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on Regulation |
| By: | Valentin Bertsch (Economic and Social Research Institute (ESRI), Dublin, Trinity College Dublin, German Aerospace Center (DLR), University of Stuttgart); Valeria Di Cosmo (Fondazione Enrico Mattei, Milan, Economic and Social Research Institute (ESRI) Dublin) |
| 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: | Renewable Energy Targets, Renewable Electricity Generation, RES-E Target, EU Electricity Market, Profitability |
| JEL: | Q4 Q42 |
| Date: | 2018–08 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2018.28&r=all |
| By: | Scott P. Burger; Christopher R. Knittel; Ignacio J. Pérez-Arriaga; Ian Schneider; Frederik vom Scheidt |
| Abstract: | Electricity tariffs typically charge residential users a volumetric rate that covers the bulk of energy, transmission, and distribution costs. The resulting prices, charged per unit of electricity consumed, do not reflect marginal costs and vary little across time and space. The emergence of distributed energy resources—such as solar photovoltaics and energy storage—has sparked interest among regulators and utilities in reforming electricity tariffs to enable more efficient utilization of these resources. The economic pressure to redesign electricity rates is countered by concerns of how more efficient rate structures might impact different socioeconomic groups. We analyze the bill impacts of alternative rate plans using interval metering data for more than 100,000 customers in the Chicago, Illinois area. We combine these data with granular Census data to assess the incidence of bill changes across different socioeconomic groups. We find that low-income customers would face bill increases on average in a transition to more economically efficient electricity tariffs. However, we demonstrate that simple changes to fixed charges in two-part tariffs can mitigate these disparities while preserving all, or the vast majority, of the efficiency gains. These designs rely exclusively on observable information and could be replicated by utilities in many geographies across the U.S. |
| JEL: | H23 L5 Q41 Q58 |
| Date: | 2019–02 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:25570&r=all |
| By: | Eike Blume-Werry (Energy Economics Group (EEG), Institute of Energy Systems and Electric Drives TU Wien and Axpo Holding AG); Thomas Faber (Axpo Holding AG); Lion Hirth (Neon Neue Energieökonomik GmbH (Neon) and Hertie School of Governance); Claus Huber (Axpo Holding AG); Martin Everts (Axpo Holding AG) |
| Abstract: | Upon discussion of price setting on electricity wholesale markets, many refer to the so-called merit order model. Conventional wisdom holds that during most hours of the year, coal- or natural gas-fired power plants set the price on European markets. In this context, this paper analyses price setting on European power markets. We use a fundamental electricity market model of interconnected bidding zones to determine hourly price-setting technologies for the year 2020. We find a price-setting pattern that is more complex and nuanced than the conventional wisdom suggests: across all researched countries, coal- and natural gas-fired power plants set the price for only 40 per cent of all hours. Other power generation technologies such as wind, biomass, hydro and nuclear power plants as well as lignite-fired plants set the price during the rest of the year. On some markets, the price setting is characterised by a high level of interconnectivity and thus foreign influence – as illustrated by the example of the Netherlands. During some 75 per cent of hours, foreign power plants set the price on the Dutch market, whilst price setting in other more isolated markets is barely affected by foreign markets. Hence, applying the price setting analysis to the proposed Dutch carbon price floor, we show that different carbon prices have little effect on the technological structure of the price-setting units. In this respect, the impacts of the unilateral initiative are limited. There are, however, considerable changes to be observed in wholesale power prices, import/export balances as well as production volumes and subsequent CO2 outputs of lignite-, coal- and gas-fired power plants. |
| Keywords: | Price Setting, Electricity Markets, Merit Order, Generation Technologies, Carbon Price Floor |
| JEL: | O13 Q41 |
| Date: | 2018–12 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2018.34&r=all |
| By: | Iossa, Elisabetta; Rey, Patrick; Waterson, Michael |
| Abstract: | The paper studies competition for the market in a setting where incumbents (and, to a lesser extent, neighboring incumbents) benefit from a cost advantage. The paper first compares the outcome of staggered and synchronous tenders, before drawing the implications for market design. We find that the timing of tenders should depend on the likelihood of monopolization. When monopolization is expected, synchronous tendering is preferable, as it strengthens the pressure that entrants exercise on the monopolist. When instead other firms remain active, staggered tendering is preferable, as it maximizes the competitive pressure that comes from the other firms. |
