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on Regulation |
| By: | Fabian Feger; Doina Radulescu |
| Abstract: | Many OECD countries such as the USA, the UK or Switzerland are concerned with the affordability of utility services and the distributional consequences inherent in the pricing strategy of basic goods and services, such as electricity. However, the effectiveness of the electricity tariff as a redistribution device is questionable in the presence of a progressive income tax schedule. To shed light on this controversy, we structurally estimate a model that combines public utility pricing and income taxation. We employ a large panel data set on about 105,000 households in the Swiss Canton of Bern from 2008 to 2013, including detailed energy consumption and household income and tax payment characteristics. While the theoretical model predicts that electricity prices should be subsidised in the presence of purely income redistribution concerns, we find a positive mark-up of 49%, in our data. This suggests that, in practice, the government is concerned with energy conservation as well as income redistribution. |
| Keywords: | redistribution, public utility pricing, energy, asymmetric information |
| JEL: | D12 D31 H21 H23 H24 L94 L98 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_7195&r=reg |
| By: | Axel Gautier; Robert Somogyi |
| Abstract: | This paper analyzes two business practices on the mobile internet market, paid prioritization and zero-rating. Both violate the principle of net neutrality by allowing the internet service provider to discriminate different content types. In recent years these practices have attracted considerable media attention and regulatory interest. The EU, and until recently the US have banned paid prioritization but tolerated zero-rating under conditions. With prioritization, the ISP delivers content at different speeds and it is equivalent to a discrimination in terms of quality. With zero-rating, the ISP charges different prices for content and it is equivalent to a discrimination in terms of prices. We first show that neither of these practices lead to the exclusion of a content provider, a serious concern of net neutrality advocates. The ISP chooses prioritization when traffic is highly valuable for content providers and congestion is severe, and zero-rating in all other cases. Furthermore, investment in network capacity is suboptimal in the case of prioritization and socially optimal under zero-rating. |
| Keywords: | net neutrality, paid prioritization, zero-rating, sponsored data, data cap, congestion |
| JEL: | D21 L12 L51 L96 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_7185&r=reg |
| By: | Comello, Stephen (Stanford University); Reichelstein, Stefan J. (Stanford University) |
| Abstract: | We introduce and validate a measure of the Levelized Cost of Electricity Storage (LCOES). On a per kWh basis, this metric captures the economic break-even price required to charge and discharge electricity in N cycles per year, subject to the maximum power (dis)charge not exceeding the power rating of the storage system at any point in time. LCOES is shown to be instrumental in characterizing the optimal size of a battery that balances the initial investment expenditure with periodic savings from storing, and subsequently consuming, self-generated energy. We apply the model to residential solar customers in Germany and California, two jurisdictions with markedly different electricity pricing rules and policy support mechanisms for the adoption of battery storage. |
| Date: | 2018–07 |
| URL: | http://d.repec.org/n?u=RePEc:ecl:stabus:3696&r=reg |
| By: | Fabra, Natalia |
| Abstract: | I build a simple model 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-off it introduces when designing the optimal regulatory instruments. In contrast to the energy-only market paradigm that assumes perfect competition, my 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 mitigate market power as long as strike prices are set sufficiently close to marginal costs. |
| Keywords: | capacity markets; market power; reliability options; scarcity pricing |
| JEL: | L13 L51 L94 |
| Date: | 2018–07 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:13088&r=reg |
| By: | Richard S.J. Tol (Department of Economics, University of Sussex, Brighton, UK; Department of Spatial Economics, Vrije Universiteit, Amsterdam; Institute for Environmental Studies, Vrije Universiteit, Amsterdam; Tinbergen Institute, Amsterdam; CESifo, Munich; Payne Institute for Earth Resources, Colorado School of Mines, Golden, Colorado) |
| Abstract: | Carbon dioxide emissions have grown less fast than the economy because of improvements in energy efficiency. Switching to less carbon-intensive fuels and climate policy have played a minor role. Scenarios of future emissions are optimistic about economic growth and energy efficiency, and the higher scenarios assume resurgent coal use at odds with current trends. Climate policy is cheap for moderate targets and smart implementation. Costs are much higher for more realistic policies and for more stringent targets. The negative emission required by the Paris Agreement would need large subsidies. Greenhouse gas emission reduction is a global public good that is hard to provide. Key players in the climate debate benefit from the rents created by inefficient policies, from causing confusion, and from mixing climate with other matters. |
| Keywords: | climate change, energy, climate policy |
| JEL: | Q42 Q48 Q54 |
| Date: | 2018–08 |
| URL: | http://d.repec.org/n?u=RePEc:sus:susewp:1618&r=reg |
| By: | Bertsch, Valentin; Di Cosmo, Valeria |
