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on Regulation |
| By: | Brown, David P. (University of Alberta, Department of Economics); Eckert, Andrew (University of Alberta, Department of Economics) |
| Abstract: | We analyze the effects of commonly employed renewable compensation policies on firm behavior in an imperfectly competitive market. We consider a model where firms compete for renewable capacity in a procurement auction prior to choosing their forward contract positions and competing in wholesale electricity markets. We focus on fixed and premium-priced feed-in tariff (FIT) compensation policies. We demonstrate that the renewable compensation policy impacts both the types of resources that win the renewable auction and subsequent market competition. While firms have stronger incentives to exercise market power in wholesale markets under a premium-priced FIT, they also have increased incentives to sign pro-competitive forward contracts. Despite these countervailing incentives, in net firms have stronger incentives to exercise market power under the premium-priced policy. We find conditions under which renewable resources that are more correlated with market demand are procured under a premium-priced design, while the opposite occurs under a fixed-priced policy. If the cost efficiencies associated with the "more valuable" renewable resources are sufficiently large, then welfare is larger under the premium-priced policy despite the stronger market power incentives in the wholesale market. Finally, we consider incumbent behavior in the renewable auction when competing against entrants with more valuable resources. |
| Keywords: | Electricity; Renewables; Market Power; Regulation; Procurement |
| JEL: | D43 L40 L51 L94 Q48 |
| Date: | 2018–08–24 |
| URL: | http://d.repec.org/n?u=RePEc:ris:albaec:2018_012&r=reg |
| By: | Anna Kowalska-Pyzalska |
| Abstract: | This paper investigates the acceptance of green electricity among Polish residential consumers. Our focus was on the socio-economic and environmental attributes of consumers in terms of their willingness to adopt renewable energy sources (RES) and green electricity tariffs. In particular, this study explores the determinants of adoption by examining consumers' willingness to pay (WTP) for green electricity, willingness to switch to green electricity tariffs, and willingness to install small-scale generators in the household. The hypotheses were tested empirically with data collected by means of a standardized telephone survey of 502 household electricity consumers in Poland. Most Polish people accept and support the development of RES, but they do not know how to contribute to this process. Their WTP increases with income, education, pro-environmental attitudes, and knowledge. They also care about social influence. To increase the adoption rate of RES among residential consumers, stable legal regulations, clear procedures, subsidies, social campaigns, and educational trainings are needed. We believe that the findings from this study may be valuable for those involved in marketing green electricity offers and for politicians responsible for the increase of the share of renewables in the Polish power system. |
| Keywords: | Renewable energy sources; Green electricity tariffs; Consumer adoption; WTP; Prosumers; Social influence; Environmental attitudes; Questionnaire survey |
| JEL: | D12 D90 Q20 Q42 Q48 Q56 |
| Date: | 2018–04–27 |
| URL: | http://d.repec.org/n?u=RePEc:wuu:wpaper:hsc1801&r=reg |
| By: | Kaushal, Kevin Raj (School of Economics and Business, Norwegian University of Life Sciences) |
| Abstract: | The allowances in an emission trading system (ETS) are commonly allocated for free to the sector, e.g., in the form of output-based allocation (OBA). The reason is the risk of carbon leakage exposure such as relocation of emission-intensive and trade-exposed industries (EITE). A prime example of this is the EU ETS, where the policymakers have stated that they will continue this practice. However, lately a third approach, combining OBA with a consumption tax, has been proposed to mitigate carbon leakage, and it has been shown to have an unambiguously global welfare improving effect. This paper presents the potential outcome of climate policy, by examining the Nash equilibrium of a policy instrument game between regions who regulate their emissions separately. In particular, we investigate the case when a policymaker can choose to supplement her ETS with OBA and/or with a consumption tax, based on another policymaker’s optimal choice for her ETS. We show analytically the optimal rate of OBA and consumption tax in the presence of a climate polices in another region. Finally, we present the results from a numerical simulation in the context of the EU ETS and the Chinese ETS. |
| Keywords: | Emission price; Output-based allocation; Consumption tax; Carbon leakage; Emission trading system; Unilateral policy |
| JEL: | C70 D61 F18 H23 Q54 |
| Date: | 2018–08–20 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:nlsseb:2018_008&r=reg |