| Keywords: | asymmetric auctions; Competition; Dynamic procurement; Incumbency Advantage; local monopoly; staggered contracts; synchronous contracts |
| JEL: | D44 H40 H57 L43 L51 R48 |
| Date: | 2019–01 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:13461&r=all |
| By: | Valeria Di Cosmo (Economic and Social Research Institute and Fondazione Eni Enrico Mattei); Elisa Trujillo-Baute (University of Barcelona and Barcelona Institute of Economics) |
| Abstract: | The benefits of smoothing demand peaks in the electricity market has been widely recognised. European countries such Spain and some of the Scandinavian countries have recently given to the consumers the possibility to face the spot prices instead of having a fixed tariffs determined by retailers. This paper develops a theoretical model to study the relations between risk averse consumers, retailers and producers, both in the spot and in the forward markets when consumers are able to choose between fixed tariffs and the wholesale prices. The model is calibrated on a real market case - Spain - where since 2014 spot tariffs were introduced beside the flat tariffs for household consumers. Finally, simulations of agents behavior and markets performance, depending on consumers risk aversion and the number of producers, are used to analyse the implications from the model. Our results show that the quantities the retailers and the producers trade in the forward market are positively related with the loss aversion of consumers. The quantities bought by the retailers in the forward market are negatively related with the skewness of the spot prices. On the contrary, quantity sold forward by producers are positively related with the skewness of the spot prices (high probability of getting high prices increase the forward sale) and with the total market demand. In the spot market, the degree of loss aversion of consumers determine the quantity the retailers buy in the spot market but does not have a direct effect on the spot prices. |
| Keywords: | Electricity Spot Market, Electricity Forward Market, Risk Aversion |
| JEL: | D40 L11 Q41 |
| Date: | 2018–12 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2018.31&r=all |
| By: | Michel Noussan (Fondazione Eni Enrico Mattei) |
| Abstract: | The transport sector has rarely seen disruptive evolutions after the diffusion of the internal combustion engine, and today the European mobility is still heavily relying on oil derivates and on private cars. However, there is a significant push in cities towards more sustainable mobility paradigms, and digital technologies are playing a major role in unleashing possible alternatives to a car- and fossil-based mobility. Three major digital trends can be highlighted, with different levels of maturity and some potential synergies among them: Mobility as a Service, Shared Mobility and Autonomous Vehicles. The effects of these trends are also related to the strong push towards electric mobility, which currently appears as the most supported solution by companies and regulators to decarbonize the transport sector. This working paper discusses an investigation of the potential effects of digital transition, by means of a data-driven model for the calculation of the impacts of mobility demand in Europe in terms of primary energy consumption and CO2 emissions. The results show that digitalization may have a positive effect on energy consumption and CO2 emissions for passenger transport, given the strong efficiency improvements expected by technological development in the vehicles powertrains. The benefits are maximized if digital technologies are used towards a collective optimization, by increasing the share of available mobility options. Conversely, if digital technologies are limited to increase the quality of private mobility, the environmental benefits will likely remain very limited. Thus, there is a need of tailored policies supporting the right mobility models to fully exploit the potential benefits of digitalization. |
| Keywords: | Digitalization, Transport, Energy Consumption, Energy Modelling |
| JEL: | L91 O33 Q4 R41 |
| Date: | 2019–02 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2019.01&r=all |
| By: | Donna, Javier D. |
| Abstract: | This paper develops a structural model of urban travel to estimate long-run price elasticities. A dynamic discrete choice demand model with switching costs is estimated, using a panel dataset with public market-level data on automobile and public transit use for Chicago. The estimated model shows that long-run own- (automobile) and cross- (transit) price elasticities are more elastic than short-run elasticities, and that elasticity estimates from static and myopic models are downward biased. The estimated model is used to evaluate the response to a gasoline tax. Static and myopic models mismeasure long-run substitution patterns, and could lead to incorrect policy decisions. |
| Keywords: | Long-run price elasticities, Dynamic demand travel, Hysteresis |
