nep-reg New Economics Papers
on Regulation
Issue of 2018‒08‒27
fifteen papers chosen by
Natalia Fabra
Universidad Carlos III de Madrid

  1. Engineering and Economic Analysis for Electric Vehicle Charging Infrastructure --- Placement, Pricing, and Market Design By Chao Luo
  2. The Role of Carbon Capture and Storage Electricity in Attaining 1.5 and 2°C By Vinca, Adriano; Rottoli, Marianna; Marangoni, Giacomo; Tavoni, Massimo
  3. Willingness to Pay for Solar Panels and Smart Grids By Tunç Durmaz; Aude Pommeret; Ian Ridley
  4. Taxation and Privacy Protection on Internet Platforms * By Francis Bloch; Gabrielle Demange
  5. To switch or not to switch? – Understanding German consumers’ willingness to pay for green electricity tariff attributes By Sauthoff, Saramena; Danne, Michael; Mußhoff, Oliver
  6. Drugs, Showrooms and Financial Products: Competition and Regulation when Sellers Provide Expert Advice By David Bardey; Denis Gromb; David Martimort; Jérôme Pouyet
  7. The Role of the Regulator in SMS By Terry Kelly
  8. One Markup to Rule Them All: Taxation by Liquor Pricing Regulation By Eugenio Miravete; Jeffrey Thurk; Katja Seim
  9. Missing money, missing policy and Resource Adequacy in Australia’s National Electricity Market By Simshauser, P
  10. Complex Disclosure By Ginger Zhe Jin; Michael Luca; Daniel J. Martin
  11. Energy Efficiency Standards Are More Regressive Than Energy Taxes: Theory and Evidence By Arik Levinson
  12. Drivers of Renewable Technology Adoption in the Household Sector By Anke Jacksohn; Peter Grösche; Katrin Rehdanz; Carsten Schröder
  13. On Competing Mechanisms under Exclusive Competition By Andrea Attar; Eloisa Campioni; Gwenaël Piaser
  14. Directed Technical Change in Clean Energy: Evidence from the Solar Industry By Lööf, Hans; Perez, Luis; Baum, Christopher F
  15. A novel machine learning approach for identifying the drivers of domestic electricity users’ price responsiveness By Guo, P.; Lam, J.; Li, V.

  1. By: Chao Luo
    Abstract: This dissertation is to study the interplay between large-scale electric vehicle (EV) charging and the power system. We address three important issues pertaining to EV charging and integration into the power system: (1) charging station placement, (2) pricing policy and energy management strategy, and (3) electricity trading market and distribution network design to facilitate integrating EV and renewable energy source (RES) into the power system. For charging station placement problem, we propose a multi-stage consumer behavior based placement strategy with incremental EV penetration rates and model the EV charging industry as an oligopoly where the entire market is dominated by a few charging service providers (oligopolists). The optimal placement policy for each service provider is obtained by solving a Bayesian game. For pricing and energy management of EV charging stations, we provide guidelines for charging service providers to determine charging price and manage electricity reserve to balance the competing objectives of improving profitability, enhancing customer satisfaction, and reducing impact on the power system. Two algorithms --- stochastic dynamic programming (SDP) algorithm and greedy algorithm (benchmark algorithm) are applied to derive the pricing and electricity procurement strategy. We design a novel electricity trading market and distribution network, which supports seamless RES integration, grid to vehicle (G2V), vehicle to grid (V2G), vehicle to vehicle (V2V), and distributed generation (DG) and storage. We apply a sharing economy model to the electricity sector to stimulate different entities to exchange and monetize their underutilized electricity. A fitness-score (FS)-based supply-demand matching algorithm is developed by considering consumer surplus, electricity network congestion, and economic dispatch.
    Date: 2018–08
  2. By: Vinca, Adriano; Rottoli, Marianna; Marangoni, Giacomo; Tavoni, Massimo
    Abstract: The climate targets defined under the Paris agreement of limiting global temperature increase below 1.5 or 2°C require massive deployment of low-carbon options in the energy mix, which is currently dominated by fossil fuels. Scenarios suggest that Carbon Capture and Storage (CCS) might play a central role in this transformation, but CCS deployment is stagnating and doubts remain about its techno-economic feasibility. In this article, we carry out a throughout assessment of the role of CCS electricity for a variety of temperature targets, from 1.5 to above 4°C, with particular attention to the lower end of this range. We collect the latest data on CCS economic and technological future prospects to accurately represent several types of CCS plants in the WITCH energy-economy model, We capture uncertainties by means of extensive sensitivity analysis in parameters regarding plants technical aspects, as well as costs and technological progress. Our research suggests that stringent temperature scenarios constrain fossil fuel CCS based deployment, which is maximum for medium policy targets. On the other hand, Biomass CCS, along with renewables, increases with the temperature stringency. Moreover, the relative importance of cost and performance parameters change with the climate target. Cost uncertainty matters in less stringent policy cases, whereas performance matters for lower temperature targets.
