unbiased forward hypothesis of the futures prices. However, the sequence of futures prices near maturity has some predictive power on the risk premium.
    Keywords: electricity markets, MIBEL, futures contracts, risk premium, price dynamics
    JEL: G13 G14 Q40
  9. By: Sinha, Avik; Shahbaz, Muhammad; Sengupta, Tuhin
    Abstract: Numerous studies on the causal relationship between economic growth, energy consumption and carbon dioxide (CO2) emissions have shown divergence in policy recommendations, which arises mainly due to the choice of methodology and the period of study. This inconclusiveness in policy prescriptions might turn out to be critical, when the renewable energy policies of the developing nations are considered. Our study analyses the causal relationship between economic growth, carbon emissions, fossil fuel and renewable energy consumption in Next 11 countries during the period of 1990-2016. Along with conducting parametric and non-parametric causality tests together, introducing the Geweke (1982) causality test in the literature of energy economics, we attempt to establish a wholesome aspect of policy design, by comparing and complementing results of different causality analysis, and how the causality directions should comply with the context setting. Our empirical evidence confirms that robust renewable energy policy can be designed by complementing the various causality test results, rather than focusing on one particular causality test.
    Keywords: Renewable Energy Policy; CO2 Emissions; Geweke Causality; Next 11 Countries
    JEL: B0
    Date: 2018–06–03
  10. By: Rakesh Kumar Jain (Indian Railways & Department of Business Economics South Campus, University of Delhi); Surender Kumar (Department of Economics, Delhi School of Economics)
    Abstract: This paper estimates production efficiency and shadow prices of CO2 emissions for thermal power plants in India. It employs a unique sample of 56 power plants for 2000-2013 acquired primarily by invoking the Right to Information (RTI) Act, 2005. It estimates parametric quadratic directional output distance function using linear programming approach. We find that CO2 intensity of electricity generation could be reduced about 16 and 23 percent if the power plants were made to operate efficiently. The estimated average shadow prices of US$ 14.54 and 18.68 for a ton of CO2 emission, depending upon a plant’s strategies for enhancing electricity and reducing CO2 emissions, reflects that the prevailing Clean Energy Cess of US$ 6.15 a ton of coal or US$ 3.81 a ton of CO2 emissions is not enough to induce the required emission mitigation. Significant variation in the estimates of shadow prices calls for the application of economic instruments for cost effective reduction of the emissions.
    Keywords: CO2 emissions, shadow price, directional distance function, thermal power plants, India
    JEL: D24 Q25 Q52
    Date: 2018–04
  11. By: Globisch, Joachim; Plötz, Patrick; Dütschke, Elisabeth; Wietschel, Martin
    Abstract: This paper explores factors that determine the usefulness of public charging infrastructure for electric vehicles from the point of view of its potential users. Our analysis is based on evaluations of different (hypothetical) public charging infrastructure networks by 1003 drivers of passenger cars from Germany. We employ a hierarchical linear model to explore the relevance of the attributes of public charging infrastructure as well as the influence of personal characteristics on the respondents' evaluations. Our main conclusions of the results are that public charging infrastructure is generally important to attract additional consumer segments to EVs. In addition charging duration at the autobahn as well as in cities seems to be more important to the mainstream passenger car drivers than the density of public charging spots. Our results also provide some indications regarding distinct target groups and the willingness to pay for public charging infrastructure.
    Keywords: public charging infrastructure,EVSE,user perspective,electric vehicle,willingness to pay,target groups
    Date: 2018
  12. By: Yujiao Xian; Ke Wang; Xunpeng Shi; Chi Zhang; Yi-Ming Wei; Zhimin Huang
    Abstract: This paper proposes a scenario analysis to address whether the national and provincial CO2 emissions intensity reduction target during 2016-2020 would be achievable for China¡¯s power industry with the identification of change on carbon productivity. This productivity indicator is further decomposed to investigate contributions of different sources to productivity growth when there exists technological heterogeneity. Evaluation results show that even if all electricity-generating units in each region were able to adopt the best practice, the nationwide 18% intensity reduction target is not feasible through improving technical efficiency or upgrading technology on electricity generation and carbon abatement in a short or medium term. The existence of regional technological heterogeneity in power generation and associated CO2 emissions reduction processes implies the necessity of more differentiated regulations and policies for emission reduction across China¡¯s regions and inter-regional technology transfer. The emerging national emission trading scheme could easy some challenges in formulating emission policy for heterogeneous regions.
    Keywords: Data Envelopment Analysis (DEA); Endogenous directional distance function (DDF); Meta-technology frontier; Heterogeneity; Technological gap
    JEL: Q54 Q40
    Date: 2018–07–01
  13. By: JongRoul Woo; Christopher L. Magee
    Abstract: Battery electric vehicles (BEVs) are now clearly a promising candidate in addressing the environmental problems associated with conventional internal combustion engine vehicles (ICEVs). However, BEVs, unlike ICEVs, are still not widely accepted in the automobile market but continuing technological change could overcome this barrier. The aim of this study is to assess and forecast whether and when design changes and technological improvements related to major challenges in driving range and battery cost will make the user value of BEVs greater than the user value of ICEVs. Specifically, we estimate the relative user value of BEVs and ICEVs resulting after design modifications to achieve different driving ranges by considering the engineering trade-offs based on a vehicle simulation. Then, we analyze when the relative user value of BEVs is expected to exceed ICEVs as the energy density and cost of batteries improve because of ongoing technological change. Our analysis demonstrates that the relative value of BEVs is lower than that of ICEVs because BEVs have high battery cost and high cost of time spent recharging despite high torque, high fuel efficiency, and low fuel cost. Moreover, we found the relative value differences between BEVs and ICEVs are found to be less in high performance large cars than in low performance compact cars because BEVs can achieve high acceleration performance more easily than ICEVs. In addition, this study predicts that in approximately 2050, high performance large BEVs could have higher relative value than high performance large ICEVs because of technological improvements in batteries; however low performance compact BEVs are still very likely to have significantly lower user value than comparable ICEVs until well beyond 2050.
    Date: 2018–05

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