| JEL: | L71 L91 L98 |
| Date: | 2018–11–05 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:92233&r=all |
| By: | Rafik Abdessalam (Université de Lyon, Lumière Lyon 2, COACTIS, EA 4161, 69365 Lyon Cedex 07, France); Patricia Renou-Maissant (Normandie Univ, UNICAEN, CNRS, CREM, F-14000 Caen, France et EconomiX, UMR CNRS 7235, Université de Paris Nanterre, 92001 Nanterre, France); Ferdaous Roussafi (Normandie Univ, UNICAEN, CNRS, CREM, F-14000 Caen, France) |
| Abstract: | The energy transition towards low-carbon energies is today a dominant paradigm of public policies related to energy. This article aims to propose an inventory of the energy transition in France and more precisely to evaluate the performances of regions in terms of diversification of the energy mix. Multidimensional data analysis methods have been implemented. A typology of French regions relating to the regional development of the renewable energies (RE) in France in 2015 is proposed; it highlights the emergence of five typical profiles of RE development sharply contrasted according to RE sectors and regions. The various statistical models realized underlines the importance of economic factors (economic performance and sector specialization), demographic specificities and geographical characteristics to explain contrasted performances of renewable energy development in French regions. By contrast, environmental and political factors do not discriminate between the five types of RE development. |
| Keywords: | multidimensional data analysis, regional disparities, Renewable Energies |
| JEL: | C38 P25 Q48 R11 |
| Date: | 2018–12 |
| URL: | http://d.repec.org/n?u=RePEc:tut:cremwp:2018-15&r=all |
| By: | Yue Zhang (China University of Petroleum); Qi Zhang (China University of Petroleum); Arash Farnoosh (IFPEN - IFP Energies nouvelles - IFPEN - IFP Energies nouvelles); Siyuan Chen (China University of Petroleum); Yan Li (China University of Petroleum) |
| Abstract: | The rapid development of electric vehicles can greatly alleviate the environmental problems and energy tension. However, the lack of public supporting facilities has become the biggest problem hinders its development. How to reasonably plan the placement of charging stations to meet the needs of electric vehicles has become an urgent situation in China. Different from private charging piles, charging station could help to break the limitation of short range. It also has a special dual attribute of public service and high investment. Therefore, a mathematically optimal model with two objective functions is developed to analyze the relationship between upfront investments and operating costs and service coverage of charging station system and it was solved by Particle Swarm Optimization. Besides, we take into account the conveniences of stations for charging vehicles and their influences on the loads of the power grid. Geographic Information System is used to overlay the traffic system diagram on power system diagram to find the alternative construction sites. In this study, a district in Beijing is analyzed using the proposed method and model. And the following suggestions are given: government should lead the construction of charging station; service ability needs to be enhanced; it is better to make more investment at earlier stage; constructions of charging stations can facilitate EV's development. |
| Keywords: | Multi-objective particle swarm optimization,GIS,Electric vehicle,Charging station |
| Date: | 2019–02–15 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-02009151&r=all |
| By: | Atal, Juan Pablo; Cuesta, Jose Ignacio; Sæthre, Morten |
| Abstract: | We study the equilibrium effects of quality regulation on market outcomes by exploiting the staggered phase-in of bioequivalence requirements for generic drugs in Chile. While the objective of the regulation was to increase the perceived quality of generics to reduce vertical differentiation and enhance price competition, we find mostly adverse effects. Even if a large number of drugs obtained the quality certification mandated by the regulation, we estimate that the number of drugs in the market decreased by 13% as a result of the policy. Moreover, we find that prices increased on average by 13% as well as no significant effects on the market share of generics. These adverse effects were mostly concentrated in molecules with small market size. Put together, our results suggest that the intended effects of the regulation on competition through increased (perceived) quality of generics were overturned by adverse competitive effects arising from the costs of complying with the regulation. |
| Keywords: | Medición de impacto, Salud, |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:dbl:dblwop:1211&r=all |
| By: | Bonetti, Pietro; Duro, Miguel; Ormazabal, Gaizka |