    Keywords: Research and Development/Tech Change/Emerging Technologies
    Date: 2017–12–21
  3. By: Tunç Durmaz; Aude Pommeret; Ian Ridley
    Abstract: It is expected that the renewable share of energy generation will rise considerably in the near future. The intermittent and uncertain nature of renewable energy (RE) calls for storage and grid management technologies that can allow for increased power system flexibility. To assist policy makers in designing public policies that incentivize RE generation and a flexible power system based on energy storage and demandside management, better knowledge as to the willingness to pay for the corresponding devices is required. In this paper, we appraise the willingness of a household (HH) to pay for a 1.9 kW peak photovoltaic (PV) system and smart grid devices, namely, a smart meter and a home storage battery. Results indicate that having access to a storage device is key for the HH decision to install a smart meter. We also find that it is beneficial for the HH to install the PV system regardless of the pricing scheme and the ownership of the battery pack. It is, nevertheless, barely desirable to install the battery pack regardless of the presence of the PV system; an outcome pointing to the fact that the high cost of storage is a drawback for the wider use of these systems. When storage is constrained in such a way that only the generated power can be stored, the willingness to install the battery pack reduces even further. The investment decisions made when legislation prohibits net-metering are also analyzed.
    Keywords: Resource /Energy Economics and Policy
    Date: 2017–06–14
  4. By: Francis Bloch (PSE - Paris School of Economics, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique); Gabrielle Demange (PSE - Paris School of Economics, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique)
    Abstract: This paper studies data collection by a monopolistic internet platform We show that the optimal strategy of the platform is either to cover the market or to choose the highest data exploitation level, excluding users with high privacy costs from the platform. For likely parameter values, the platform chooses an excessive level of data exploitation from the point of view of users. We study how different tax instruments can be used to reduce the level of data collection and analyze the effect of an opting-out option, letting users access the platform with no data collection. We show that a differentiated tax, taxing access revenues and data revenues at different rates is the most effective instrument and that the introduction of an opting-out option may harm users as it induces the platform to raise the level of data exploitation. JEL classification numbers: H23, L86, L50
    Keywords: Privacy protection,Digital services,Taxation,Opt-out option
    Date: 2016–10–13
  5. By: Sauthoff, Saramena; Danne, Michael; Mußhoff, Oliver
    Abstract: In order to achieve an environmentally friendly and sustainable energy supply, it is necessary that this goal is supported by society. In different countries worldwide it has been shown that one way consumers want to support the energy transition is by purchasing green electricity. However, few people make the leap from their intention to a buying decision. This study explores parameters that influence whether German consumers decide to switch to a green electricity tariff. We conducted a quota-representative online survey including a discrete choice experiment with 371 private households in Germany in 2016. For the econometric analysis, a generalized multinomial logit model in willingness to pay (WTP) space was employed, enabling the estimation of WTP values to be as realistic as possible. The results show that consumers’ decision regarding whether or not to make the switch to green energy is influenced by many underlying drivers, such as the source of green energy, whether a person can outsource the switching process, and a person’s attitude towards the renewable energy sources levy that currently exists in Germany. Implications for policy makers and recommendations for the marketing of green energy tariffs are provided.
    Keywords: Consumer/Household Economics, Environmental Economics and Policy, Institutional and Behavioral Economics
    Date: 2017
  6. By: David Bardey (Toulouse School of Economics, Universidad de Los Andes); Denis Gromb (HEC Paris - Ecole des Hautes Etudes Commerciales); David Martimort (PSE - Paris School of Economics, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique); Jérôme Pouyet (PSE - Paris School of Economics, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique)
    Abstract: We consider a market in which sellers can exert an information-gathering effort to advise buyers about which of two goods best fits their needs. Sellers may steer buyers towards the higher margin good. We show that for sellers to collect and reveal information, profits on both goods must be sufficiently close to each other, i.e., lie within an implementability cone, which competition or regulation may ensure. Instruments to do so vary with the context. Controlling market power while improving the quality of advice is more difficult when sellers have private information on the profitability of the goods.