| By: | Bartosz Uniejewski; Rafal Weron |
| Abstract: | Recent electricity price forecasting (EPF) studies suggest that the least absolute shrinkage and selection operator (LASSO) leads to well performing models, generally better than obtained from other variable selection schemes. Conducting an empirical study involving three expert models, two multi-parameter regression (called baseline) models and four variance stabilizing transformations, we discuss the optimal way of implementing the LASSO. We show that using a complex baseline model and a well chosen variance stabilizing transformation indeed leads to significant accuracy gains compared to the typically used EPF models. |
| Keywords: | Electricity spot price; Day-ahead market; Long-term seasonal component; LASSO; Automated variable selection; Variance stabilizing transformation |
| JEL: | C14 C22 C51 C53 Q47 |
| Date: | 2018–06–29 |
| URL: | http://d.repec.org/n?u=RePEc:wuu:wpaper:hsc1802&r=reg |
| By: | Perrotton, F.; Massol, O. |
| Abstract: | This paper examines the deployment of a natural gas pipeline in a developing region where the rate-of-return (RoR) regulation has been implemented to attract investment. We assume that the pipeline firm considers the proven demand emanating from a few large industrial sites but ignores the eventual rise of other domestic-oriented uses. We first assess the magnitude of the overcapitalization generated ex ante at the planning stage by the application of RoR regulation (i.e., the Averch-Johnson effect). We then analyze the ex-post situation when the enlarged domestic demand materializes. We prove that the allowable rate of return can be set to obtain ex ante the degree of overcapitalization needed ex post to serve the enlarged demand in a costefficient manner. We finally discuss whether RoR regulation can fulfill two public policy objectives: optimally building ahead of proven demand and protecting society from monopoly prices. |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:cty:dpaper:18/05&r=reg |
| By: | Gregor Semieniuk; Mariana Mazzucato (Department of Economics, SOAS University of London, UK) |
| Abstract: | This paper surveys the current state of financing green growth in the energy sector, based on the insight that there are different qualities of finance. In past transformational changes in other sectors, public monies played a key role across the innovation landscape. Public financing was central also in a number of past national energy transitions, as reviewed here for Iceland (from fossil to geothermal energy), Norway (from mainly non-electricity energy to hydroelectricity), France (from oil to nuclear) and the United States (from conventional to shale gas). In the current transition to low-carbon energy supplies, there is much public activity, most directed and concerted in China, but also reasons to doubt it is enough and applied in the right places to be able to finance the transition to a low carbon sector on time scales consistent with current climate change mitigation targets. A discussion of opportunities and challenges to a more central role for public financing concludes, drawing also on insights from the recent mission-oriented innovation literature. |
| Keywords: | energy intensity, labor productivity, decoupling, green growth, stylized fact |
| JEL: | O44 O47 Q43 E17 |
| Date: | 2018–04 |
| URL: | http://d.repec.org/n?u=RePEc:soa:wpaper:210&r=reg |
| By: | Hiroki Onuma (Organization for University Research Initiatives, Waseda University, Japan, and Research Institute for Environmental Economics and Management, Waseda University, Japan); Shigeru Matsumoto (Faculty of Economics, Aoyama Gakuin University, Japan, and Research Institute for Environmental Economics and Management, Waseda University, Japan); Toshi H. Arimura (Faculty of Commerce, Waseda University, Tokyo, Japan, and Research Institute for Environmental Economics and Management, Waseda University, Japan) |
| Abstract: | Many countries have promoted the replacement of conventional lamps with next-generation lamps to reduce electricity usage for lighting. In Japan, the majority of the lamps sold at home appliance mass merchant shops have been changed from incandescent lamps to energy-saving lamps. All conventional lamps are planned to be replaced with light-emitting diodes (LEDs) by 2020. Although the energy saving effect of LEDs has been stressed in many engineering studies, studies have not examined how much electricity has actually been saved by the installation of LEDs. Using micro-level data from the Survey on Carbon Dioxide Emission from Households (SCDEH), we compare monthly electricity usage between households using conventional lamps and those using LEDs. Our empirical result demonstrates that the installation of LEDs can reduce household electricity usage by 2.3%-2.8%. However, this saving rate is smaller than that expected from the engineering calculation. This result suggests the possibility of a rebound effect associated with LED installation. The empirical result further demonstrates that middleincome households have higher price elasticity of electricity demand and are more likely to receive greater benefit from LED installation. |