| Abstract: | This paper examines the effect of disclosure regulation on the market for corporate control. We study the implementation of a recent European regulation imposing tighter disclosure requirements regarding the financial and ownership information provided by public firms. We find a substantial drop in the number of control acquisitions after the implementation of the regulation, a decrease that is concentrated in countries with more dynamic takeover markets. Consistent with the idea that the disclosure requirements increased acquisition costs, we also observe that, under the new disclosure regime, target (acquirer) stock returns around the acquisition announcement are higher (lower), and toeholds are substantially smaller. Overall, our evidence suggests that tighter disclosure requirements can impose significant acquisition costs on bidders and thus slow down the market for corporate control. |
| Keywords: | Acquisitions; Disclosure regulation; market for corporate control; mergers; Proprietary costs; Takeover laws |
| JEL: | G34 G38 K22 |
| Date: | 2019–01 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:13458&r=all |
| By: | Kai Li; Cheryl Long; Wei Wan |
| Abstract: | The study is motivated by two seemingly contradictory patterns observed in China’s airline industry with prevalent airfare caps. On the one hand, airfares tend to be higher and thus airfare caps are more likely to be binding in routes operated by fewer airlines; but on the other hand, it is in these same routes where airfare caps are more likely to be deregulated. To explain this apparent paradox, we build a simple theoretical model, which derives distinctive predictions from the public interest theory versus the capture theory of regulation. When empirically testing the model, we find more support for the public interest theory. In particular, Chinese regulators seem to genuinely care about public interests when making deregulation decisions, and their concern with market exit and the consequent failure to serve certain markets is the main reason for removing airfare caps in routes served by fewer airlines. In contrast to most studies that investigate consequences of deregulation in the airline industry, we explore the motivation for deregulation. We also contribute to the literature by emphasizing the role of universal service obligations in understanding regulatory reforms in developing countries. |
| Keywords: | Regulatory Capture; Public Interest; Airfare Cap; Airline Deregulation |
| JEL: | D7 L5 L9 |
| Date: | 2019–02–19 |
| URL: | http://d.repec.org/n?u=RePEc:wyi:wpaper:002399&r=all |
| By: | Meredith Fowlie; Edward A. Rubin; Reed Walker |
| Abstract: | We use state-of-the-art, satellite-based PM2.5 estimates to assess the extent to which the EPA's existing, monitor-based measurements over- or under-estimate true exposure to PM2.5 pollution. Treating satellite-based estimates as truth implies a substantial number of "policy errors"—over-regulating areas that comply with air quality standards and under-regulating other areas that appear to violate standards. We investigate the health implications of these apparent errors and highlight the importance of accounting for prediction error in satellite-based estimates. Uncertainty in "policy errors" increases substantially when we account for these underlying prediction errors. |
| JEL: | H23 H41 Q50 Q52 Q53 |
| Date: | 2019–02 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:25560&r=all |
| By: | Victor Court (EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique); Pierre-André Jouvet (EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique); Frédéric Lantz (IFPEN - IFP Energies nouvelles - IFPEN - IFP Energies nouvelles) |
| Abstract: | This article builds a bridge between the endogenous economic growth theory, the biophysical economics perspective, and the past and future transitions between renewable and nonrenewable energy forms that economies have had to and will have to accomplish. We provide an endogenous economic growth model subject to the physical limits of the real world, meaning that nonrenewable and renewable energy production costs have functional forms that respect physical constraints, and that technological level is precisely defned as the effciency of primary-to-useful exergy conversion. The model supports the evidence that historical productions of renewable and nonrenewable energy have greatly infuenced past economic growth. Indeed, from an initial almost-renewable-only supply regime we reproduce the increasing reliance on nonrenewable energy that has allowed the global economy to leave the state of economic stagnation that had characterized the largest part of its history. We then study the inevitable transition towards complete renewable energy that human will have to deal with in a not-too-far future since nonrenewable energy comes by defnition from a fnite stock. Through simulation we study in which circumstances this transition could have negative impacts on economic growth (peak followed by degrowth phase). We show that the implementation of a carbon price can partially smooth such unfortunate dynamics, depending on the ways of use of the income generated by the carbon pricing. |
| Keywords: | Energy transition,Exergy,Technological change,Endogenous economic growth |
| Date: | 2018–01 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-01987974&r=all |