    Keywords: Asymmetric Information Keywords Mis-Selling, Asym- metric Information ,Mis-Selling, Expertise, Retailing, Competition, Regulation
    Date: 2016–11
  7. By: Terry Kelly
    Abstract: In almost all cases, the transport industry has adopted safety management systems (SMS) in response to a regulatory initiative. SMS vary dramatically across transport modes and jurisdictions – often because of the influence of different legacy regulatory programmes, and the attendant cultures. Consequently, there is no single path to guarantee a regulatory authority success in designing and implementing SMS regulations. For many, SMS has become a voyage of discovery, an experiment in proactive safety management that is being conducted in real time. SMS has been a “step change” that has challenged industries in all modes of transport. It has severely taxed the capabilities of many regulatory authorities. It is arguably the most significant regulatory change that has occurred in the transportation industry in recent times. Regulating SMS has often led to revised legislation, regulations or standards; whole scale restructuring of the regulatory agency; new or revised regulatory protocols, processes, activities, and tools; and new information technology (IT) and new processes for information management (IM). SMS will continue to evolve in the coming decades. The paper draws on lessons learned to explore strategies that can be used to design, implement and operate the related regulatory programmes. Observations are provided to help decision makers manage the challenges they will predictably face. The critical role of dynamic, wide-reaching communications and strategic planning, with industry and within the regulatory organisation, is underlined.
    Date: 2017–08–04
  8. By: Eugenio Miravete (University of Texas at Austin); Jeffrey Thurk (University of Notre Dame); Katja Seim (University of Pennsylvania)
    Abstract: Government often chooses simple rules to regulate industry even when firms and consumers are heterogeneous. We show this practice is sub-optimal for a large class of empirically-relevant consumer preferences. We evaluate the implications of in the context of alcohol pricing where the regulator uses a single markup rule that does not vary across products. We estimate an equilibrium model of wholesale pricing and retail demand for horizontally differentiated spirits that allows for heterogeneity in consumer preferences based on observable demographics. We show that the single markup increases market power among upstream firms, particularly small firms whose portfolios are better positioned to take advantage of the policy. For consumers, the single markup acts as a progressive tax by overpricing products favored by the rich. It also decreases aggregate consumer welfare though $16.7\%$ of consumers are better off under the policy. These consumers tend to be older, less wealthy or educated, and minorities. Simple policies therefore generate significant cross-subsidies and may be an effective tool for government to garner favor of key constituencies.
    Date: 2018
  9. By: Simshauser, P
    Abstract: From 2012-2017 more than 5000MW of coal plant exited Australia’s National Electricity Market (NEM). The average plant exit notice period was 5.2 months. Exit at scale peaked just as imbalances in the market for natural gas emerged. Compounding matters were Variable Renewable Energy (VRE) plant entry lags due to policy discontinuity in prior periods. By 2016/17, the culmination of coal plant exit, gas market imbalances and VRE entry lags produced more than 20 Lack of Reserve events across the NEM, three blackouts including a black system event in the South Australian region. Spot and forward electricity prices rose to record levels, viz. $90-$130/MWh compared to an historic average of $42.50. In this article, the lead-up to these abnormal trading conditions are traced back to policy decisions a decade earlier in the markets for electricity, natural gas and renewable energy. Lessons for other energy markets undergoing transformation include i). transparency over lumpy plant exit decisions, ii). climate change policy stability, and iii). clear policy limits to gas export capacity vis-à-vis domestic supply.
    Keywords: Resource Adequacy, Climate Change Policy, Electricity Prices
    JEL: D61 L94 L11 Q40
    Date: 2018–08–15
  10. By: Ginger Zhe Jin; Michael Luca; Daniel J. Martin
    Abstract: Disclosure policies have the potential to help consumers and make markets more efficient. Yet, the effectiveness of disclosure policies can be undermined if firms strategically make unfavorable information unnecessarily complicated to understand. To explore the incentives for using complexity in disclosure, we implement a game of mandatory disclosure where senders are required to report their private information truthfully, but can choose how complex to make their reports. We find that senders use complex disclosure over half the time, and most of this obfuscation is profitable because receivers make systematic mistakes in assessing complex reports. Stated beliefs suggest that receivers correctly infer the strategic implications of complexity, but are overconfident about their ability to assess complex reports.
    JEL: D8 D91 K2 L15
    Date: 2018–06
  11. By: Arik Levinson (Department of Economics, Georgetown University)
    Abstract: Economists endorse taxes as a cost-effective means of reducing pollution. But policymakers raise concerns about their regressivity, or disproportional burden on poorer families, preferring instead to regulate energy efficiency. I first show that in theory, energy efficiency standards are more regressive than energy taxes, not less. I then provide an example using data on automobiles in the United States. Taxing gas would be less regressive than regulating the fuel economy of cars if the two policies are compared on a revenue-equivalent basis.