| Abstract: | The European Union has set ambitious targets for emission reduction and the penetration of renewable energy, including the electricity generation sector as one of the major emitters of CO2. After a period of subsidy-driven investments, the costs of renewables decreased strongly making investments more attractive. Since European countries differ strongly in terms of natural resources, we analyse the profitability of wind onshore and offshore and solar PV across Europe to determine where it is optimal to invest in the future and to understand which factors drive the profitability of the investments. We use a power systems model to simulate the whole European electricity market in 2030. Using the renewable revenues determined by the model, we calculate the internal rate of return to analyse how profitable each technology is in each country. We find that investments in the considered technologies are not homogeneously profitable across Europe. This suggests that cooperation between European countries can be expected to achieve the overall targets at lower costs than nationally-driven approaches. We also find that in many countries, wind onshore and solar PV are profitable by 2030 in absence of any financial support. Wind offshore does not seem to be profitable without financial support. |
| Keywords: | Resource /Energy Economics and Policy |
| Date: | 2018–08–31 |
| URL: | http://d.repec.org/n?u=RePEc:ags:feemes:276178&r=reg |
| By: | Bartosz Uniejewski; Grzegorz Marcjasz; Rafal Weron |
| Abstract: | Using a unique set of prices from the German EPEX market we take a closer look at the fine structure of intraday markets for electricity with its continuous trading for individual load periods up to 30 minutes before delivery. We apply the least absolute shrinkage and selection operator (LASSO) to gain statistically sound insights on variable selection and provide recommendations for very short-term electricity price forecasting. |
| Keywords: | Intraday electricity market; Variable selection; Price forecasting; LASSO |
| JEL: | C14 C22 C51 C53 Q47 |
| Date: | 2018–08–31 |
| URL: | http://d.repec.org/n?u=RePEc:wuu:wpaper:hsc1807&r=reg |
| By: | Burgelman, Robert A. (Stanford University); Thomas, John K. (?) |
| Abstract: | This study of the transformation of the mobile device industry examines how cross-boundary disruption (XBD) superseded the incumbents' sustaining innovation, which helps explain the rapid rise of Apple and Google Android and the equally rapid fall of Nokia and other incumbents between 2007 and 2013. Four concatenated strategic factors limited the incumbents' capacity to adapt: (1) incumbents' market myopia about latent unserved needs of the high-end customer segment, (2) incumbents' dynamic capabilities gaps for meeting these needs, (3) demand shift timing of high-end customers toward the disruptors' radically innovative products, and (4) the rapid growth of novel ecosystems around the disruptors' technology platforms. Graphical interpretation further elucidates these concatenated strategic factors and suggests computational implications. The paper's qualitative, graphical and computational insights help formulate a conceptual framework of XBD-from-above, which contributes to theory development about inter-industry disruption and transformation. |
| Date: | 2018–08 |
| URL: | http://d.repec.org/n?u=RePEc:ecl:stabus:3705&r=reg |
| By: | Ben Gilbert (Division of Economics and Business, Colorado School of Mines); Joshua S. Graff Zivin (Department of Economics, University of California, San Diego and NBER) |
| Abstract: | The intermittency of payment for many goods creates a disconnect between paying and consuming such that the marginal price is not always salient when consumption decisions are made. This paper derives optimal dynamic corrective taxes when there are externalities as well as internalities from inattention and persistence in consumption across periods. Our optimal taxes address dynamic inefficiencies that are not captured in static models of inattention. We also characterize a second-best constant tax and the excess burden associated with time-invariant tax rates. We then calibrate the model to U.S. residential electricity consumption. |
| Keywords: | Salience, Inattention, Optimal Taxes, Energy Demand, Consumption Persistence |
| JEL: | D03 D11 D62 D91 H21 H23 L97 Q40 Q41 Q50 |
| Date: | 2018–08 |
| URL: | http://d.repec.org/n?u=RePEc:mns:wpaper:wp201805&r=reg |
| By: | Grzegorz Marcjasz; Tomasz Serafin; Rafal Weron |
| Abstract: | We conduct an extensive empirical study on the selection of calibration windows for day-ahead electricity price forecasting, which involves 6-year long datasets from three major power markets and four autoregressive expert models fitted either to raw or transformed prices. Since the variability of prediction errors across windows of different lengths and across datasets can be substantial, selecting ex-ante one window is risky. Instead, we argue that averaging forecasts across different calibration windows is a robust alternative and introduce a new, well-performing weighting scheme for averaging these forecasts. |
| Keywords: | Electricity price forecasting; Forecast averaging; Calibration window; Autoregression; Variance stabilizing transformation; Conditional predictive ability |
| JEL: | C14 C22 C51 C53 Q47 |
| Date: | 2018–08–29 |
| URL: | http://d.repec.org/n?u=RePEc:wuu:wpaper:hsc1806&r=reg |
| By: | Jagoda Egeland (International Transport Forum); Paul Smale |
| Abstract: | This paper is based on expert discussions on how airport capacity could be improved to benefit the users of aviation, without building new airport infrastructure. These discussions took place at a Roundtable meeting of 34 experts held in Querétaro, Mexico in March 2017. Roundtable participants took a view that any congested airport represents a market failure with rents accruing either to airlines and/or elsewhere along the value chain. Administrative slot allocation, while it can help achieve particular connectivity outcomes, cannot allocate capacity in a market efficient way. Allocating capacity through market based instruments such as slot auctioning can achieve that goal, but it currently is both technically and politically difficult to implement without creating significant disruption to the network. The distributive impacts of slot allocation regimes and any trade-offs from potential changes to them thus need to be considered by policy makers before deciding on any capacity allocation measures. Participants agreed that a multi-faceted approach is needed to improve welfare of aviation users, which in particular needs to take advantage of technological change in the sector. |
| Date: | 2017–10–31 |
| URL: | http://d.repec.org/n?u=RePEc:oec:itfaab:2017/27-en&r=reg |