| Keywords: | Electricity Usage, Energy Saving, LED, Household-Level Data, Conditional Demand Analysis |
| JEL: | C23 D12 Q41 |
| Date: | 2018–08 |
| URL: | http://d.repec.org/n?u=RePEc:was:dpaper:1803&r=reg |
| By: | Ding, Liang; Aflaki, Sam; Kapuscinski, Roman |
| Abstract: | Energy efficiency projects are often executed by specialized entities, namely energy service companies (ESCOs). A typical ESCO's core business is conducted using performance-based contracts, whereby payment terms depend on the energy savings achieved. Despite their success in public, commercial, and industrial sectors, ESCOs in the residential sector are involved in fewer projects and face several challenges. First, an energy efficiency project often leads to changed consumption behavior; hence it is more difficult to evaluate the energy savings that are due to the project itself. The second challenge is that residential clients are more risk averse and, thus, less willing to contract for projects whose outcomes are uncertain. Third, a lack of monitoring protocols leads to ESCO's moral hazard problems. This paper studies ESCO contract design issues, focusing primarily on the residential market for energy efficiency. As opposed to other sectors, coordinating contracts do not exist. We show, however, that simple piecewise linear contracts work reasonably well. To improve their profitability, ESCOs can reduce uncertainty about the technology employed and/or develop ways of verifying post-project energy efficiency. Since policy makers are understandably keen to promote energy efficiency, we show also how regulations and monetary incentives can reduce inefficiencies in ESCOs' relationships and thereby maximize environmental benefits. |
| Keywords: | Sustainable Energy; Energy Efficiency; Performance-Based Contracts; Double Moral Hazard |
| JEL: | C44 |
| Date: | 2017–02–27 |
| URL: | http://d.repec.org/n?u=RePEc:ebg:heccah:1189&r=reg |
| By: | Boom, Anette (Department of Economics, Copenhagen Business School); Buehler, Stefan |
| Abstract: | This paper studies how competition and vertical structure jointly determine generating capacities, retail prices, and welfare in the electricity industry. Analyzing a model in which demand is uncertain and retailers must commit to retail prices before they buy electricity in the wholesale market, we show that welfare is highest if competition in generation and retailing is combined with vertical separation. Vertically integrated generators choose excessively high retail prices and capacities to avoid rent extraction in the wholesale market when their retail demand exceeds their capacity. Vertical separation eliminates the risk of rent extraction and yields lower retail prices. |
| Keywords: | Electricity; Generating Capacities; Vertical Integration; Monopoly; Competition |
| JEL: | D42 D43 D44 L11 L12 L13 |
| Date: | 2018–08–23 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:cbsnow:2018_008&r=reg |
| By: | Specht, Jan Martin (E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN)); Madlener, Reinhard (E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN)) |
| Abstract: | The ongoing digitalization of the energy sector opens up opportunities for novel business models, which can help to overcome challenges that accompany the transition towards a sustainable energy supply. One necessity in a more decentralized energy system with high shares of renewables is the provision of flexibility. This paper uses the business model generation approach of Osterwalder and Pigneur (2010) to understand the challenges of the transition towards distributed power generation for energy suppliers. The insights gained indicate that the focus of business models in the electricity supply market has to switch to an offer-driven perspective. To this end, the business model of an “Energy Supplier 2.0” as a dedicated aggregator of flexible capacities on the household level is investigated. It is found that the aggregation of flexibilities can provide additional revenue streams, extra customer comfort, support for grid operators, and reduce society’s costs for the sustainable energy transition process. Despite these promising advantages, and even though early movers indicate economic interest, we find that the current regulation and policies bear obstacles for a broad diffusion of this type of business models in the energy sector. We identify several obstacles and suggest solutions how to overcome legislative hurdles where possible. |
| Keywords: | Energy Supplier 2.0; Utility of the Future; Business Model Generation; Flexibility; Distributed Energy; Virtual Power Plant |
| JEL: | H23 L94 M21 Q21 Q48 |
| Date: | 2018–04 |
| URL: | http://d.repec.org/n?u=RePEc:ris:fcnwpa:2018_007&r=reg |
| By: | Neal, Mark |
| Keywords: | Agribusiness, Community/Rural/Urban Development, Environmental Economics and Policy, Farm Management, Livestock Production/Industries |
| Date: | 2016–08–26 |
| URL: | http://d.repec.org/n?u=RePEc:ags:nzar16:260802&r=reg |