    Keywords: Pigouvian tax, performance standards, pollution
    JEL: H23
    Date: 2018–08–15
  12. By: Anke Jacksohn; Peter Grösche; Katrin Rehdanz; Carsten Schröder
    Abstract: Using representative household survey panel data from Germany, we undertake a simultaneous assessment of the importance of factors that have individually been found significant for the adoption of renewable energy systems but have never been tested jointly. These are sociodemographic and housing characteristics, environmental concern, personality traits, and economic factors, i.e. the expected costs of and revenue from the investment. Our results suggest that household decisions to invest in photovoltaic systems and solar thermal facilities are mainly driven by the economic factors. Taking account of sociodemographic and housing characteristics, environmental concern or personality traits has comparatively little relevance, while the quantitative nexus between the decision to invest and returns on the investment is robust to their inclusion.
    Keywords: renewable technology adoption; investment decision; solar energy; household sector
    JEL: C25 D12 Q55
    Date: 2018
  13. By: Andrea Attar (DEF & CEIS, Università di Roma Tor Vergata and Toulouse School of Economics (CNRS)); Eloisa Campioni (DEF & CEIS, Università di Roma Tor Vergata); Gwenaël Piaser (IPAG Business School)
    Abstract: We study games in which several principals design mechanisms in the presence of privately informed agents. Competition is exclusive: each type of each agent can participate with at most one principal and meaningfully communicate only with him. Economic models of exclusive competition restrict principals to use standard direct mechanisms, which induce truthful revelation of agents’ exogenous private information. This paper investigates the rationale for this restriction. We provide two results. First, we construct examples showing that direct mechanisms fail to completely characterize equilibrium outcomes even if we restrict to pure strategy equilibria. Second, we show that truth-telling strongly robust equilibrium outcomes survive against principals’ unilateral deviations toward arbitrary mechanisms.
    Keywords: Competing Mechanisms, Exclusive Competition, Incomplete Information
    JEL: D82
    Date: 2018–08–09
  14. By: Lööf, Hans (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology); Perez, Luis (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology); Baum, Christopher F (Department of Economics, Boston College and Department of Macroeconomics)
    Abstract: This paper studies directed technical change and innovation in renewable energy. We construct panel data with micro- and macro observations from nearly 200 countries over a 20-year period and estimate how energy prices, government subsidies, financial markets, spillovers, and path dependence affect patenting in solar thermal and solar cells. Carbon taxes, R&D subsidies to solar technology and own-knowledge stocks have strong, significant positive effects on solar innovations. Subsidies to fossil energy have the adverse effect. We find no compelling evidence that the quality of financial markets and institutions has any consistent impact on the patenting activities of innovators in solar energy.
    Keywords: Directed Technical Change; Climate Change; Innovation; Patents; Solar Energy.
    JEL: O13 O30 P28 P47
    Date: 2018–08–15
  15. By: Guo, P.; Lam, J.; Li, V.
    Abstract: Time-based pricing programs for domestic electricity users have been effective in reducing peak demand and facilitating renewables integration. Nevertheless, high cost, price non-responsiveness and adverse selection may create the possible challenges. To overcome these challenges, it can be fruitful to investigate the ‘high-potential’ users, which are more responsive to price changes and apply time-based pricing to these users. Few studies have investigated how to identify which users are more price-responsive. We aim to fill this gap by comprehensively identifying the drivers of domestic users’ price responsiveness, in order to facilitate the selection of the high-potential users. We adopt a novel data-driven approach, first by a feed forward neural network model to accurately determine the baseline monthly peak consumption of individual households, followed by an integrated machine-learning variable selection methodology to identify the drivers of price responsiveness applied to Irish smart meter data from 2009-10 as part of a national Time of Use trial. This methodology substantially outperforms traditional variable selection methods by combining three advanced machine-learning techniques. Our results show that the response of energy users to price change is affected by a number of factors, ranging from demographic and dwelling characteristics, psychological factors, historical electricity consumption, to appliance ownership. In particular, historical electricity consumption, income, the number of occupants, perceived behavioural control, and adoption of specific appliances, including immersion water heater and dishwasher, are found to be significant drivers of price responsiveness. We also observe that continual price increase within a moderate range does not drive additional peak demand reduction, and that there is an intention-behaviour gap, whereby stated intention does not lead to actual peak reduction behavior. Based on our findings, we have conducted scenario analysis to demonstrate the feasibility of selecting the high potential users to achieve significant peak reduction.
    Keywords: Time-based electricity pricing, price responsiveness, high-potential users, variable selection, Time of Use, machine learning
    JEL: Q41
    Date: 2018–08–16

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